Many in N.J. may lose rebate checks

About 500,000 homeowners who received property-tax rebates last year would lose their checks in 2009 under the budget Gov. Corzine proposed yesterday.

They and hundreds of thousands more New Jerseyans could be stripped of another benefit meant to take the sting out of the state's highest-in-the-nation property taxes: the ability to deduct those charges on their state income-tax returns.

The two changes combined will cost homeowners about $917 million - $517 million in rebate cuts and an estimated $400 million in higher income taxes due to the lost deduction - according to the administration.

Senior citizens would not be affected by either change. Instead, 40,000 homeowners over 65 would be newly eligible for property-tax breaks through a program that effectively freezes their rates.

The loss of the deduction will result in the largest tax increase in Corzine's proposal. The rebate cut is among his largest spending reductions, after slashing payments to the state's pension system.

The prospect of cutting rebates and suspending the tax deduction had some Republicans envisioning an election-year revolt, although analysts and a small, informal sampling of homeowners greeted the news with more of a resigned shrug.

"Gov. Corzine today talked a lot about families at the kitchen table. I think a lot of families in New Jersey, when they hear this speech, are going to be banging on their kitchen table," said Sen. Bill Baroni (R., Mercer). He called the suspension of the tax deduction "a dramatic tax hike."

"That proposal is this year's 'toilet paper' moment," Baroni said, referring to the ill-fated paper-products sales tax in the 1990s that led voters to drum Democrats out of office.

Since then, Republicans have labeled a number of proposals as new versions of that hated tax, but none has riled New Jerseyans the same way.

Ernest Reock, a Rutgers University professor emeritus who has studied property taxes, said he doesn't expect to see residents up in arms. The rebates, after all, have seesawed with regularity.

As recently as 2007 - an election year - the rebates were at record levels and pitched as a key solution to New Jersey's high property taxes. This budget, however, would be the second in a row to scale the program back.

"I personally think that people don't really pay that much attention to it," said Reock, of Rutgers' Bloustein School of Planning and Public Policy.

Corzine said more than one million homeowners would continue to get rebates at some level. He stressed the importance of helping senior citizens, who would receive about half of the checks, and those with lower and midlevel incomes.

"Protecting rebates as much as possible is consistent with one of the most basic priorities of my administration: providing direct property-tax relief on a progressive basis," he said.

Corzine is projecting that 500,000 homeowners younger than 65 will get rebates, about half the number who received them last year. Those making $50,000 or less will get their full rebate, averaging $890. For those with incomes between $50,001 and $75,000, the checks will be a third less than last year - an average of $670. Anyone earning between $75,001 and $150,000 - last year's ceiling to receive a rebate - will go without in Corzine's budget.

The rebates averaged $1,000 for homeowners younger than 65 last year.

The average New Jersey property-tax bill was $7,045 last year.

About 500,000 senior citizens will receive the same $1,200 average check they got last year. Renter rebates also are unchanged.

Democrats argued that the property-tax deduction "suspension," which Corzine said would last only one year, was a "progressive" measure because it would have more impact on the wealthy.

The state previously let residents deduct up to $10,000 of property tax paid on their income-tax filings. In 2006, the last year for which statistics are available, 1.6 million state income-tax returns included the deduction.

Those with larger incomes saved more. Filers in the state's second-highest income bracket, earning between $150,000 and $500,000, saved an average of $525 in 2006. For those with incomes between $50,000 and $70,000, the savings averaged $175.

"This burden is being put on people that are earning more and are better able to get through this year," said Assemblyman Louis Greenwald (D., Camden), chairman of the Assembly budget committee.

Brigid Harrison, a political-science professor at Montclair State University, said Corzine likely spared himself some voter anger by protecting senior citizens and people with lower incomes.

"By dividing the rebate changes like that, you really let some of the air out of the balloon of the opposition," Harrison said.

Robert Shinn, a Cherry Hill Republican who has been critical of the tax hikes in his town, said residents were facing "the perfect storm" of rebate cuts and tax increases resulting from state aid reductions last year.

Shinn, 60, said he would have qualified for a rebate in 2009 were Corzine not altering the income limits.

"It certainly would have been nice," said Shinn, a recent retiree. "But the reality is, with what's going on with the economy and state revenue, something had to give."

The proposed budget:

Eliminates property-tax rebates for non-senior citizen homeowners with incomes over $75,000.

Provides two-thirds of last year's rebate amount to homeowners who earn between $50,000 and $75,000.

Provides last year's full rebate to all senior citizens and those who earn under $50,000.

Maintains rebates for renters who earn under $75,000 or are senior citizens. The maximum rebate for seniors is $860; for non-seniors, it is $80.

Expands the property-tax freeze program for senior citizens up to an income of $80,000.

Eliminates, for one year, the property-tax deduction on next year's state income tax for all taxpayers except senior citizens.

SOURCE: Associated PressEndText