New Jersey Democrats propose millionaires' tax

Reuters News
Posted: Jun 24, 2011 7:03 PM
New Jersey Democrats propose millionaires' tax

By Edith Honan

NEW YORK (Reuters) - New Jersey's senate majority leader proposed on Friday that the state spend $1 billion more on education next year and increase taxes on those earning more than $1 million a year.

The proposal comes less than a week ahead of the state's June 30 budget deadline. If approved by the Democrat-controlled state legislature, it requires the approval of Republican Governor Chris Christie.

"Our budget looks out for the middle-class and low-income people in the state... It truly is a Democrat-principled budget," Senate President Steve Sweeney said in an interview with Reuters.

Sweeney, a Democrat, has been under fire by New Jersey's public sector unions for supporting a plan to force public employees to pay significantly more for their pension and health coverage, increase the retirement age and eliminate a cost of living adjustment for retirees.

The plan passed both houses of the Democrat-controlled legislature this week, marking a huge political victory for Christie, who has made reining in the state's public sector employee costs a signature issue.

Christie is expected to sign the bill, which affects about 750,000 employees and retirees, into law on Monday.

The Democrats' spending plan, which will be introduced on Monday, will also include a property tax freeze for some seniors, restore the earned income tax credit and boost spending for women's health by $7.5 million.

Christie issued a statement on Friday, calling the proposal "unrealistic, pie in the sky, fantasy budgeting."

"New Jerseyans are the most over-taxed citizens in America and they want us to reduce spending and make government smaller," Christie said.

Sweeney responded by saying his plan represents "the priorities of the majority of New Jerseyans."

The Democrats' increase in education spending comes in part in response to a May ruling by New Jersey's highest court ordering the state to provide about $500 million more for its poorer school districts next year.

The court ruled that last year's school aid cuts of more than $1 billion -- ordered by Christie and enacted under protest by the legislature -- shortchanged the state's most disadvantaged students.

The so-called "millionaires' tax," which will be introduced separately from the budget, would generate between $550 million and $600 million in additional revenue, which would be applied to education spending, said Sweeney.

The legislature proposed a "millionaires' tax" last year as well, but Christie vetoed it. Both Sweeney and Louis Greenwald, an Assembly Democrat who chairs the budget committee, said they expected the governor to veto it again.

The senate could vote on the spending plan as early as Wednesday, one day ahead of the state's June 30 budget deadline. New Jersey's fiscal year begins July 1.

The budget requires Christie's signature to become law.

Christie, known for his blunt style, has been a rising star in the Republican Party since taking office last year with a low-tax, lean-government agenda.

But this year New Jersey has suffered downgrades to its credit rating, tarnishing Christie's budget fighting reputation. Christie blamed the downgrades on his Democratic predecessors' policies.

The state's fiscal picture is somewhat rosier than it was in February, when Christie unveiled his budget plan. In May, the nonpartisan Office of Legislative Services said the state should capture an extra $914 million of tax revenue over the next two years.

(Editing by Ellen Wulfhorst and Greg McCune)