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N.J. tax amnesty brings windfall

More than $400 million has been collected, leading to a budget review and an eye to restoring rebates.

TRENTON - New Jersey received an unexpected windfall of at least $400 million from its tax amnesty program, Gov. Corzine announced yesterday, prompting lawmakers to delay a vote on the state budget in order to decide how to spend the money.

The governor pledged to put the money toward property-tax relief, a message echoed by legislative leaders on both sides of the aisle, some of whom called for restoring rebates. New Jerseyans pay the highest average property taxes in the nation.

"When revenues fell, the last item we cut was property-tax relief," Corzine said. "Now that we have recovered some lost revenues, the first thing we will restore is property-tax relief. This money belongs to the taxpayers, and we're going to give it back to them in property-tax relief."

Officials initially hoped the state's fourth tax amnesty program in 22 years would bring in $100 million. The figure was later revised to $200 million. By Monday, the deadline for delinquents to pay taxes without penalty, it was clear even the second goal had been exceeded.

Corzine said the state had collected at least $600 million, and state officials said 17,500 more envelopes had yet to be opened and processed, which could bring the final tally closer to $700 million.

The governor promised that no "Christmas trees" - pet projects - would be added to the budget. And to special interest groups that might line up for a part of the windfall, Corzine reiterated that his priority is property-tax relief.

The $28.6 billion budget proposal that both houses were scheduled to vote on yesterday would have eliminated property-tax rebates for everyone but senior citizens and the disabled, and cut property-tax deductions for those earning more than $150,000.

Assembly Budget Chairman Louis D. Greenwald (D., Camden) said lawmakers were considering restoring rebates for those earning less than $75,000 - the limit Corzine proposed in March before having to cut even more - as well as restoring property-tax deductions for those earning up to $200,000. Some Democrats want to see the threshold at $250,000.

The deduction can save homeowners hundreds of dollars on income taxes.

Lawmakers were also talking about scaling back a proposed tax increase on health insurers.

Restoring the rebates would cost from $400 million to $500 million. Expanding the deduction would cost about $56 million, Greenwald said.

If rebates are restored for those earning up to $75,000, an additional 510,000 homeowners could get the checks, according to budget documents. When the budget was first proposed, people in that income bracket were set to get checks averaging $890 or $670 depending on income. More than 700,000 renters fall below that income threshold as well, but it was not clear yesterday if their rebates could be restored.

Lawmakers sometimes also label aid to towns and schools "property-tax relief," but most were focused yesterday on rebates.

Budget committees in both the Assembly and Senate will meet Monday to reconsider the budget. Full house votes could come next Thursday. The state constitution calls for a budget to be signed into law by July 1, the start of the next fiscal year.

After months of unrelentingly grim economic news, lawmakers were giddy yesterday. Assembly Speaker Joseph J. Roberts Jr. (D., Camden) said members of the Democratic caucus applauded when they heard about the tax amnesty collections.

"This new development certainly brightens an otherwise gloomy day," said Senate President Richard J. Codey (D., Essex).

Assembly Republican Officer Joseph Malone had a slightly different take.

"While today's information may provide some good news, this is yet another temporary, one-shot solution to the 2010 budget," said Malone, of Burlington County. Even before Corzine's announcement put off the vote, it was unclear if Democrats could move the budget through the closely divided Senate, where three Democrats and every Republican had said they would vote against the plan, potentially stalling it.

Democrats rule both houses but control the Senate by a slim majority, 23-17. Sens. Joseph Vitale, Jeff Van Drew and Ronald Rice have said they planned to vote against the budget, leaving Democrats with only 20 of 21 votes needed in the upper house.

Vitale said he was still hopeful for a deal that would use federal dollars - not the amnesty revenue - to expand FamilyCare, a health care program for the poor that he has championed. Without that agreement, he said, he would oppose the budget.

Under the tax amnesty program, those owing back taxes due between Jan. 1, 2002, and Feb. 1, 2009, had from May 4 until June 15 to pay. The state waived the penalty and half the owed interest. After June 15, tax delinquents would owe a 5 percent penalty on top of penalties, interest and collection fees.

Senate Minority Leader Thomas H. Kean Jr. (R., Union) questioned the timing of yesterday's announcement, saying the money must have been flowing in before now.

"It wasn't as if all the envelopes showed up yesterday," Kean said.

The Treasury Department, however, said a large chunk - more than $200 million - was received on Friday alone, as the deadline approached.

Greenwald said lawmakers took a "conservative" approach in estimating how much revenue they might take in.

"We did believe it would generate a little more [than first estimated], but never anticipated this much," Greenwald said.

Prior to this year, New Jersey's most successful tax amnesty program yielded $359 million, in 1996, according to the Treasurer's Office.

New York has had the largest recorded tax amnesty collection - $582.7 million in 2002-03, according to the Federation of Tax Administrators, which has data through 2007.

The legislature authorized $10 million to administer this year's tax amnesty program, including $2.2 million for advertising. Outreach by the Treasury included direct mail to known tax delinquents, advertising at train stations, on coffee cups, on YouTube and on billboards.

The most common theme among lawmakers was relief after months of bad reports.

"It's good to have good news for once," said Sen. Barbara Buono (D., Middlesex), the budget chair.