NJPP Monday Minute 5/17/10: The Millionaire’s Tax: It’s a Start

The New Jersey state budget is far from settled. In just over a week Treasurer Sidamon-Eristoff and Legislative Budget and Finance Officer David Rosen will appear again before the budget committees to reexamine the state’s financial condition and revenue collections.

A showdown is brewing between the Democrats in the Legislature and Governor Christie. Last week, both the Senate and Assembly passed bills out of committee to raise income taxes on taxpayers with incomes over $1 million. Votes were along partisan lines and a full vote of the legislature is expected shortly. The bills are expected to pass both houses because Democrats are the majority party in both chambers (Senate: 23 Democrats out of 40; Assembly: 47 Democrats out of 80). Gov. Christie has reiterated he will veto all tax increases. A two-thirds majority is needed to override a veto – that might be problematic.

Identical bills (S-10 and A-10) have been introduced to raise income tax rates to 10.75 percent from 8.97 percent on taxpayers with incomes exceeding $1 million. This new rate would be retroactive to January 1, 2010 and is expected to raise about $637 million in FY 2011. Approximately 16,000 taxpayers would be affected.

These tax bills have companion spending bills (S-20 and A-20) that reinstate homestead rebates to certain senior and disabled homeowners and tenants ($563.2 million) and restore cuts the Governor recommended to the prescription assistance programs Pharmaceutical Assistance to the Aged and Disabled or PAAD ($55.5 million) and Senior Gold ($55.5 million). These companion spending bills would be inactive until the tax bill is passed.

The provisions of the companion spending bills are as follows:

Homestead Rebates for Senior and Disabled Citizens
The Governor’s proposed budget eliminates homestead rebates for 2010, affecting over 500,000 homeowners and 100,000 tenants. These rebates would be replaced with a tax credit that would be deducted directly from quarterly property tax bills starting in May 2011.

S-20/A-20 would pay property tax rebates to senior and disabled homeowners whose incomes are under $150,000 and to senior and disabled tenants whose incomes are under $100,000. Depending on income, average homeowner rebates would range from $750 to about $1,300 and average tenant rebates would range from $150 to $700.

Pharmaceutical Assistance to the Aged and Disabled (PAAD) and Senior Gold
The Governor’s proposed budget increases the PAAD co-payment for brand name drugs to $15 per prescription from $7 and beginning January 1, 2011 requires recipients of both PAAD and Senior Gold to pay an annual $310 deductible before being eligible for low-cost medications. The $310 deductible affects approximately 100,000 senior and disabled PAAD recipients with incomes below $24,432 (single) and $29,956 (married) and another 23,000 Senior Gold participants with incomes between $24,432 and $34,432 (single) and $29,956 and $39,956 (married). The deductible for married couples is $620.

S-20/A-20 would eliminate the co-pay increase for PAAD recipients and the new $310 deductible for both PAAD and Senior Gold recipients.

This could be great news for New Jersey’s senior and disabled residents, but not so much for everyone else:

  • Libraries will close or have shorter hours with limited internet access because the state library budget has been eliminated.
  • Children will pay more for breakfast and lunch or go without.
  • Some after school programs that keep kids safe are eliminated.
  • Tuition Aid Grants to college students are reduced at the same time the state cut more operating funds than ever to the state’s public colleges.
  • Some parents of children enrolled in the state’s FamilyCare program will no longer be eligible for this program themselves.
  • Women who can’t afford health insurance will not get prenatal and ob-gyn care.
  • Working families receiving the state Earned Income Tax Credit will be hit with a tax hike when the credit amount is cut from 25 percent to 20 percent.
  • NJ Transit fare increases up to 45 percent will further strain the budgets of commuters and the state’s mass transit system.

All of the above represent increased costs in one form or another. Cuts to schools, municipalities and libraries will increase class sizes, raise property taxes and eliminate free services like library internet use and inter-library loans. Increased costs to college students may make them defer college or take longer to complete degrees. Cuts in FamilyCare and family planning services will mean more people in emergency rooms and more expensive health care. The highest ever transit increases will put more people in cars, causing greater deterioration of roads and bridges and an increase in air pollution.These cuts will most severely hurt middle and low-income people in the state – those with the fewest choices.

The new revenue and spending bills are a good start but more needs to be done. New Jersey’s budget crisis must be resolved with a balanced approach that includes other taxes and shared sacrifice by all. For other budget options, check out the Better Choices Coalition.

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Filed under disabled residents, homestead rebates, Millionaire'sTax, Monday Minute, New Jersey Policy Perspective, Seniors

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