Showdown over millionaire’s tax in N.J.

TRENTON - Gov. Christie and the state Legislature appear headed for a showdown over the millionaire's tax in a dispute that could stall the adoption of a state budget and force the shutdown of state government.

Committees in both the Senate and Assembly approved a pair of bills Thursday to reinstitute the millionaire's tax and use the revenues to help senior citizens and residents with disabilities. The bills are scheduled for floor votes in both houses next Thursday.

Christie reiterated that he had no intention of approving any tax increase.

"I've made it very clear that I'm not going to sign any tax increases," Christie said in a news conference Thursday. "That's it."

Senate President Stephen Sweeney (D., Gloucester) said the legislation was on its way to Christie's desk.

"Just because someone is governor, it doesn't mean they're right," Sweeney said. "He's wrong on this issue. He's 100 percent wrong."

Under former Gov. Jon S. Corzine, the so-called millionaire's tax applied to filers earning more than $400,000 per year. The income tax surcharge was intended to last for only one year and expired in December with little notice.

Under the current Democratic proposal, the surcharge would be reinstated, but only for filers earning more than $1 million annually, increasing the tax rate on income over $1 million from 8.97 percent to 10.75 percent.

According to the nonpartisan Office of Legislative Services, the surcharge, which would apply to about 16,000 tax filers, would raise an additional $637 million. Christie disputes that estimate, saying it is based on 2007 revenue figures, which he believes are optimistic.

Democrats want to use the revenue from the surcharge to restore property tax relief for more than 600,000 homeowners and tenants, eliminate a $310 deductible Christie has proposed for senior citizens and disabled residents in two state prescription drug programs, and reduce a planned increase in the co-payments for drugs in the programs.

According to the state constitution, Christie is required to sign a budget into law by July 1.

The governor has presented his budget proposal to the Legislature, which now must return its own proposal to him for approval. Christie's $29.3 billion proposal slashed spending across the board to close a deficit of about $11 billion.

Democrats have criticized a wide variety of Christie's cuts, including state aid to municipalities and schools, cuts to college scholarship programs, and a reduction in the Earned Income Tax Credit for the working poor. In recent weeks, they have coalesced around reinstating the millionaire's tax.

Assembly Speaker Sheila Oliver (D., Essex) said the Democratic proposal was a compassionate plan that would help senior citizens and disabled residents struggling to pay for medications and to keep their homes.

"We have made it very clear that we will work with the governor to solve our budget problems, but Democrats will not do so at the expense of elderly New Jerseysans," Oliver said. "This plan spares the pain and protects our most vulnerable."

Democrats have argued that while Christie is calling for "shared sacrifice," the state's wealthiest residents are exempt in the governor's budget.

"This is really a question of priorities," said Assemblyman Paul Moriarty (D., Gloucester). "We think everyone should share the sacrifice, and our priority is senior citizens. Gov. Christie's priority is tax breaks for millionaires."

Republicans argue that to tax the wealthiest more would only encourage them to move to other states.

"Millionaires have shared the sacrifice for quite some time," Christie said. "These folks have paid over 35 percent of the overall tax burden and do right now."

He added that business incentive programs that will be cut in his budget also would hurt the state's wealthiest residents.

"They are sharing [in] the sacrifice on a regular basis," Christie said. "They shared the sacrifice a year earlier when others were not sharing the sacrifice."

Democrats would need the votes of two-thirds of the Legislature to override a gubernatorial veto, which leaders would be unlikely to muster. Democrats control the Senate 23 seats to 17 and the Assembly 47-33.

Politically, however, whether the measure ultimately passes is likely less important than which side the public agrees with - or blames if the budget stalls.

"The larger point is if you believe New Jersey's going to fix its problems by raising another tax for another year then you're in one camp," Christie said. "My camp is we've tried that for eight years and it failed, and we need to stop doing it. We need to get down to the hard work of making government smaller, making it spend less money and lowering taxes so that we create private sector jobs in New Jersey again."