Fee and tax hikes draw pushback from Kean

TRENTON - Senate Minority Leader Thomas H. Kean Jr. said Monday that lawmakers should nix a series of tax and fee hikes proposed by Gov. Christie for the fiscal year beginning July 1.

Kean's proposal comes as legislators are scrambling to fill a projected $1.7 billion revenue shortfall for fiscal year 2015. They have two weeks to pass a balanced budget, as required by the state constitution.

Specifically, Kean (R., Union) wants to eliminate the Republican governor's proposed taxes on electronic cigarettes and businesses in Urban Enterprise Zones, as well as 23 fee increases.

"The Senate Republican caucus would like to drive the overall conversation on affordability, and we think a responsible way to do that is to present some options on the table," Kean said.

"We think there's a better alternative than increasing fees," he said.

The tax and fee hikes account for about $137 million in revenue in Christie's proposed $32.7 billion budget. Kean declined to say where he would like to cut spending in the budget to make up for that revenue loss, saying, "We would reduce the overall size of the budget."

Kean said his remarks were intended to start philosophical and policy discussions on the budget. Since Democrats control both houses of the Legislature, it is unlikely that his comments will significantly move the needle.

"I would join Sen. Kean in saying I'd like a budget that has no new taxes," said Assembly Budget Chairman Gary Schaer (D., Passaic). "I'd even go so far as to say we have no income tax, and let's rebate everyone 100 percent of their property tax. Now, after we've discussed our wish list, why don't we speak about the serious business of the state government: How are you paying for the necessary programs that you want?"

Even if Kean's ideas don't catch on in the short term, his proposal "may be an indication that [Republicans] realize they have to figure out what the Republican Party is going to look like after Christie," said Patrick Murray, a pollster at Monmouth University.

Murray and other political observers said that because the governor's popularity has not translated into legislative gains or party-building in New Jersey, Kean could be trying to rebrand his caucus in anticipation of Christie's departure in 2016 or sooner, should the governor run for president.

Christie wants to extend the tobacco products wholesale sales tax to e-cigarettes to "achieve rough parity" with taxes on conventional cigarettes.

His other tax proposal would eliminate an exemption for businesses in Urban Enterprise Zones from the 3.5 percent sales tax on purchases of certain supplies. Within the zones, the sales tax is half the usual 7 percent as an incentive to spur economic activity.

Kean believes the e-cigarette tax would stymie an emerging industry and the jobs it could create, and says the Urban Enterprise Zone tax would hurt small businesses.

He supports Christie's proposal to require out-of-state online retailers to collect state sales tax, which the administration has said is needed to protect brick-and-mortar businesses that already collect it.

Most of the debate on the budget has revolved around Christie's proposal to cut the state's payment to the pension system.

Last month, Christie revised his revenue projections downward for both this fiscal year and next, citing reduced income tax receipts related to changes in federal tax policy. He signed an executive order cutting the pension payment to help fill a $1 billion shortfall this year, and proposed reducing the payment next year from $2.25 billion to $681 million.

A dozen unions sued to halt the first action, and Democrats have called for a full payment in next year's budget. Kean said he agreed with Christie's pension proposal.

"Clearly we have to make the pension payments over time, and it's the right thing to do," Kean said.