Politics & Government

Budget Expert: Income Tax Cuts Will Benefit the Rich

Christie defends cuts in rebate program that led to 20 percent hike in net property taxes.

The debate over income tax cuts vs. property tax cuts took center stage in Trenton yesterday, as Governor Christie defended his decision to chop property tax rebates, while Democrats and Republicans on the Senate Budget Committee sparred over whether Christie's income tax cut would simply benefit the rich.

"The fact of the matter is we had to reduce the property tax rebate program because we had overspent our budgets by an extraordinary amount of money in the years before we came here," Christie said in response to a question about an NJ Spotlight report that showed that the average household paid $1,275 -- or 20 percent -- more in net property taxes in 2011 than it did two years earlier because of deep cuts in the rebate program.

State revenues are now improving, but Christie decided to propose a 10 percent across-the-board income tax cut in his State of the State speech, rather than urge restoration of property tax credits to the $1,000-plus per household provided by his Democratic predecessor, Jon Corzine, during the last three years of his administration. Christie's income tax cut would cost the state an estimated $1.35 billion in lost revenue, while restoring the full property tax rebates would cost about $1.1 billion.

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Christie made the wrong choice, Senate Budget Committee Chairman Paul Sarlo (D-Bergen) contended. 

"Property taxes, not income taxes, are hurting the middle class," Sarlo asserted, noting that Christie cut the property tax rebate program over the objections of Democratic legislators. "We're spending a lot of time talking about a 10 percent income tax cut when we should be talking about a 10 percent property tax cut."

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In fact, the $1,275 increase in net property taxes over the first two years of the Christie administration is more than the entire income tax bill of $1,124 paid by a New Jersey family of four earning $75,000, according to statistics provided to the Senate Budget Committee yesterday by David Rosen, budget officer for the nonpartisan Office of Legislative Services.

That family making $75,000, however, would receive just $112.40 from Christie's 10 percent income tax cut.

"The question isn't, 'Who will pry money out of the cold, dead hands of legislators?'" Sarlo said, reciting a popular Christie YouTube line. "It is, 'Whose bank accounts will be the big winner under the governor's proposal?'"

Based on Rosen's analysis of Christie's proposed income tax cuts, Sarlo noted, "A family earning $50,000 per year will save $80.50; a famiy with a $100,000 income will save $275. At the other end of the income spectrum, millionaires will get a tax break of $7,265.75, and those earning $3 million would get a windfall of $25,200. In other words, working families won't get enough for their weekly groceries, while millionaires will receive enough to vacation at five-star resorts on the French Riviera."

Rosen reported yesterday that only New Jerseyans making over $200,000 pay more in income taxes than they do in property taxes. He cited a 2006 Treasury Department study that showed that families earning between $30,000 and $40,000 in gross income paid $4,232 in property taxes compared to just $439 in income taxes, and that even families making between $100,000 and $150,000 paid an average of $6,006 in property taxes compared to $2,971 in income taxes.

However, Senator Kevin O'Toole (R-Essex) defended Christie's income tax cut. "Governor Christie's income tax cut would provide a tax cut for every New Jerseyan, and that's fair," O'Toole said, ignoring Rosen's point that the rich would receive much larger income tax cuts. "If it's Governor Christie's initiative, a lot of people want to firebomb it just because it's his plan."

Christie made it clear during a Statehouse press conference yesterday that he remains committed to his plan to cut state income taxes, and that he believes the most effective way to cut local property taxes is by cutting spending.

"I am going to continue to look at ways to reduce property taxes, and Sen. [Steven] Sweeney and I as we speak are working on legislation regarding shared services," Christie said, referring to the Democratic Senate president from Gloucester County with whom he worked to impose a 2 percent cap on annual school district and local government spending increases.

Continue reading this story in NJ Spotlight.

NJ Spotlight is an online news service providing insight and information on issues critical to New Jersey.

 


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