New Jersey Officials Close Out May with a Flourish

 

Atlantic City Bailout Bills Pass Both NJ Houses

New Jersey legislation that aims to help Atlantic City financially recover from poor gaming revenue and successful tax appeals now awaits Gov. Chris Christie’s signature, after passing both houses of the state Legislature on Thursday.

During their regular voting sessions, the New Jersey Senate and Assembly approved a pair of bills that would give city officials 150 days come up with a financial plan to avoid bankruptcy and would create a tax deferral arrangement for casinos.

The two Senate bills evolved from Senate and Assembly proposals that had been merged and advanced Monday by the Assembly Judiciary Committee, giving rise to new bailout legislation that leaves collective bargaining agreements intact and gives officials of the struggling resort town more time to hash out its budget before state officials intervene.

The two points of contention had sparked showdowns between Assembly Speaker Vincent Prieto, D-Bergen, and Senate President Steve Sweeney, D-Gloucester, but lawmakers hailed the latest versions of the Municipal Stabilization and Recovery Act, or S1711, and the payment-in-lieu-of-taxes plan, memorialized in S1715.

The two sides had worked on a series of amendments to the Senate versions to bring them in line with the Assembly’s vision. For example, casinos are not allowed to opt out of the PILOT program, and the Municipal Stabilization and Recovery Act — formerly known as the “state takeover” bill, before Prieto and unions decried the stripping of the city’s autonomy — now extends early retirement incentives to all full-time employees to save money.

The Municipal Stabilization and Recovery Act won 32-5 approval in the Senate and 60-12 passage in the Assembly. The PILOT bill got 33-4 approval in the Senate and 61-12 passage in the Assembly.

Twelve casinos had made up 70 percent of annual property taxes in Atlantic City as of 2013. But competition from surrounding states and other factors have left the city with eight operating casinos, after four closed in 2014, and a tax base that dropped from $20.5 billion in 2010 to $7.3 billion in 2015.

The dire situation prompted Christie in January 2015 to tap an emergency manager for the resort town, after which Moody’s Investors Service slashed the municipality’s bond rating.

The pressure to come up with a plan to avoid insolvency reached fever pitch in recent months as city officials braced for a shutdown and battled legal wars.

Previously, the state Department of Education sued the town to ensure its school district got its share of taxes, although a state court judge last month declined to freeze the city’s assets. Compounding the fiscal woes are $240 million the city allegedly owes to bondholders and $150 million for successful tax appeal, including $88 million allegedly owed to Borgata Hotel Casino & Spa.

Prieto and Sweeney locked horns again earlier this month, when Prieto said the Assembly was not going to consider the Senate’s state takeover, which was the only plan Christie had said he would endorse to fix the resort town.

NJ Assembly Passes $15 Minimum Wage Bill

The New Jersey Assembly on Thursday advanced legislation that would gradually boost the minimum wage to $15 an hour in phased increases over the next five years, an initiative touted by the chamber’s Democratic leaders as a tool to help reverse the trend of poverty in the state.

Unveiled in February, the bill previously passed the Assembly Labor Committee and now sits before the Senate after its 42-30-1 passage Thursday. The legislation heeds the call of the nationwide Fight for $15 movement and its advancement comes a month after New York and California signed the initiative into law.

Assembly Bill 15 would increase the state’s current base hourly rate of $8.38 to $10.10 at the start of next year and make incremental boosts annually from 2018 to 2021 until the minimum wage is $15

Stating their case for the proposal’s importance in the Garden State, the bill’s primary sponsors cited Legal Services of New Jersey’s estimates that the state is home to 2.8 million adults and 800,000 children living in poverty as of 2014, marking a 40 percent increase in the poor population since the recession of 2008, according to LSNJ estimates.

The take-home pay for a full-time minimum wage worker is less than $18,000 a year in a state that has among the highest costs of living in the country, the sponsors said.

The bill’s primary backers also include Assembly Budget Chairman Gary Schaer, D-Passaic/Bergen, and Assemblywoman Cleopatra Tucker, D-Essex.

An identical Senate version of the legislation sponsored by Senate President Steve Sweeney, D-Gloucester, and Sen. Joseph Vitale, D-Middlesex, was advanced by that chamber’s Labor Committee last week.

