N.J. Democrats advance own budget plan

TRENTON — Legislative Democrats on Tuesday advanced a $34.1 billion budget proposal for the fiscal year beginning July 1 that would raise taxes on New Jersey's highest earners and fund a $2.25 billion payment into the state pension system, even as they expected Gov. Christie to veto the key elements of the plan.

The Senate and Assembly budget committees advanced bills that would tax income over $1 million at a rate of 10.75 percent, up from 8.97 percent, for revenue of $723 million annually.

The tax, retroactive to January, would end after three years.

A 15 percent one-year surcharge on the corporate business tax would net $389 million.

The proposal also includes an extra $176 million in revenue, using a higher estimate than Christie for income-tax collections. This year, an $800 million revenue shortfall opened in April after income-tax collections missed administration projections, which underestimated the effects of a federal tax policy change.

The budget proposal cleared the Senate committee shortly after 11 p.m. in a party-line vote. Lawmakers on the Assembly committee also approved the bill.

The plan would meet the demands of public-sector unions for the state to make a full payment into their pension system, in contrast with Christie's plan to cut payments in the current fiscal year and next to fill a $2.7 billion revenue shortfall over the two-year period.

The Democrats' budget proposal would include a $2.25 billion pension payment - as opposed to Christie's $32.7 billion proposal, which would put $681 million into the system next year.

"Nobody, nobody, takes any pride, or any pleasure, in voting for something like this," said Paul Sarlo (D., Bergen), the Senate Budget Committee chairman, as the panel took up the bill increasing the corporate business tax. "It should be a last-resort measure. But we have an obligation to pay our bills."

The plan must win approval in the Senate and Assembly on Thursday before it goes to Christie - who has vowed to veto tax increases. Lawmakers must pass a balanced budget by Monday.

Republicans said the tax increases would only add volatility to the state's budget and cause long-term harm to the economy.

"To throw another tax at those businesses around our state could be the straw that breaks the camel's back," Assemblyman Anthony Bucco (R., Morris) said.

Of 2.7 million income tax returns submitted to the state in 2011 - the year for which the most recent Treasury Department data are available - 15,000 were filed by those who made $1 million or more.

Democrats said they were not happy about raising taxes, but believed that failing to make the pension payment would be worse.

"For me the issue is not one of raising taxes or not raising taxes, but rather of confronting the reality of a $2.2 billion problem," said Assembly Budget Committee Chairman Gary Schaer (D., Passaic).

Christie, a Republican, in May announced his plan to fill the projected revenue holes by slashing next year's pension payment, issuing an executive order to cut the payment for the current fiscal year from $1.58 billion to $696 million. He said he had no other option for addressing the shortfall.

His plan, which reversed course on a landmark pension reform deal reached with Democrats during his first term, prompted a legal challenge from a dozen public-sector unions that is to be heard Wednesday in state court in Trenton.

Christie has said that if the judge rules against his plan, he will appeal.

Republicans and business leaders rallied early Tuesday against the Democratic proposal.

"What are you telling businesses that may consider moving to New Jersey? That we're no longer open for business," Assembly Minority Leader Jon Bramnick (R., Union) said at a news conference.

"We've had enough antibusiness legislation," added Tom Bracken, president and chief executive of the New Jersey Chamber of Commerce.

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