Taxes & Spending

Christie calls for 10 percent tax cut, praises ‘New Jersey comeback’

New Jersey Republican Gov. Chris Christie went before the state Legislature last month to present his third budget proposal. Christie’s first two budgets, which were enacted with virtually no changes by the Democratic legislature, focused on cutting government. But with the third time the charm, Christie told lawmakers that the tough choices of the previous two years sparked a “New Jersey comeback,” and announced that his fiscal 2013 budget would start to give the fruits of that revival back to the people of the Garden State.

“Because we have made the tough choices in these last two years,” he added, “we can make the right ones now,” Christie said. “Today, I ask this chamber a simple question: Why not cut income taxes for all New Jerseyans when our fiscal house is now in order?”

Early in his first year in office, Christie announced a spending freeze, unilateral cuts to 375 state agencies and the impoundment of close to $500 million in planned school aid to help close a looming $2 billion budget hole in the second half of fiscal year 2010. He followed that with proposals that cut state spending by more than 2 percent from the year before Christie took office. He also deferred payments into the state’s beleaguered pension fund, cut funding for mass transit, including canceling the nation’s largest construction project for a new rail tunnel under the Hudson River, enacted a 2 percent cap on local property tax increases, and pushed through reforms to the state pension system projected to save $130 billion over 30 years.

By contrast, the 2013 budget Christie unveiled will see spending increase by nearly 4 percent, to $32 billion. State aid to education, the single largest item in the budget, will increase by just over $200 million, although total outlays will still be lower than they were when Christie took office. Christie’s budget also contains a $1.1 billion payment into the pension fund. The proposed payment would be less than the $3.1 billion the fund requires, but would keep a promise Christie made to resume contributions—long withheld under both Democratic and Republican administrations—once reforms to the system were enacted.

Democrats reject proposal

The centerpiece of the Christie proposal, however, is a 10 percent cut in income tax rates. Christie said the tax cut was the next step in bringing jobs back to the state, following the cuts in state spending.

“A 10 percent tax cut for every working New Jerseyan will help families to keep more of what they earn. It will make us more competitive with other states and attract more new jobs to New Jersey. Every New Jerseyan deserves a tax cut,” he said.

“Lower tax rates will relieve over-burdened middle-class families. They will keep job creators here. They will begin to bring us into a more competitive situation with our neighbors in the region. For make no mistake, even with the 10 percent cut that I propose, our tax rates in many brackets will still be higher than New York’s, higher than Connecticut’s, higher than Pennsylvania’s. Even though a few of these states are making the mistake of trying to catch up by raising tax rates, we need to reverse our competitive disadvantage. In the mid-Atlantic region, New Jersey needs to be the best home for growth.”

Democrats immediately rejected the governor’s proposal, calling it “dead.” They unveiled their own tax proposal in the wake of Christie’s speech, It focused solely on property tax credits targeted at property owners making less than $250,000 and included a tax increase for people earning over $1 million. Calling Christie’s across-the-board plan, “tax cuts to the wealthy,” State Senate President Steve Sweeney (D-Camden) vowed not to even discuss the proposal. “I am not negotiating an income tax cut. I can tell you that right now,” he said.

No tax hike

Christie has turned back two previous attempts to reinstate the so-called “millionaire’s tax”—actually a surcharge on incomes over $400,000. Anticipating the Democrats’ move in his budget address, Christie made clear that he would block it again. “I am proud to have twice vetoed the effort to re-introduce [the millionaire’s tax],” he said. “And just so there is no mistake in my intention: I will veto any tax increase again.”

Last week, Christie claimed the high ground in the upcoming tax battle, declaring that he and Sweeney, “are actually pretty close,” on the issue. The script appears to be playing out similarly to the first two budget battles between the governor and the legislature. Christie enjoys majority approval, 53 percent, among New Jersey voters, and Democrats have yet to beat him in any significant way when it comes to budgetary matters. There is still time to go before the budget deadline of June 30, but Christie’s popularity and determination make him a good bet to best the Democrats again this summer.

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