Democratic leaders say budget must reinstate tax hike

New Jersey's Democratic-controlled Legislature will not approve a state budget unless it reinstates an income tax increase on the wealthy, Senate President Stephen Sweeney (D., Gloucester) and Assembly Speaker Sheila Oliver (D., Essex) said yesterday.

Their mandate presents the potential for a lengthy standoff with Gov. Christie, who has unequivocally vowed to veto any such tax hike.

Sweeney, speaking to The Inquirer's editorial board, said he would insist on reauthorizing a tax hike on incomes of $400,000 and up, even if it meant a government shutdown.

"There's no way he's going to get a budget without it," Sweeney said in his most emphatic public comments to date about the tax. He said Christie's $29.3 billion spending plan cuts programs for the needy and raises taxes for those with low incomes, but leaves the wealthy paying less.

In the meeting, Sweeney also said he planned to advance a softer version of a bill requiring public workers to live in New Jersey, urged teachers to accept wage freezes, and said he would leave his Gloucester County freeholder director's post sometime after Election Day, allowing fellow Democrats to appoint his replacement.

His most forceful comments came on the tax hike, which he said could raise $800 million to $1 billion to offset spending cuts. Asked if he would allow a government shutdown over the tax dispute, Sweeney said "absolutely."

"The poor are going to take a beating on this, so we've got to stand our ground on some of it, and that money can help ease the burden," Sweeney said. He said he did not want to raise taxes, but that extending the higher rates for another year was a fair way to spread the pain.

Oliver agreed that the tax is a necessary piece of the budget.

"While we have not fully undergone our budget process in the Assembly, without question there's strong sentiment from within our ranks that our budget incorporate that," Oliver said in a telephone interview.

Sweeney said the added revenue could help reduce cuts to higher education and urban enterprise zones. Oliver said she would like to restore some funding for education and health-care programs.

Gov. Corzine imposed the tax hike last year on incomes of $400,000 and more, creating three new tax brackets. The top rate, 10.75 percent on income over $1 million, was among the highest in the nation. The tax expired at the end of 2009, and Christie has refused to renew it, saying New Jerseyans' already are overtaxed. He has argued that many small businesses also are forced to pay the tax.

"Mark my words, if a tax increase is sent to my desk, I will veto it," Christie said in his March 16 budget address and has reiterated in public appearances.

The Legislature has until July 1 to approve a budget and send it to Christie. The dispute over the tax figures to loom over the debate.

Democrats could have extended the tax months ago when they controlled the governor's office and the Legislature, Christie spokesman Michael Drewniak said yesterday. That they didn't, he said, is a sign that the tax now is "being used for political advantage."

"Where were Sen. Sweeney and his colleagues in the months leading up to the expiration of that tax? Surely he must have seen the budget crisis closing in fast and knew that something had to be done," Drewniak said.

Sweeney agreed with Christie in other areas. He said most spending cuts the governor proposed would stand. He also backed Christie's call for teachers to accept a pay freeze this year to offset reductions in state education aid.

"If they care about their members, they'll do it," Sweeney said, referring to teachers' unions. He said without accepting the freeze, teachers' fellow union members face layoffs.

Sweeney supported a plan, proposed by Sen. Donald Norcross (D., Camden), to require public workers at all levels of government to live in New Jersey. He said he would offer to change the bill so that only new hires would have to reside in the state.

"I don't think that you disrupt [current workers'] lives where you actually have to uproot them and move them," Sweeney said. "I don't think that's fair, but I think anybody coming on board now, yeah, they gotta stay here."

Sweeney said his dual positions as Senate president and Gloucester County freeholder director are taking a personal toll and that he would leave the county post after Election Day, but before the end of the year. Sweeney, who is also a business representative for the iron workers' union, said many public events draw him to North Jersey late into the night.

"It's clear I need to get out. I'm too busy. I'm working 20 hours a day and I'm killing myself," Sweeney said.

Holding the job until after Election Day means there would be no vote on Sweeney's replacement until next year. In the meantime, local Democrats would appoint a new freeholder.

"The voters elected a Democrat. They voted for a Democrat to serve a three-year term and a Democrat's going to serve a three-year term," he said.