Republican leaders have expressed opposition to the legislation. In statements issued when the Senate proposal was announced, Sen. Christopher J. Connors, Assemblyman Brian E. Rumpf and Assemblywoman DiAnne C. Gove said seniors and small businesses would be hit particularly hard while Senate Republican Leader Tom Kean said the minimum wage increase — along with pushes to mandate paid sick leave and add more flexible leave and benefit options — would make life more unaffordable for all New Jerseyans.

The Ailing Transportation Trust Fund

With a crisis in Atlantic City apparently averted, Trenton’s attention will turn — after the Memorial Day weekend — to the virtually exhausted Transportation Trust Fund.

With competing schemes to revive the fund being floated, there will be plenty to argue about. And just to keep things interesting, lawmakers will also be pushing to wrap up a new state budget by the June 30 deadline.

The trust fund pays for more than $3 billion in annual road, bridge, and rail-network improvements, with money that comes from federal matching funds and New Jersey’s 10.5-cent per-gallon tax on gasoline and the its 4-cent per-gallon tax on the gross receipts of petroleum products. Revenue from the sales tax and highway tolls also help subsidize annual state spending of about $1.6 billion under a five-year financing plan that Christie put forward in 2011.

But money from the gas tax will be enough to service only the fund’s extensive debt starting July 1.

Up for debate: whether to create a new “tax-fairness package” that makes cut in the general budget to offset a gas-tax hike that is set aside of for transportation projects.

The alternative? A pay-as-you go system that trims existing budget lines but primarily relies on an expectation of tax revenue to grow each year.

The pay-as-you-go folks, led by Sen. Jennifer Beck (R-Monmouth) dug in launching a petition drive that’s intended to push back against the bipartisan tax-fairness package, which has gained momentum in the State House in recent weeks.

Gov. Chris Christie will also have a say, and over the next month the issue will likely put to a test two of his longest-standing records. He’s yet to approve a major tax increase since he took office early in 2010, and he’s yet to be overridden by a Legislature that’s controlled by Democrats, but not with veto-proof majorities.

Many in Trenton expect the issue will eventually be resolved with a bipartisan deal that will involve hiking either the 10.5-cent tax on gasoline, the 4-cent tax on petroleum products, or some combination of increases that will affect both levies. New Jersey has the second-lowest gas tax in the nation, which was last raised in 1988.

Democrats have been working diligently behind the scenes to secure votes for a gas-tax increase – which they’ve yet to define publicly – by offering up a series of tax cuts to entice Republicans into endorsing what’s being described as a broader “tax fairness” deal. They include proposals to phase out the estate tax over five years; increase current state income tax exemptions for retirement income like pensions and annuities; create a state income tax deduction for charitable contributions; and increase the state version of the Earned Income Tax Credit.

For his part, Christie hasn’t ruled out a gas-tax increase, but he also hasn’t clearly defined what he would like to see in any deal that could win his support. When asked about the issue by a woman calling into his monthly radio show on NJ 101.5 FM radio earlier this week, Christie said he expects to hear more from lawmakers now that they’ve resolved their differences on the Atlantic City rescue.

But Beck, the Monmouth County senator, has been clear in her opposition to a gas-tax increase. She’s launched an online petition to rally opposition that a recent Quinnipiac University poll measured to be 54 percent of New Jersey’s registered voters.

As part of a trust fund renewal plan that she’s put forward, Beck introduced two bills yesterday that are designed to help free up cash in the annual budget to pay for $1.6 billion in transportation upgrades each year through the 2023 fiscal year.

One bill seeks to save about $50 million annually by consolidating several state transportation agencies like New Jersey Transit and the New Jersey Turnpike Authority. But the bulk of the new revenue would come from another, more controversial measure that would reduce healthcare benefits for public workers at all levels and then repurpose most of the savings for transportation projects.

Beck’s plan is also relying on some new borrowing and at least 3 percent growth in annual revenues. She would also raise additional funds by increasing motor-vehicle fines and diverting more money from the state’s Clean Energy Fund.

Her efforts drew support from the New Jersey chapter of the conservative Americans for Prosperity organization, which has been making phone calls to stoke grassroots opposition to a gas-tax hike.

But transportation advocates and public-worker unions criticized Beck’s proposal yesterday, questioning whether her revenue sources and forecasts are realistic.

Projections for 3 percent annual growth over seven years comes as the Christie administration was just forced to scale back its own tax-collection forecasts by a combined $1 billion for the current budget and the fiscal year that will begin on July 1. Growth has also been slow over the last decade, with revenues up just over 6 percent, from $31.2 billion during the 2007 fiscal year to a projected $33.2 billion for the current fiscal year.

