New Jersey lawmakers to introduce budget plan

TRENTON, N.J. -- New Jersey lawmakers on Tuesday were closing in on passing what they call a millionaire's tax to help solidify a budget proposed by Democrats for the fiscal year that begins next week, though the idea appears to be headed for a veto by Republican Gov. Chris Christie.

Though they have hiked income taxes on the wealthy three times in the last five years, their tax proposal this year differs by targeting a higher income group.

The tax rate would jump from 8.97 percent to 10.75 percent on earnings over $1 million after deductions, and would affect about 16,000 tax filers across the state, according to Paul Sarlo, chairman of the Senate Budget Committee.

The Assembly and Senate budget committees both advanced the measure Tuesday night on party-line votes. Republicans warned that a tax hike would drive some wealthy people out of the state.

The committees were expected to address the overall budget plan late Tuesday night.

Like the three previous hikes approved on high earners by the Democrat-controlled Legislature, Christie is expected to veto the measure.

The Assembly and the Senate were each planning to give the legislative budget plan a hearing Tuesday evening and vote on it Thursday. Under the state constitution, a balanced budget must be in place by Monday so it can take effect the next day, the start of the new fiscal year, without shutting down state government.

But Christie and lawmakers have been in a showdown over how to address a budget gap that was discovered only in April when the state's income tax revenues fell below expectations. Christie's administration is projecting a $2.75 billion gap over the current and coming fiscal years.

Christie's solution is to balance the budget mostly by cutting the state's contribution to the pension funds for public workers. He has already used his executive powers to reduce the planned payment due this month, sparking a legal challenge in court by a group of public employee unions. A hearing on the issue is scheduled for Wednesday.

But cutting the payment for the new budget year requires legislative action.

The payment is rising quickly under a deal struck in 2010 to make up for decades of skipped or skimped contributions. Although grumbling about it, Christie proposed earlier this year to make the full $2.25 billion payment. But after the surprise budget gap, he proposed paying $681 million - enough to fund the new obligation but not to make up for what he called "the sins of the past."

The state budget proposed by Democrats would make the full payment and use a variety of measures to bridge the budget gap, including the income tax hike on the wealthiest New Jerseyans, repurposing unspent funds, and a 15 percent one-year increase in a corporate tax.

The proposal also calls for cutting some fee increases and tax extensions proposed by the governor. But lawmakers want to add state funding in several areas, including nursing homes.