N.J. Budget Committees Advance Bills To Raise Taxes On Corporations, High Earners
TRENTON, N.J. (CBSNewYork/AP) -- The New Jersey legislative budget committees on Tuesday night advanced bills to raise taxes on corporations and the wealthy, as an alternative to Gov. Chris Christie's plan to slash the state's contribution to public employee pension funds.
Budget committee Democrats in both the Assembly and Senate voted for the hikes Tuesday; Republicans against them. The hikes are part of a $33.3 billion budget proposed by Democratic lawmakers.
The Senate budget committee is also considering the tax increases.
Democrats emphasized that the tax hikes are temporary. Under one measure, companies would have a one-year, 15 percent surcharge on their corporate business tax bills. Under another, personal income over $1 million would be taxed at a higher rate. That measure would be in place for three years.
Though New Jersey lawmakers have hiked income taxes on the wealthy three times in the last five years, their tax proposal this year differs by targeting a higher income group.
The tax rate would jump from 8.97 percent to 10.75 percent on earnings over $1 million after deductions, and would affect about 16,000 tax filers across the state, according to Paul Sarlo, chairman of the Senate Budget Committee.
But like the three previous hikes approved on high earners by the Democrat-controlled Legislature, Republican Gov. Chris Christie is expected to veto the measure.
The Assembly and the Senate were each planning to give the legislative budget plan a hearing Tuesday evening and vote on it Thursday. Under the state constitution, a balanced budget must be in place by sometime Monday so it can take effect the next day, the start of the new fiscal year, without shutting down state government.
But Christie and lawmakers have been in a showdown over how to address a budget gap that was discovered only in April when the state's income tax revenues fell below expectations. Christie's administration is projecting a gap of $2.75 billion for the new fiscal year.
Christie's solution is to balance the budget mostly by cutting the state's contribution to the pension funds for public workers. He has already used his executive powers to reduce the planned payment due this month, sparking a legal challenge in court by a group of public employee unions. A hearing on the issue is scheduled for Wednesday.
But cutting the payment for the new budget year requires legislative action.
The payment is rising quickly under a deal struck in 2010 to make up for decades of skipped or skimped contributions. Although grumbling about it, Christie proposed earlier this year to make the full $2.25 billion payment. But after the surprise budget gap, he proposed paying $681 million -- enough to fund the new obligation but not to make up for what he called ``the sins of the past.''
The state budget proposed by Democrats would make the full payment and use a variety of measures to bridge the budget gap, including the income tax hike on the wealthiest New Jerseyans, repurposing unspent funds, and a 15 percent one-year increase in a corporate tax.
The proposal also calls for cutting some fee increases and tax extensions proposed by the governor. But lawmakers want to add state funding in several areas, including nursing homes.
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