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Tax Plans & Presidential Candidates

There appears to be at least a theoretical agreement among all Presidential candidates’ that the current Federal tax system is broken — measured by its complexity, inefficiency and disorder.

The field of presidential candidates in both parties is diverse and possibly evolving— as is the eventual tax agenda for 2017 after the election of a new president in November 2016. Obviously, the congressional elections in November 2016 will also have a significant bearing on the specific issues that eventually comprise the tax agenda in the new Congress. Understandably, most candidates have not provided many specifics of their tax reform plans, but a general consensus for comprehensive tax reform appears to be developing on both sides of the aisle.

A number of Republican candidates favor some version of a “flat” tax rate on personal income, with proposals ranging from 10 to 15 percent based on income levels. Sen. Marco Rubio’s (R-Fla.) proposal would implement a 15 percent rate on middle-class earners, with a rate of 35 percent for higher-income taxpayers. Similarly, Sen. Rand Paul of Kentucky has proposed a 14.5 percent “flat and fair” tax rate that would apply to all earners and businesses, with the first $50,000 of family income untaxed. Sen. Ted Cruz of Texas has said that he supports a flat tax, but he has not provided details as to a specific rate level. Neurosurgeon Ben Carson has proposed a flat tax rate of 10 percent.

Another priority for Republican candidates appears to be lowering the corporate tax rate to encourage investment in the United States and the repatriation of foreign earnings. Proposals by Rubio and New Jersey Gov. Chris Christie would reduce the maximum corporate rate to 25 percent, while former Texas Gov. Rick Perry has proposed a 20 percent rate. Other candidates support lowering the corporate rate but have not given a specific tax level. As stated above, Paul’s plan would apply a 14.5 percent rate to businesses, as well as individuals.

The candidates generally agree that taxes on capital gains and dividends should be lowered or eliminated. In addition, many proposals assert that any revenue loss from reducing tax rates should be offset by restricting or eliminating various tax deductions, with the exception of charitable donations and mortgage interest.

Clinton remains the front-runner of the Democratic field. While she has not released a specific tax plan, Clinton has expressed support for lowering the tax burden on middle-class taxpayers. In addition, Clinton has indicated that, if elected, she would close several business tax “loopholes,” including the current tax treatment of carried interest. Clinton has also stated that she opposes the current tax incentives for oil and gas companies and would seek to end them. That said, she has expressed support for implementing tax incentives to encourage profit-sharing between businesses and their employees and has proposed a $1,500 tax credit for businesses that hire apprentices. Recently, Clinton proposed a comprehensive college affordability plan, financed by a 28 percent cap on itemized deductions similar to the budget proposal advanced by President Barack Obama.

Sen. Bernie Sanders, I-Vt., appears to be narrowing the gap with Clinton in several national and state-specific polls. With respect to Sanders’ tax policy positions, he has proposed to increase and restructure the estate tax, beginning with a 45 percent rate on estates worth up to $7 million, a 50 percent rate on those worth $7 million to $10 million, and a 55 percent rate on those worth $10 million to $50 million. In addition, Sanders has expressed support for an additional 10 percent surtax on estates valued at more than $1 billion. Sanders has also sponsored legislation that would change the current tax rules for corporate inversions and earnings stripping by foreign companies, and another bill that would prohibit U.S. corporations from deferring federal income taxes on profits of offshore subsidiaries. Like Clinton, Sanders opposes current tax incentives for the oil and gas industry.

Other Democratic presidential candidates, such as former Maryland Gov. Martin O’Malley and former Sens. Jim Webb of Virginia and Lincoln Chafee of Rhode Island, have all expressed support for lowering individual tax rates generally while not advancing any specific tax plans. The one exception was an open letter written by O’Malley to the financial sector on July 9, 2015, outlining steps that he would take to prevent another major banking crisis. In that letter, he proposes a tax on financial instruments to discourage high-frequency trading and a separate financial transaction tax to discourage speculation.

Martin J. Milita, Jr. Esq., is senior director at Duane Morris Government Strategies, LLC

Visit his blog at: https://martinmilita1.wordpress.com

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http://www.dmgs.com/

Duane Morris Government Strategies (DMGS) supports the growth of organizations, companies, communities and economies through a suite of government and business consulting services. The firm offers a range of government relations and public affairs services, including lobbying, grant writing; development finance consulting, media relations management, grassroots campaigning and community outreach. Milita works at the firm’s Trenton and Newark New Jersey offices.