Corzine budget: Expect targeted hikes

Businesses, the state's wealthiest residents, and anyone buying cigarettes, wine, or liquor could all pay higher taxes under the budget Gov. Corzine is set to present today, according to officials briefed on the plan.

Property-tax rebates may be scaled back for most homeowners, except those who are older, disabled, or low-income. Homeowners younger than 65 who earn more than $75,000 a year would lose the checks entirely. Those who make $50,000 to $75,000 would see their rebates reduced. Checks would be preserved for homeowners making under $50,000, according to three Statehouse officials familiar with the budget.

Corzine also is considering a plan to eliminate an income-tax deduction for property taxes paid. The move would effectively mean higher income taxes for homeowners.

Income taxes would rise about 1 percentage point on the amount a filer earns above $500,000.

Employers will likely face an increase in the payroll tax to shore up a dwindling unemployment-insurance fund. Corzine pledged more than $500 million over the last two years to try to prevent an automatic tax increase from being triggered if the fund dips too low, but that sum does not appear to be enough.

The tax would equal less than $90 per employee, according to the officials.

Spending cuts will far outweigh tax increases, Corzine has said.

The idea, say top lawmakers, is for a broad swath of the state to share the pain of a recession-year budget.

"These are the toughest times we've ever seen, and we're doing everything possible to make it as less onerous as possible on the people of the state of New Jersey," said Senate President Richard J. Codey (D., Essex).

The proposals are part of a budget expected to be in the range of $29 billion, down from the $32.9 billion plan approved in July.

Total spending Corzine proposes for the fiscal year that begins July 1 will be similar to the first budget he signed, in 2006, reflecting the impact of the national fiscal crisis.

Even the money New Jersey expects in federal stimulus aid won't prevent spending cuts and tax increases.

The governor is also expected to call on public employees to give up the 3.5 percent raises promised in their contracts this year and to propose that state workers take 12 unpaid furlough days in the forthcoming fiscal year.

"This is a brutally tough budget that cuts to the bone and provides essential lifeline services in this state and nothing else," said Assembly Speaker Joseph J. Roberts Jr., who was among the top Democratic leaders to meet with the governor yesterday.

"The message of this budget is that there has to be shared sacrifice," Roberts added. "New Jerseyans will be asked to sacrifice, and public workers will be asked the same."

Corzine has said that health, education, and safety are his top priorities. Cuts in those areas are not expected to be as severe as some first feared. Towns and hospitals will see aid reductions of roughly 2 percent. Direct aid to school districts will either remain flat or increase slightly, though other forms of education funding may be reduced.

Any plan Corzine proposes today would require approval from the Legislature. The budget must be signed by July 1.

Among those worried that they will be asked to bear more than their fair share of the pain are unionized state workers.

Robert Master, legislative director for the largest state workers union, Communications Workers of America District 1, would not confirm or deny a report that the unions had agreed to a wage freeze in order to avoid furloughs.

"We don't bargain in public, period," Master said. "What we've said has been very consistent: State workers are prepared to do their fair share in helping the state get through this crisis."

Master said there had been informal discussions between the executive branch and labor unions, which he described as "not productive."

State workers' contracts expire June 30, 2011.

Master worries that focusing so much attention on spending cuts is dangerous.

"I think that you cannot simply cut your way out of a crisis of this magnitude. If you do, you are actually completely counteracting the intent and the effect of the stimulus package," Master said. "You need a better mix of revenue and cuts to solve a crisis of this magnitude."

Businesses also are concerned about the impact of a potential payroll-tax increase. The money would be used to replenish an unemployment trust fund that has been raided for years by previous governors and has been strained by increased job losses.

"This is a tax on jobs, and in this environment, where we lost 85,000 jobs last year and 9,300 in January . . . the last thing you want to do is make it harder for employers to keep their employees," said Steven Wilson, a spokesman for the New Jersey Business and Industry Association.

This time last year, Corzine liked to say he was willing to stake his second term on the success of his plan to restructure the state's finances.

With Election Day less than eight months away, Corzine doesn't say that anymore. But if he wants to remain governor for a second term, the budget address he gives today, in the midst of one of the nation's worst recessions, must attempt to show voters why he should be reelected.