Corzine may raise income taxes for N.J.’s wealthiest
Posted by cjrothma March 02, 2009 20:06PM
Gov. Jon Corzine is considering raising income taxes on New Jersey’s wealthiest residents, a wage freeze and 12-day furlough for state workers, and increases in the cigarette, wine and liquor taxes, according to people familiar with budget negotiations.
Corzine, who will release his budget next week, is considering a 5 percent surcharge on the taxes paid by residents with incomes of $250,000 or higher, according to four people familiar with the budget who requested anonymity because they are not authorized to discuss the governor’s plans.
The Democratic governor is also weighing increasing the cigarette tax by 10 cents a pack as well as hikes to wine and liquor taxes as he grapples with a $7 billion shortfall. The liquor tax increases would not affect the tax on beer.
In total, the tax hikes would produce about $400 million in revenue, those familiar with the budget said.
Another $400 million in savings could come from freezing wages for state workers as well as requiring them to take off 12 unpaid furlough days, or one each month starting in July, according to an administration official.
The spending plan, which Corzine has projected in the $29 billion range, is still being finalized. Corzine is scheduled to present his budget proposal to the Legislature a week from Tuesday.
Corzine’s spokesman, Robert Corrales, declined comment.
“Everything is on the table,” Corrales said. “All options are open during this unprecedented national fiscal crisis.”
Corzine’s plan would increase taxes on those with incomes over $250,000 by 5 percent of their current income tax bill. For example, a resident paying $10,000 would pay $10,500. The levy would affect about five percent of New Jersey’s population, and would only be charged for one year, according to the administration official.
Some leaders in Corzine’s own party, however, criticized the possible levies on the rich, saying that will discourage high earners from living here and create a double burden for taxpayers who are also facing the rollback of former President George W. Bush’s tax cuts.
Last week, President Obama said he would let the Bush tax cuts expire in 2011, increasing the top federal income tax rate for couples making more than $250,00 from 35 percent to 39.6 percent. Those taxpayers would also face new limits on itemized tax deductions.
“The president already announced he’s going to go after that group. It’s a double hit,” Senate Majority Leader Stephen Sweeney said.
He pointed out that New Jersey also raised the income tax on those making $500,000 or more in 2004, under Gov. James E. McGreevey’s so-called millionaire’s tax.
“We’ve hit that income bracket pretty hard. I’m not one of them, but we’ve hit them pretty hard,” said Sweeney (D-Gloucester).
Sen. Raymond Lesniak (D-Union) said he’s not against raising the cigarette tax but views an income tax hike on the wealthy as “a huge mistake.” As New Jersey tries to attract businesses, particularly those fleeing Manhattan during the recession, “it would be very counterproductive” to add to the tax burden of top executives, he said.
“I will aggressively oppose it,” Lesniak said.
The cigarette tax was last raised in 2006, to $2.575 per pack, and is among the highest in the nation.
The governor is also considering reducing or eliminating property tax rebates for all residents except the elderly and disabled, as well as slashing aid to towns and hospitals, those familiar with the budget said.
“Nobody wants to see most of these things done, but you’ve got a huge hole,” said Senate President Richard Codey (D-Essex). “The governor’s back is against the wall. To his credit, he’s standing up and saying, ‘Hey, I don’t want to do it, but I’m the leader.'”
Mary Forsberg, acting president of New Jersey Policy Perspective, a liberal think tank, praised the idea of raising taxes on the rich “because the budget needs it and those are the people who can afford to pay.” She said the belief that the wealthy will abandon New Jersey because of higher taxes has not proven true.
“They’re not as grossly overtaxed as they think they are. For people whose incomes are under a million dollars, they are paying less taxes in New Jersey than they would be in New York state,” she said.
But Rugters University economics professor Joseph Seneca said the top one percent of New Jersey’s earners pay about 40 percent of its income tax, and Corzine would have to make bold spending cuts for a tax increase to fly.
“To raise that tax in this economy, at this time is an out-of-the-box proposal, in an economic situation that requires out-of-the-box proposals,” Seneca said. “But you would need an equivalent out-of-the-box proposal on the other side of the budget to give it credibility and political viability.”