NorthJersey.com

Deal To Push Tax On Rich Gains Speed In Trenton

NorthJersey.com — Tuesday, April 6, 2004

By JOSH GOHLKE
TRENTON BUREAU

The governor and legislative leaders appear close to raising income taxes for the wealthiest New Jerseyans and framing the increase as a form of property-tax relief.

Governor McGreevey would not commit to such a course Monday, but he said a tax on households earning more than $1 million could be part of a package of measures designed to relieve the state's mounting property-tax burden.

"It's one of the initiatives we are seriously examining," McGreevey said of the so-called millionaire tax.

Assembly Speaker Albio Sires said his long-standing support of the tax has begun to gain acceptance. Officials could characterize the revenue as property-tax relief by spending it on rebates or - in a more expansive definition - on aid to school districts and municipalities that rely on the property levy.

"I've been proposing a millionaire income tax for the last year and a half, and I think some people have finally started listening," said Sires, D-West New York. "I think the governor has started listening. ... As long as we don't throw [the increase] in the general fund, I think it's more acceptable to him."

Sires' counterpart in the Legislature's upper house, Senate President Richard J. Codey, also expressed qualified support for such a tax Monday. He, too, said it would have to be linked to broader efforts to control rising property taxes.

"I'm for it as long as we can deliver property tax relief with cost containment for the future," said Codey, D-Essex.

Republicans said the revenue would not come close to addressing the problem of property taxes, which rose an average 6 percent last year. But they seemed less than surprised to see the Democrats inching toward the tax, which is a popular cause among some of the party's factions and has been under serious consideration in recent months.

"This is really just the other shoe dropping," said Assemblyman Richard A. Merkt, R-Morris. "I never believed McGreevey would keep this promise either."

McGreevey and his aides have made a number of statements that appeared to preclude an income tax increase - understandably so, because the last one toppled a Democratic governor, Jim Florio, and took the party with him for a decade. But they have also been careful to leave themselves room for maneuvering.

Only two months ago, McGreevey spokesman Micah Rasmussen seemed to be ruling out the millionaire tax when he told reporters: "There will be no sales or income tax hike to balance the budget."

It now seems fairly clear that the last clause would allow the governor to raise the tax and designate the revenue as property tax relief - that is, not for budget-balancing - and technically avoid a contradiction.

The governor and his aides insist that they have not made a decision about the tax. As such, they would not discuss details of the proposal - for example, what the rate would be; whether it would extend to households earning at least $500,000 a year, making it a less euphonious "half-millionaire tax"; whether it would fund not only rebates, but other programs that might be defined loosely as relieving property taxes; and whether McGreevey would endorse a constitutional convention, task force, or something else to address the more complicated aspects of the state's heavy reliance on property taxes.

All McGreevey promised was a comprehensive proposal for immediate and perpetual property-tax relief by the end of the month.

"We have not made any decisions as of yet," the governor said. "Our goal is to provide a short-term strategy for property-tax relief as well as a long-term strategy."

A millionaire tax would affect about 10,100 households, or 0.3 percent of the state's total, according to state Treasury Department data. If the figure were dropped to $500,000, the tax would affect about 29,700 households, or 1 percent. The average New Jersey household earns $64,438 a year.

Bergen County, one of the most affluent of the state's 21 counties, would be disproportionately affected. It ranked third in average household income in 2001; Morris County ranked first.

The liberal think tank New Jersey Policy Perspective has long advocated higher income taxes on the state's wealthier households. The organization, backed by several unions and other advocacy groups, argues that the state's tax structure relies too heavily on low- and middle-income households.

Assemblyman Kevin J. O'Toole, R-Cedar Grove, said he was generally opposed to new taxes and believes the proposed levy would discourage success. But he guessed that the governor had considered the consequences.

"I think he made a political calculation that those 10,000 families ... are going to vote on the Republican side of the ledger," O'Toole said. "He's projecting that he's not going to need those votes."

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