State Budget - APP - Property taxes part of discussions

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Published in the Asbury Park Press, Sunday, June 256, 2006

Property taxes part of budget discussions

BY JONATHAN TAMARI
GANNETT STATE BUREAU

TRENTON — Lawmakers are planning to focus on reforming property taxes this summer, but the debate over how to handle one of the most politically touchy subjects in New Jersey also may influence the final rounds of debate on the state budget.

Officials wrangling over budget plans have extended property tax reform as an olive branch and wielded the threat of cuts in property tax aid as a stick to try to move negotiations along.

With just six days remaining until the constitutional deadline for approving a state budget, some Assembly Democrats are pinning their opposition to a $1.1 billion sales tax increase — a key element of Gov. Corzine's budget — to their call instead to keep that option as a resource for property tax relief.

In a push back against its opposition, however, Corzine administration memos obtained by Gannett New Jersey show the threat of cuts to municipal and school aid, which would each result in higher property taxes, linger over the budget negotiations as an alternative if Corzine does not believe the budget is properly balanced.

The memos, obtained Friday, following a week of budget haggling among elected officials, incited a sharp response from Assembly Speaker Joseph J. Roberts Jr., D-Camden, a leading advocate for property tax reform and one of the most vocal opponents to the sales tax increase.

Some compromise plans also revolve around property taxes. One of many proposals floated during meetings last week would call for a sales tax hike with a portion set aside for property tax relief.

Sen. Barbara Buono, D-Middlesex, said that proposal has the potential to assuage concerns over raising taxes.

"I will not support the sales tax unless there is some nexus between it and property tax relief," said Buono, a member of the Senate budget committee. "In order for that to be a viable option, we need to tie it to property tax relief, and we could start doing that right now."

Trouble in both houses

With Democrats holding a slim Senate majority and several senators already openly opposing the sales tax increase, any further defections against the plan could seriously damage its chances of passage.

In the Assembly, where opposition to the sales tax is stronger, Democratic Party leaders remain opposed to the tax hike.

"That sales tax must be protected ultimately for property tax reform," said Assemblyman Louis Greenwald, D-Camden, chairman of the Assembly Budget Committee.

Corzine remains committed to his plans. He repeated last week that he sees the increased sales tax as the best way to balance his budget and provide lasting revenues to help eliminate annual budget holes.

"We need to get a real structural change in the underlying finances of the state of New Jersey independent of what we have going on in property tax. We need to do both," Corzine said at a news conference Wednesday. "People trying to place (the sales tax) in an either-or situation — it's convenient at a time when you're trying to negotiate (a) budget, but it isn't convenient when you (recognize) we have an ongoing structural deficit in this state."

The debate about whether to increase the sales tax from six percent to seven is likely to be the central point of contention as lawmakers and the administration try to hammer out a budget plan this week. Midnight Friday is the constitutional deadline for striking a spending plan.

The Corzine administration has warned that missing the deadline could result in closing state parks and casinos and halting ongoing road construction, but past administrations have missed the due date without any impact on operations.

Some progress reported

Despite the division on the tax plan, people involved in the negotiations insisted late last week that they have reached common ground on some issues, such as restoring some funding to colleges and universities and eliminating a proposed tax on hospitals.

The challenge, however, comes in reaching an agreement on how to pay for those restorations or replace the taxes that have been taken off the table.

The level of aid to colleges, for example, remains unclear, and a Corzine administration memo said last week that any additional aid would be unlikely if more cuts become necessary.

Greenwald said lawmakers are focusing first on replacing the money from the sales tax increase with other options, then on restoring the cuts with which they disagree.

"We have to find equally reliable replacement revenue, and then you have to find either additional cuts or new revenues to fill the gap on some of the holes that we'd like to fix," Greenwald said.

Where there is agreement, pieces of the budget plan have begun to slowly trickle through the Legislature. Friday, lawmakers advanced plans to repeal a tax on cosmetic surgery and impose a new tax on commercial real estate sales that exceed $1 million.

Other budget plan elements, such as bills to expand taxes on some tobacco products, transfer $50 million from the disability fund to the operating budget and levy a surcharge on business taxes have begun working their way through the system.

However, another piece of Corzine's proposal, a call to reform some of the tax breaks given to businesses in Urban Enterprise Zones, was held in an Assembly committee. It's scheduled to be considered Monday by a Senate panel.

http://www.app.com/apps/pbcs.dll/article?Date=20060625&Category=NEWS&ArtNo=606250444&SectionCat=&Template=printart

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