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Christie, Legislature on Collision Course to Government Shutdown

Fearing revenue shortfall, Democrats back off original tax cut plans, but may send Christie a millionaire’s tax.

If Gov. Chris Christie and Democratic legislators stick to their guns, New Jersey could be headed to its second state government shutdown in six years on July 1.

Christie has vowed not to negotiate any state budget with the Democratic-controlled Legislature that does not include a tax cut.

But Democratic legislative leaders made it clear yesterday that the only tax cut Christie might get before June 30 would be a direct property tax cut funded by an $800 million income tax increase on millionaires, and that might not happen because Democrats are divided over whether to give Christie the opportunity to veto a millionaire’s tax for the third year in a row.

What Democrats agree on is that the $183 million Christie has earmarked for an income tax cut will be set aside in the budget in a special surplus account dedicated to property tax relief. The Legislature would appropriate these funds only if the Republican governor is on track to hit his aggressive $32.02 billion revenue projection. That decision would not be made until December or later, Democratic legislative leaders said, depriving Christie of a tax cut to trumpet in August at the Republican National Convention in Tampa, where he could be a leading candidate for the GOP vice-presidential nomination.

Christie reiterated Wednesday at a town meeting in Atlantic County that he would “not negotiate a budget with the state Legislature unless they cut your taxes” and noted that he has asked his Cabinet for contingency plans for a government shutdown in the event of a budget impasse.

Senate Budget Committee Chairman Paul Sarlo (D-Bergen) dismissed Christie’s threat yesterday as just “something he said at a town hall” and added that there would “not be a government shutdown, at least from the Legislature.” “We’re approving his budget, with his revenue numbers, with his $183 million set aside for a tax cut if he hits his revenue projections,” Sarlo stressed. “If the numbers aren’t there, he won’t get it.”

A Nebulous Promise

Whether Christie would accept the nebulous promise of a future tax cut based on Democratic certification that his revenue numbers are on target is questionable.

“It’s absurd,” Senate Minority Leader Thomas Kean Jr. (R-Union) said. “In the end, what the Democrats are saying is that they don’t trust the governor’s revenue numbers -- even though they’re going to vote for a budget based on those numbers -- and yet they’re challenging the governor’s constitutional right to certify revenues by holding back appropriation of those dollars until they say the money is there.”

Kean, the son of former Gov. Thomas Kean, said such an infringement on gubernatorial powers would be unprecedented.

What would not be unprecedented would be yet another Democratic bill for a millionaire’s tax landing on Christie’s desk.

Senate and Assembly Democratic leaders presented to their caucuses yesterday a new property tax relief plan pushed by Assembly Majority Leader Lou Greenwald (D-Camden) that would use $800 million raised through the millionaire’s tax to fund approximately a $1,000 increase in direct property tax credits for those who meet the current homestead eligibility limits of $150,000 for senior citizens and $75,000 for non-seniors.

The switch from a new property tax credit on state income tax returns to an increase in direct property tax credits underscored the insistence of Greenwald and Senate President Stephen Sweeney (D-Gloucester) that their tax cut plans were designed for property tax relief – and were not simply different versions of an income tax cut, as Christie has repeatedly insisted.

The Assembly Democratic caucus enthusiastically embraced the idea of forcing Christie to veto a $1,000 property tax cut for lower- and middle-income homeowners to be paid for entirely by millionaires -- a plan that regularly wins support in state public opinion polls and a winning tactic in the view of some Democratic strategists. “He can either do what’s right for middle-class families in New Jersey or he can go to Tampa and beat the drums for trickle-down economics [by vetoing the millionaire’s tax],” Greenwald said. “I don’t care what happens in Tampa, I care about New Jersey.”

However, Senate Democrats, while supportive of the millionaire’s tax as a policy, balked at the idea of giving Christie the opportunity to veto yet another Democratic tax increase.

“Do you give the governor a loaded gun that he can shoot back at you?” one Senate Democratic insider asked after the three-hour caucus yesterday. Senate Democrats, he said, are worried that the popular governor would use his liberal conditional veto powers to completely rewrite the bill and send back to the Democratic-controlled Legislature an unacceptable alternative tax cut bill that he could hammer them for failing to approve.

Greenwald said the Senate Democratic leadership had assured him that Senate Democrats would support the millionaire’s tax, but it will clearly take at least another caucus meeting to win Senate support for the income tax increase. That meeting presumably will have to take place on or prior to next Thursday, when the Senate and Assembly budget committees are tentatively scheduled to vote out both the budget and millionaire’s tax bills so that they can be considered by the full Senate and Assembly on June 25.

Who Wants to Be a Millionaire?

The split in the caucuses over whether to approve the millionaire’s tax mirrors the original disagreement between Sweeney, who said it would be futile to include the millionaire’s tax in his original tax cut proposal because Christie would simply veto it, and Assembly Speaker Sheila Oliver (D-Essex) and Greenwald, who made the millionaire’s tax a centerpiece of their plans.

