Corzine offers a concession on N.J. taxes

All New Jerseyans earning less than $150,000 will be able to deduct their property taxes on their income-tax bills, Gov. Corzine said yesterday, reversing course on one of the most politically volatile pieces of his new budget.

In place of broadly slicing the deduction, Corzine proposed an even larger income-tax hike on filers earning $500,000 or more. Taxes on income earned above that threshold would rise to 10.25 percent, from 8.97. Corzine had originally called for a smaller increase on those filers.

Corzine had at first proposed eliminating the deduction, for one year, for everyone but senior citizens. Republicans and some key Democrats hammered the plan, saying the change would be a tremendous burden on middle-class homeowners, especially those who may also lose their property-tax rebates or see the checks reduced.

Eliminating the write-off would have amounted to an income-tax increase on everyone who lost it.

"I've been listening to New Jerseyans and think we need to preserve this deduction to continue our fight to ease the burden of property taxes," Corzine said in a news release.

Corzine said 84 percent of filers will be able to take the deduction, which lets homeowners and tenants effectively lower their income taxes by writing off the property taxes they paid. New Jerseyans pay the largest property-tax bills in the nation, $7,045 on average.

The depth of the anger at the original plan can be seen in the swiftness of Corzine's change, which comes just nine days after he introduced his budget.

Senate President Richard J. Codey (D., Essex) and Assembly Speaker Joseph J. Roberts Jr. (D., Camden) praised Corzine's move in a news release.

Assemblyman Joseph Malone, the Republican budget officer, said he was not surprised the governor had retreated on this issue.

"It's a step forward, but I'm going to tell you - so instead of everyone dying of a thousand cuts, we're going to die of 999 cuts now," said Malone, of Burlington County. "There's just so much in this budget that goes after middle class people - the fees, new taxes, this tax and that tax."

Malone cited increased fees related to motor vehicles and hunting, for example.

"He did what he had to do politically," Malone added.

The change in the state's top income-tax rate affects about 44,000 filers, roughly 1 percent of the total, according to the administration. The new levy would give New Jersey the second-highest top rate in the nation, after the 10.3 percent California charges people making $1 million or more.

Corzine has said the tax increase would last only one year.

The changes would mean $240 million more in taxes on those making $500,000 and up, in addition to the $380 million hike Corzine first proposed. The added taxes would offset the money lost by giving back the deduction, said Corzine spokesman Robert Corrales. Suspending the deduction was originally supposed to bring in $400 million to the state.

For a person with a taxable income of $600,000, the change in the top rate would mean paying an additional $1,280 in income taxes.

Filers who make more than $500,000 already account for 42 percent of the state's total income-tax collections, according to figures from 2006, the last year for which statistics are available. In the past, Republicans have criticized the high tax rate on the wealthy, saying it drives well-off families out of the state and into Pennsylvania, where state income taxes are flat.

"In some ways I think the budget address represented floating some trial balloons to see which proposals would garner the most opposition and which would pass public muster," said Brigid Harrison, a professor of political science and law at Montclair State University. "One of the things that there was a relative lack of criticism of were progressive taxes. We didn't hear a lot of criticism of some of the progressive income taxes or even, in many circles, the tax on business."

Corzine has emphasized putting the budget burden on those who can afford it. Lawmakers have begun their review of the budget, which must be signed by July 1.

Harrison said the governor is in a difficult position. Along with facing a tough budget, he and the Assembly must run for election in November.

"In many ways, I think he's walking a tightrope in terms of giving legislators what they think they can comfortably bring back to their constituents and districts and at the same time create those revenue solutions and make his numbers," she said.