N.J. budget plan restores some property-tax rebates

TRENTON - Property-tax rebates would be restored for about 500,000 New Jersey homeowners under state budget revisions approved yesterday.

The latest spending proposal would reinstate at least partial rebates for those earning up to $75,000 and also allow more households to deduct all or some of their property-tax bills from their state income tax returns.

The changes, made possible by a more than $400 million windfall from a tax amnesty, will provide rebates for many homeowners who were expected to get no checks this year, and expand the deduction eligibility to reach about 200,000 more people.

Households with incomes up to $250,000 would be eligible for the deduction, up from $150,000.

For many homeowners, the new budget, now at $29 billion, represents a swift change from the one that was supposed to be voted on Thursday. That proposal would have eliminated the rebate program for everyone but senior citizens and the disabled.

Now, most homeowners earning up to $50,000 can expect the same rebate as last year, an average of $890. Households making between $50,000 and $75,000 can expect two-thirds of last year's rebate, $670, on average.

The changes bring the program for homeowners back up to what Gov. Corzine proposed in March.

But it will still be significantly smaller than a year ago. About 500,000 fewer homeowners will receive rebates compared with 2008, when checks went to those earning up to $150,000.

And 230,000 homeowners with incomes between $50,001 and $75,000 can expect less, as their rebates will be about $300 smaller on average.

Renters other than senior citizens have been left out, cutting around 760,000 people out of the program. They got rebates averaging $80 last year.

Before now, there was also no income cap on the property-tax deduction, which can save hundreds of dollars for homeowners.

Under the changes proposed yesterday, those earning between $150,001 and $250,000 can write off up to $5,000 of their property taxes paid. Those making less than $150,000 can still deduct up to $10,000.

Democrats said the moves would give money back to homeowners.

"You can imagine how difficult it is for people that are making under $75,000 living in this state, so any help you can give them is actually a lifeline. . . . And that's a good thing," said Senate Majority Leader Stephen Sweeney (D., Gloucester).

But he was not crowing over a spending plan that would still raise income taxes by about $1 billion on incomes of $400,000 and more, increase levies on hard alcohol, wine and cigarettes, and cut many programs in the face of drastically falling state revenues.

"This budget still stinks," Sweeney said. "It's a budget that we can pass in the economic times that we're in."

He said putting the newfound money into rebates prevented a scramble for legislators' pet causes.

Assembly Budget Chairman Louis D. Greenwald (D., Camden) said the budget was an improvement from last week's.

"As legislative leaders and the governor noted on Thursday, this revenue will be put to work to help New Jersey's taxpayers, not grow the bureaucracy," Greenwald said.

Republicans, who blasted Corzine for his proposal to drop much of the rebate program this year, voted against restoring checks in the Senate Budget Committee.

"They didn't really do what was right and have a total restoration of rebates and find a cut somewhere else," said Sen. Kevin O'Toole (R., Essex).

He called the plan an "election-year gimmick" funded by a one-shot source of money.

The revisions passed the Senate and Assembly committees both along party lines.

Both houses were hopeful for a Thursday vote to pass the budget.

Under the state constitution, Corzine has until July 1 to sign a new spending plan.

Lawmakers were also planning to ease a proposed tax increase on group health insurers and some dental insurers. Under the new plan, the tax would now raise around $20 million instead of about $75 million.

To make up for the smaller taxes, lawmakers plan to pull $60 million from a fund that backs unusual insurance lines - making another budget raid to help balance the spending plan.

The tax on "surplus lines" of insurance - often unusual coverage for items such as fine art or a particular body part - will rise from 3 percent to 5 percent.

But much of the attention yesterday focused on the rebates, checks that over the years have been labeled as everything from real property-tax relief to gimmicks meant to buy votes.

Corzine called for scaling the program back in March, when he introduced his recession-hit spending plan. In May, as revenues continued to fall, he called for eliminating it except for senior citizens and the disabled.

Thursday's revelation of a tax amnesty windfall, however, gave lawmakers $464 million to work with.

Of that amount, $404 million will go into rebates and the rest will help pay for broadening the deduction.

The rebate program will spend around $1.1 billion, down from roughly $1.7 billion a year ago.

Despite yesterday's restorations, the new budget will still mark the second consecutive year of falling rebate amounts or decreased eligibility after Democrats in 2007 touted the fatter checks as a key piece of their solution to the state's large property-tax bills.

Based on Treasury data, about one million homeowners, senior citizens and otherwise, will get property-tax rebates. The rebates are unchanged for senior citizens.

Senior tenants with incomes up to $100,000 - about 108,000 in all - will get the same rebates as last year.

Budget committees in both houses also approved a bill to place a $400 million bond referendum on the November ballot to preserve open space, farmland, and historic areas. The amount of the bond question was originally proposed at $300 million, then doubled to $600 million, before being cut back. The final amount is expected to fund preservation efforts for two to three years, said Sen. Bob Smith (D., Middlesex), a sponsor of the bill.