Legislature OKs Tax Package

Higher tax on rich will fund bigger rebate checks

CourierPostOnline — Tuesday, June 22, 2004

Gannett State Bureau

TRENTON — Wealthy people will pay higher income taxes, most residents will receive larger property tax rebates, and county and municipal governments face tighter spending limits under bills approved Monday by lawmakers.

But a last-ditch blitz by education groups persuaded lawmakers to change the plan to cut the allowable yearly spending increase by school districts 2.5 percent or the rate of inflation, whichever is lower. Instead, it will be the higher of the two.

Following the Senate and Assembly votes to approve the bills, with each receiving some Republican support, Gov. James E. McGreevey has on his desk most of what he requested 53 days ago in a speech about property taxes to the Legislature.

"This is a victory for nearly all of New Jersey, especially our senior citizens and hardworking middle-class families," McGreevey said.

The plan includes the first boost in the income tax since 1990, a 40 percent increase in the top tax rate affecting people with income exceeding $500,000. It affects roughly 28,500 taxpayers and would have generated $800 million to $850 million this year.

That increase and the money that comes from ending the NJ SAVER rebates will fund larger homestead rebates of $500 to $1,200 for 1.9 million homeowners and a $50 rebate increase for around 820,000 renters.

"This bill is a cynical attempt at redistribution of the state's wealth. A primary requisite for this bill was to include enough voters to win next year's election," said Assemblyman Joseph Pennacchio, R-Montville.

Over the course of the debate, the plan was called "class warfare" and "cowardly" by Republicans and "courageous" by Democrats. It will result in larger rebate checks, with Gov. James E. McGreevey's signature, this year and next.

The tax and rebate increase passed the Assembly 56-24 - meaning, because Assemblyman Herbert C. Conaway Jr., D-Burlington City, voted against it, that 10 Republicans out of 33 voted for it. The Senate passed it 25-13.

"You are doing this because you can get away with it," said Sen. Joseph M. Kyrillos Jr., R-Middletown, Monmouth County, gazing at Democrats.

"The bottom line is this is going to hurt people," said Sen. Diane Allen, R-Edgewater Park.

"Who will speak for the little person?" said Sen. Wayne Bryant, D-Lawnside, during an impassioned speech that prompted Sen. Shirley Turner, D-Lawrence, Mercer County, to call the lawyer "reverend." "We need immediate short-term relief."

"To turn our back on the working people, on the senior citizens, on the middle class, people who make up 99 percent of our constituents in most cases, I believe is wrong," said Assemblyman Jeff Van Drew, D-Cape May Court House.

Assemblyman Michael P. Carroll, R-Morris Township, Morris County, said the bill is one step toward dismantling democracy - a majority of citizens taking tax money from a wealthy minority because it can, like an angry mob in a riot.

"It comes down to Gov. McGreevey and this majority party finding the mob at the appliance store entrance and instead of calling the cops, they pass out bricks and gasoline and say, in effect, `Burn, baby, burn,' " Carroll said.

A bill establishing a task force that will study property taxes and consider methods for running a constitutional convention, which McGreevey wants held in 2006, was passed 30-9 by the Senate and 63-16 by the Assembly.

Another bill lowers the limit for yearly increases in municipal and county budgets from the lower of 5 percent or inflation to the lower of 2.5 percent or inflation. The Senate passed it 34-2, and the Assembly passed it 50-26.

On school caps, now 3 percent, New Jersey School Boards Association president James J. Dougherty Jr. said districts may scrap courtesy busing to meet the lower limit. He said other changes may lower taxes next year but make them rise in 2006.

Those new limits on school spending also restrict spending on administrators, exclude existing programs from what schools can ask voters to approve above the spending cap and limit how much money schools can keep in surplus.

The Senate voted for the amended bill 29-6. The Assembly will vote Thursday.

"If the legislators gave as much attention to the impact of this proposal as they did to restoring Ladies' Night, they would see its pitfalls," said Dougherty, who said the changes were being rushed through.

Separately, Democratic lawmakers and the McGreevey administration have almost agreed on a budget for the year that begins July 1. It will include what Bryant called "full funding for charity care" provided by hospitals.

It will also include a wide range of new taxes, fees and borrowing. In one change made Monday, a Senate committee endorsed a 35 cent per pack increase in cigarette taxes, to a tops-in-the-nation $2.40. McGreevey sought 45 cents.

The League of Women Voters of New Jersey announced it opposes McGreevey's plan to borrow $1.5 billion, backed by cigarette taxes and unsafe driver surcharges, and use the money to pay current expenses. Lawmakers want to borrow up to $2 billion.

Last Thursday, the nonpartisan Office of Legislative Services issued an opinion that concludes such borrowing violates the state constitution because spending will exceed yearly revenues and voters didn't approve it.

The state Supreme Court has refused to overturn more than $8 billion borrowed without voter approval for the pension fund and school construction. OLS noted the constitutional requirement "seems to have been lost in the case law."

"This is a new low," said Senate Minority Leader Leonard Lance, R-Hunterdon, who said he may go to court to try to stop it. "It is the equivalent of mortgaging your house to pay for groceries, and it is spectacularly poor governance."

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