State Budget - Bergen Record - Sales tax held in abeyance for summer?

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Published in the Bergen Record, Wednesday, June 21, 2006

Other role touted for sales tax increase

Wednesday, June 21, 2006

By JOHN P. McALPIN
TRENTON BUREAU

A warning to New Jersey shoppers: Higher sales taxes may be in your future, even if state legislators reject the governor's pleas for a tax hike to balance his new budget.

Some lawmakers are holding that option open as a possible way to lower New Jersey's property tax bills when they meet to overhaul the system this summer, top Democratic sources told The Record on Tuesday.

Although those Assembly Democrats believe a sales tax increase could help reduce the nation's highest per-capita property taxes, they fear they would have a tough time making the case for it if the public is hit with an increase now to help balance Governor Corzine's $30.9 billion budget proposal.

Assembly Speaker Joseph Roberts, D-Camden, who has told Corzine that the governor's plan to raise the tax from 6 percent to 7 percent lacks support in the lower house, said again Tuesday that cutting high property taxes is the priority.

"We need to safeguard any new available sources of revenue for property tax relief," Roberts said at a fund-raiser Tuesday near Trenton.

The New Jersey Constitution requires lawmakers to enact a budget by June 30. Democrats in the Assembly and Senate are negotiating with Corzine on several key areas, the biggest being the sales tax increase, which could cost the average family about $250 more a year.

The increase is crucial to Corzine's plans because it would raise an estimated $1.1 billion. Corzine says it would end years of fiscal gimmicks that have left New Jersey's finances on shaky ground. His administration has shown no signs of backing off the proposal despite opposition in the Assembly.

Beyond the deadline

Assembly Democrats are looking beyond next week's deadline to the summer, when both houses are expected to hold a rare summer session on property tax reform. Some believe those sessions could yield sweeping changes to New Jersey's tax structure and have already begun examining efforts in other states. Among these is Michigan, which raised its sales tax by 2 cents on the dollar and earmarked the revenue for public schools. The plan, adopted by voters in 1994, also limited property tax increases to the rate of inflation.

New Jersey property owners pay about $20 billion a year in local taxes, giving New Jersey the highest property taxes in the nation. Lawmakers for years have been under intense pressure to stem the increase, which averages 7 percent a year.

Driving local taxes and state budgets ever higher is the cost of public education. About one third -- $10.5 billion -- of Corzine's budget proposal goes to schools, including more than $4 billion to some of the poorest districts to comply with a state Supreme Court order. New Jersey also subsidizes operations at every other public school and municipal government.

To cut property taxes by 10 percent, some legislators estimate that it may cost nearly $2 billion a year. Some are eyeing the $1.1 billion brought in by raising the sales tax one percentage point as one source of revenue. Expanding the sales tax to services now exempt could also play a role in property tax relief, legislative sources said Tuesday.

Some analysts dispute the suggestion that raising the tax to balance the budget would rob them of the ability to include a sales tax increase as part of a comprehensive overhaul of property taxes.

"I don't think anything that's done to balance this budget means you can't do more of the same for tax reform," said Jon Shure, president of New Jersey Policy Perspective, a liberal think tank that has studied state tax issues.

In lieu of Corzine's sales tax proposal, some Assembly members are exploring the possibility of increasing the unemployment tax and delaying a planned $400 million cut in business taxes, sources familiar with the budget negotiations said. They also plan more cuts in state programs.

"We think the budget can provide the same progressive initiatives without the need for a sales tax increase," said Assemblywoman Bonnie Watson Coleman, D-Mercer.

Roberts declined to detail the Assembly plan. Legislative staff members and Treasury officials are reviewing the details.

Corzine's staff also is not talking details.

"We will not be commenting on the step-by-step proposals or lack thereof as we get closer to budget day," spokesman Anthony Coley said.

State Sen. Shirley Turner, D-Mercer, made her plan to tax Atlantic City casinos official Tuesday by drafting a bill that raises the rate from 8 percent to 10 percent and retains taxes on parking and rooms. Her plan would raise $140 million and not hurt the working poor the way the sales tax does, Turner said.

"The casinos continue to thrive. They can afford these taxes more than our working families can," she said in a statement.

Higher casino taxes face stiff bi-partisan opposition in the Legislature and from Corzine, who has refused to consider raising fees there.

"His position has not changed," Coley said. "Economic growth is our best solution over the long run."

If legislators miss the June 30 constitutional deadline, Corzine has asked his Cabinet to prepare for a government shutdown.

In a memo to officials, his staff has asked for lists of essential services that must be provided.

Officials were also asked to identify non-essential government employees and procedures to notify them and others of a shutdown.

Legislators have missed the deadline before, but no state services have been shut down.

E-mail: mcalpin@northjersey.com

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