The big shots in Trenton have just two weeks to settle on a budget, a time of year when good ideas and bad ideas do battle, with billions of dollars at stake.
It is a curiosity of this year that Speaker Craig Coughlin is giving us both. So, let’s hope he’s half-successful.
The good idea is that Coughlin is determined to kill a plan being pushed hard by Gov. Phil Murphy, according to several sources, to hike the sales tax and raise about $1 billion a year. Coughlin stepped out of the smoke-filled backroom last week to tell NJ Advance Media’s Brent Johnson that he hated the idea. “I don’t think this is the time,” he said. “I think we need to improve the structural nature of the budget and spending.”
That means the plan is dead, or at least on life support. Because Coughlin can block the entire budget if he doesn’t like it, and now that he’s in his seventh year as Speaker, he’s taking a more muscular approach to the job. In his early years, he would have kept his thoughts in that backroom. Going public was “a preemptive strike” as Johnson put it.
Plus, the idea has little support in either the Senate or the Assembly. Many legislators are old enough to remember when protesters against a sales tax hike signed by former Gov. Jim Florio threw toilet paper into trees at rallies. (A few twisted souls send used samples to the governor.)
The tax hike that’s likely to survive is a 2.5 percent “fee” on the 600 largest corporations doing business in New Jersey, those earning at least $10 million a year in profits, companies like CVS and Walmart. The business community is furious about it, but it’s the least bad option, given the growing deficit in the state’s budget now that pandemic aid has dried up, and the crisis at NJ Transit. More on that below.
Coughlin’s bad idea is his own pet project, a property tax rebate for seniors he calls StayNJ, an expensive monstrosity that is designed to shower its most generous benefits on retirees with annual incomes between $250,000 and $500,000. Like Donald Trump’s 2017 tax cut, StayNJ would give the middle class a small cut, and renters the crumbs left on the table after the party.
But it’s the comfortable retirees who would really benefit. Peter Chen, an analyst at New Jersey Policy Perspective, a liberal think tank, grinded the numbers. The program would send an average of $4,500 to retirees who earn between $360,000 and $500,000. It would send an average of $369 to those earning less than $26,000.
“This is the opposite of how we want taxes to work,” Chen says. “It takes money from the overall tax base, and hands the majority of it to wealthy households. If the goal is to address senior housing insecurity, a serious problem, it should focus on those most likely to lose their homes.”
And the cost is enormous, nearly $2 billion a year in the end. It would be phased in, but given the worsening budget outlook, that means it would land its hardest punch when the state is even less able to afford it.
The core problem with the proposed budget is that it spends roughly $2 billion more than it takes in, a structural deficit that budget experts in both parties expect to grow larger. That points to the core failure of this governor and this Legislature. They have shown no interest in cutting spending.
The Christie years were dominated by efforts to cut spending on public workers by trimming pension and health benefits, limiting salary hikes, even freezing pension benefits in the face of inflation. But in the Murphy years, that talk has disappeared. Will Democrats finally wake up to that need, in these last few weeks?
That would break with tradition. Legislators usually slather their own spending on top of the governor’s. But a senior Democratic staffer who is part of the backroom talks told me it’ll be different this time. “We’re having the most robust discussion about where we can make cuts, or at least not increase spending, that we’ve had since the Christie administration,” that source said.
The most likely loser in this end game is the business community, or at least the 600 largest companies who will pay that 2.5 percent surcharge, on top of the 9 percent base rate. Murphy promised to let the surcharge expire, and he did for a few months. But it’s back now, retroactive to Jan. 1. The governor is calling it a “transit fee” in a most desperate act of spin.
“This is the worst budget I’ve seen in all my years in Trenton,” says Tom Bracken, head of the state’s Chamber of Commerce.
Michele Siekerka, head of the New Jersey Business and Industry Association, notes that Democratic legislators added $1 billion in spending in the final days of budget talks last summer, close to the revenue this surcharge will raise. “That’s the billion dollars,” she says. “We have not addressed any spending issues in this budget.”
(For the record, New Jersey does not have the highest taxes in the country. That’s a myth. We’re#5 in state and local taxes per capita, and #12 as a share of income.)
Still, even if they did cut spending, the savings might be better used to reduce property taxes, defray the cost of childcare, cancel the planned cuts for community colleges, and so on. The taxes paid by the state’s most profitable companies rate low on the legislative list of priorities, and for good reason. Roughly 80 percent of these companies are headquartered out of the state, and this hike takes back only a small share of the Trump tax cuts. Is CVS or Walmart really going to stop selling in one of the country’s wealthiest consumer markets?
My guess is that Coughlin will get most of what he wants. The sales tax hike will die. And for another year, at least, money will be set aside for StayNJ, despite its flaws.
Finally, a promise: If the Legislature really does cut spending compared to this year, without gimmicks, I’ll light what’s left of my hair on fire.
More: Tom Moran columns
Tom Moran may be reached at tmoran@starledger.com or (973) 986-6951. Follow him on Twitter @tomamoran. Find NJ.com Opinion on Facebook.
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