New Jersey Governor's Budget Proposes Property Tax Reform and Reduction in State Spending
by Ellen Weiss, Esq. (RIA)

On March 16, 2010, Governor Chris Christie presented a proposed 2011 Fiscal Year budget to the State legislature. In this budget the Governor recommended tackling the stated budget deficit by reducing state spending without raising taxes because, as the governor noted, New Jersey taxpayers have more state and local taxes taken as a percentage of income than any other state in America. The governor's proposals include a constitutional amendment putting a cap on property tax growth, replacing the homestead rebates with a credit, limiting the “senior freeze” property tax reimbursement program, reducing the earned income tax credit available against the gross income tax, reducing the high-tech business tax credit funding and eliminating the state film production tax credit.

Property tax reform. The governor introduced a series of proposals that are intended to protect taxpayers from property tax increases including: (1) a constitutional amendment to cap the growth of property taxes at no more than 2 1/2% per year and a constitutional amendment to cap the growth of state spending at 2 1/2% per year; (2) collective bargaining reform that would respect these new caps and an award's potential impact on property taxes; and (3) allowing local government at every level to opt out of civil service, which the governor claims would save taxpayer dollars. The budget also proposes property tax relief in the form of a direct credit on property tax bills, rather than in a homestead rebate check. The first credits would appear in May 2011.

Senior Freeze program limited. Under the proposed budget, the senior and disabled citizens' property tax reimbursement (Senior Freeze) program will not accept new applicants during Fiscal Year 2011. In addition, current Senior Freeze recipients will see their reimbursement limited to last year's amount.

Earned income tax credit, Under the budget proposal, the Earned Income Tax Credit (EITC) will be reduced to 20% of the federal benefit. This represents a decrease from the 2009 tax year when the EITC program was at 25% of the federal benefit.

Reduction of state spending. The budget also proposes various reductions in state spending including savings from reducing state funding for the high-tech business tax credit by $30 million and eliminating the state film production tax credit. The governor also proposes that school district employees pay for a reasonable portion of their health care costs, so that the state and local governments will not have to raise taxes repeatedly to pay for this health care and proposed cutting the punitive payroll tax increase on jobs.

Other measures. Governor Christie has decided not to re-institute the temporary gross income tax increase to the rate of 10.75% in 2010, and so the top rate will be 8.97% in fiscal 2011. In addition, as an economic stimulus measure, Governor Christie has ended the 4% Corporation Business Tax surcharge for 2011.

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