While the Senate and Assembly Democratic caucuses remain split over the millionaire’s tax, it is clear that the tentative deal reached by Christie and Sweeney on a bipartisan tax cut is dead. Under that deal, Christie agreed to support Sweeney’s plan for a 10 percent property tax credit up to $1,000 on income taxes if Sweeney would raise his income limit from $250,000 to $400,000. Greenwald yesterday also shelved his original plan for a 20 percent property tax credit on income taxes up to $2,000 for those earning up to $250,000, in favor of a revised millionaire’s tax to fund direct property tax relief.

Both the Sweeney and Greenwald plans were originally put together as alternatives to Christie’s announcement in his State of the State speech that he would seek a 10 percent across-the-board income tax that would have overwhelmingly benefited the wealthy. Like Christie’s plan, the Sweeney and Greenwald proposals relied upon $1.4 billion in anticipated revenue growth by Fiscal Year 2016 for all or part of their funding.

Yesterday, Democratic legislative leaders officially ended their “arms race” with Christie to enact tax cuts funded by future revenue growth.

Democratic legislators in both caucuses agreed almost unanimously that the $700 million shortfall in Fiscal Year 2012 and 2013 revenues acknowledged by Christie -- and the $1.4 billion gap projected by David Rosen, budget director for the non-partisan Office of Legislative Services -- are proof that New Jersey cannot afford to make tax cuts based on future revenue growth until they see state revenues coming in on schedule.

Instead, they agreed to set aside the $183 million Christie planned to use for tax cuts in a special fund to be allocated to property tax relief in sometime over the upcoming year, but not before December.

“If the Democrats stick to their position to set aside that money as part of the surplus, that would be the most responsible thing they could do,’’ said David Rousseau, a former Democratic state treasurer who is serving as a budget analyst for New Jersey Policy Perspective. Rousseau has previously criticized the Democratic leaders for following Christie’s lead in proposing tax cuts based on optimistic assumptions of future revenue growth.

Continue reading on NJSpotlight.com

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

rgmacdonald June 16, 2012 at 09:26 PM
Who cares? We don't need government anyhow according to the GOP party line. What has government done except get in one's way so might as well shut it down. This will make the Big Man very happy as this is his political matrix.
sharon schmitt June 16, 2012 at 09:42 PM
The whole thing is just plain stupid. How can you give money back that you don't have? If the think about it, the revenues in the budget are an estimate. Just like the ones for this year are short. Those expenses, on the other hand, are already spent.Where will you get the money? Take it from another fund. I thought Christie would not do that. I think Christie wants to pat himself on his back. I can hear him now. I cut taxes in New Jersey. He just won't mention the rest of the story. Just like he has done many times before.
William Eib June 17, 2012 at 02:53 AM
Blow hard. What is it with people don;t they see a pattern with GOPers, cut taxes on the rich. It's their mantra. Cut taxes on the rich, and hat does NJ get. Millionaires won;t move somewhere else. And businesses will flock to the state. That is BS. Business will come to NJ if it makes sense for them to come to NJ. If there is money to be made. Tax cuts aren't going to make a new business successful. They have been making money so far, why help them make more off the taxpayers backs. How's he gong to pay for it? Cut school spending more, fire fireman and policemen. Cut back on NJ services? When someone wins, someone else loses. In this case the millionaires win, the poor schlep loses.
Micahel Iger June 17, 2012 at 02:25 PM
His desire to cut taxes is endemic of Republicans. As much as I'd not like to pay taxes I realize you have to fund government adequately or chaos ensues. This one big reason why we are in this mess with government acting in a mediocre fashion. Let him improve services instead and down the road if things improve we can talk about tax cuts. Given he'll now get more money than he needs, it should be a breeze.
Marianne Herrmann June 18, 2012 at 07:13 AM
I am disgusted with Christie's lack of leadership and the tactics of bullying his way to get what he wants and support his party hardline. All he is doing is causing hardship in NJ while he builds more casinos and gives hundreds of thousands of dollars in tax breaks to the developers of Xanadu as they laugh behind their hands and drag the project along slowly. Just this past weekend there was a massive computer failure at the DMV where the workers were heard to say..ask Governor Christie why there are long lines and no relief. He shut down quite a few DMV locations and cut services, and pensions of police, fire fighters, teachers...so if you have the big bucks to go to the casinos or develop Xanadu then you are fine...if you are a normal schlub living in this state your life has gone down hill...the big snowstorm that we had when he was on vacation where we saw days without any plows down the streets shows who he cares about..his big old self and his big old rich friends who can afford to get private contractors and who can afford to gamble and develop. He is a huge disgrace.
Joel Drew June 18, 2012 at 10:01 AM
If you're state survives , vote the clown out of office the next election .
paulie June 18, 2012 at 12:05 PM
Your post here is a joke right? You can't be serious?
Thomas Day June 18, 2012 at 12:34 PM
There are only two ways to address the state's fiscal problem. One is to reduce spending; the other is raising income through taxes. The burden has to be shared by everyone involved. Christie exempts the weathy based on a false theory that their spending will help everone. The so called "trickle down" effect. For exanple, they build a huge gateway to the entance of their estate, and the bricklayer has a job. But even with a job, the working man can't afford the costs to live a decent life and provide for his family. The words "compromise" and "fairness" are not in his vocabulary.
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