Democrats Pit Property Tax Credits vs. Christie's Income Tax Cut

Senate and Assembly Democratic leaders unveiled competing plans on Tuesday to provide property tax credits to those earning up to $250,000, but they were in full agreement on one thing: Republican Gov. Chris Christie's plan to cut income taxes 10 percent is dead.

"Property tax relief is on its way. Income tax cuts to the wealthy are not going to be had in this budget," Senate President Stephen Sweeney declared in a morning radio interview. "I am not negotiating an income tax cut. I can tell you that right now."

Both the Senate and the Assembly Democratic proposals would provide property tax relief though credits on state income tax returns – the method used by the Republican Whitman administration in the late 1990s – rather than through the direct property tax credit program now in place that replaced the much-criticized system of mailing out property tax rebate checks.

"We felt that passing a law to make the property tax credits part of the income tax would guarantee that they would stay in place because they could only be undone by a future act of the legislature," Assembly Majority Leader Lou Greenwald (D-Camden) explained in an interview. "This governor has had no problem raiding funds that should have gone into property tax rebate or property tax credit programs to balance his budget. It's too easy to cut property tax credits in the budget."

Greenwald and Sweeney both cited a NJ Spotlight study showing that net property taxes rose 20 percent from $6,244 to $7,519 during Christie's first two years in office, largely because the GOP governor's budget made deep cuts in property tax rebates that had averaged $1,037 for most homeowners during the last year of the Democratic Corzine administration.

Interestingly, Christie and Republican legislative leaders did not immediately attack the Democratic property tax credit plans, but instead signaled their willingness to work together on a compromise tax cut proposal -- presumably one that would salvage the income tax cuts for wealthier taxpayers and small business owners that are the crux of Christie's proposal.

While the Republican income tax deduction on property taxes of the late 1990s was criticized by Democrats for providing wealthy landowners with credits as high as $25,000 because it had no ceiling, both the Senate and Assembly Democratic plans unveiled yesterday avoid that problem by providing income tax credits only on the first $10,000 in property taxes paid.

The Assembly plan laid out by Greenwald, Assembly Speaker Sheila Oliver (D-Essex), and other lower house Democratic leaders is the more aggressive proposal, promising a property tax creditof up to $2,000. The Assembly plan provides a maximum credit of $1,000 in 2012 (a 20 percent cut on the first $5,000 in property taxes), rising to a maximum cut of $1,250 in 2013 on the first $6,000 in property taxes paid, to $1,500 on up to $7,500 in property taxes in 2014, and finally to the full $2,000 on up to $10,000 in property taxes in 2015.

Greenwald estimated that the average family would receive a property tax credit of $1,552 by 2015 -- about 50 percent more than under Corzine in 2009.

To fund the property tax credit program, the Assembly's plan would use the $1.4 billion estimated cost of Christie's fully implemented Fiscal Year 2016 income tax cut, add in the more than $700 million now dedicated to direct property tax credits averaging $480 per homeowner, and -- most controversially -- increase income taxes on the 16,000 New Jerseyans earning more than $1 million beginning in Fiscal Year 2013. The top rate would increase from the current 8.97 percent to the 10.75 level imposed by Corzine as a temporary surcharge in the depths of the Great Recession of 2007-2009, and would raise $800 million -- just under 30 percent of the cost of the Assembly proposal.

"I can tell you there was a lot of discussion over whether the governor would sign a millionaire's tax, but I am not going to compromise my principles or my belief that there should be shared sacrifice in this state," Greenwald said. "The governor has vetoed over good legislation we have passed."

Continue reading this story in NJ Spotlight.

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