Christie bases latest budget on rapid economic growth
Tuesday, February 21, 2012
Andrew Kitchenman, NJBIZ
Gov. Chris Christie has proposed a $32.1 billion budget for the next fiscal year that's based on rapid economic growth that would drive both tax cuts and revenue increases.
"Today, it is time to put the New Jersey comeback into high gear," Christie said.
The proposed budget projects a 7.3 percent increase in state revenue over the amount budgeted this year, including a 10.9 percent increase in corporation business taxes.
In addition, the budget includes $346.8 million in tax cuts, including $183.3 million in income tax cuts and $163.5 million in phased-in business cuts, on top of the $184 million in business tax cuts this year.
This depends on the economy continuing a sharp increase from the current fiscal year, during which state revenue increased 3 percent from last year, but is still 3 percent less than budgeted.
Business groups applauded Christie's pledge to stop any tax increase proposed by legislators.
"Just so there is no mistake in my intention: I will veto any tax increase again," Christie said, noting that he had twice previously vetoed a millionaire's tax. The statement drew a standing ovation from business leaders attending the address.
The business tax cuts include an additional $44 million for business owners to use business losses to offset their personal income tax obligation and an additional $57.5 million in corporation business tax cuts, including phasing in basing the tax on a single sales factor, reducing the minimum tax for S-corporations, and increasing research and development tax credits. The budget also includes an additional $62 million for phasing out the transitional energy facility assessment.
Senate President Stephen M. Sweeney (D-West Deptford) and Assembly Speaker Sheila Y. Oliver (D-East Orange) expressed skepticism toward the budget, saying it favored millionaires over working families. Sweeney also questioned the revenue projections
"They make them work however works best for them," Sweeney said of the revenue projections.
But at least one business leader expressed confidence in the administration's budget track record.
"I don't think this governor would put forward any proposal where he hasn't looked at all possible contingencies," said David Brogan, first vice president of the New Jersey Business & Industry Association. "We believe what he says."
Debra P. DiLorenzo, president and CEO of the Chamber of Commerce Southern New Jersey, said the tax cut proposal was needed.
"Taxes are an important consideration, not just for businesses, but also for the decision makers who determine whether to maintain, grow or locate in New Jersey," DiLorenzo said in a statement.
Senate Minority Leader Thomas H. Kean Jr. (R-Westfield) said it was a powerful speech.
"Every family in New Jersey will get a tax cut under this proposal," Kean said. "That's a good thing."
Both the income tax and business tax cuts are being phased in over the next four years, with the total tax cuts equaling $1.76 billion in the fiscal year beginning July 2015. The total impact of the business tax cuts would grow from $184 million this year to $347.5 million in the proposed budget; $541.5 in the budget beginning in fiscal year 2014; $618.5 million in fiscal 2015; and $662 million in fiscal 2016.
The rest of the budget includes items supported by business associations, including a $14.2 million increase in school choice aid — a 63.7 percent increase over the current year.
While the budget includes an additional $5.2 million for Chapter 12 debt, which pays for community college facilities, it does not include funding for other higher education facilities. Sweeney supports having a higher education facilities bond question put to voters.
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