New Jersey Gov. Chris Christie on Monday whittled down a Democrat-backed budget to $32.5 billion and rejected measures that would have hiked taxes on those earning more than $1 million as well as increasing the state’s corporate business tax.
As many expected, the governor, a Republican, signed a state budget for the new fiscal year but only after taking his line-item veto to the $34.1 billion spending plan that the Democrat-controlled Legislature approved Thursday and using absolute vetoes to sink related bills that would have instituted the income tax and corporate business tax increases.
“Rather than enacting responsible policies that will encourage and allow New Jersey’s economy and revenues to grow, the Legislature appears to be intent on inhibiting economic growth with crushing taxes,” the governor said in a message accompanying the line-item veto.
The Democrats’ plan also included a $2.25 billion contribution to the state’s pension system, which the governor nixed in favor of the $681 million payment that he previously recommended as part of a $2.4 billion reduction in contributions for fiscal years 2014 and 2015.
A judge on Wednesday refused to block Christie from cutting nearly $900 million from the pension contribution for fiscal year 2014 but declined to rule on matters related to fiscal year 2015, since the governor and lawmakers have yet to finalize a budget. The state has a constitutional deadline of July 1 to adopt a balanced budget.
Under lawmakers’ proposal, the marginal tax rate for incomes above $1 million would have increased from 8.97 to 10.75 percent for tax years 2014 through 2016, while the corporate business tax would have risen from 9 to 10.35 percent through a one-year surcharge. Those changes would have respectively generated an estimated $723 million and $389 million in revenue for the cash-strapped state.
In his veto messages, the governor said that increasing taxes on businesses and “highly productive taxpayers” would drive them out of the state.
“I strongly believe that punitively raising taxes on our already overtaxed residents and business owners is not the answer to the state’s short- and long-term fiscal challenges,” the governor said. “This bill would accomplish nothing more than to repeat the failed, irresponsible and unsustainable policies that were commonplace in Trenton for years before my administration.” (Credit AP).
The bill implementing the so-called millionaire’s tax would have also permanently increased the state earned income tax credit from 20 percent to 25 percent of the federal earned income tax credit. Christie said he supported increasing the credit but only as part of a broader plan to lower the tax burden for New Jerseyans across the board.
Also failing to secure gubernatorial approval on Monday was a measure that would have required the state to make contributions to the state’s pension systems on a quarterly basis. Such pension payments have historically been made at the end of the fiscal year.
“This bill represents an improper and unwarranted intrusion upon the long-standing executive prerogative to determine the appropriate timing of payments in order to properly match the timing of large annual expenditures with the timing of the actual receipt of state revenues,” the governor said in his veto message.
In a statement, Senate President Steve Sweeney, D-Gloucester, defended the Democrats’ budget as a “fiscally responsible plan that would have honored the state’s commitments and increased funding for critical services.” (Credit AP).
“The governor, however, has decided to continue protecting the state’s wealthiest at the expense of the middle class and working poor,” Sweeney said. “His belief in punishing the middle class is one of the reasons New Jersey’s economy continues to lag behind that of our neighbors and the nation, while working people suffer the brunt of the consequences.” (Credit AP).
By: Martin J. Milita, Jr. Esq., Sr. Director.
Please feel free to contact the author or your other Duane Morris Government Strategies LLC contact to learn more about this article and what it may mean to you.
About Duane Morris Government Strategies, LLC (DMGS):
Comprised of 19 experienced professionals representing U.S. and foreign clients at the federal, state and local levels, DMGS is as an ancillary business of international law firm Duane Morris LLP, one of the 100 largest law firms with more than 700 attorneys in the U.S. as well as in the UK and Asia. The firm operates in eight offices including Newark, NJ; Trenton, NJ; Albany, NY; Harrisburg, PA; Philadelphia, PA; Pittsburgh, PA; Columbus, OH; and Washington, DC.
DMGS offers a full range of government relations and public affairs services, including lobbying, grant identification/writing/administration, development finance consulting, procurement, grassroots campaigning, public relations, and crisis planning/crisis management needs.