By Kate King
TRENTON -- New Jersey state senators said Tuesday they were
unsure whether they are willing to support a late-night deal that
Gov. Chris Christie struck with the Assembly to cut the sales tax
by 1 percentage point in exchange for increasing the gas tax by 23
cents a gallon.
The proposal put lawmakers in the Legislature's upper chamber on
the defensive as they face a Thursday deadline to renew the state's
transportation trust fund. Just before 1 a.m. Tuesday, the
Assembly, with Mr. Christie's backing, approved a bill that would
raise the gas tax to pay for transportation needs and lower the
sales tax to 6% from 7% by January 2018.
A spokesman for Senate President Steve Sweeney declined to
comment Tuesday. Mr. Sweeney, a Democrat, had hoped to pass
legislation that won support from key Senate Republicans to phase
out the estate tax in return for the gas-tax increase.
Some senators are concerned that the reduction in revenue from
the sales-tax cut would jeopardize the state's ability to make
constitutionally mandated pension payments. Mr. Sweeney, who is
considering a run for governor next year, is pushing for a ballot
referendum to require the pension payments. This is strongly
opposed by Mr. Christie.
"Sweeney's hands are tied," said Patrick Murray, director of the
Monmouth University Polling Institute. "The construction industry
wants this [transportation] funding. Does he post that and then not
post the ballot measure on the pensions and then tick off the state
unions?"
Senate Majority Leader Loretta Weinberg, a Democrat, said the
legislative wrangling could stretch past Thursday, when New
Jersey's transportation trust fund's authorization expires.
"I would say that the Senate is not prepared to support this
plan, particularly doing it at the same time that we're trying to
put before the voters a plan to fund the pension payments," Ms.
Weinberg said. "It blows much too large a hole in the budget."
Mr. Christie said the Assembly legislation achieves his goal of
"tax fairness."
"At the same time we are going to have constitutionally
dedicated revenue to improve roads, bridges and the mass transit
systems in the state," he said in a statement.
Sen. Joe Kyrillos, a Republican, said he prefers the Senate's
proposal, which would gradually phase out the state estate tax and
eventually eliminate it completely. The tax cut would cost about
$120 million next fiscal year and $512 million by fiscal 2021,
according to an analysis by the state Office of Legislative
Services.
Mr. Kyrillos said an estate-tax phaseout would encourage wealthy
people to stay in New Jersey, generating more income for the state
than a sales-tax cut would. New Jersey's threshold for taxing
deceased residents' assets is $675,000, the lowest in the
country.
"I'd love to vote for a sales-tax cut and have people enjoy it,"
Mr. Kyrillos said. "In my judgment it won't motivate the economy in
a way that I'd like to see take place."
New Jersey's sales tax is projected to generate about $10.5
billion in revenue for the state next fiscal year, which begins
Friday. A reduction in the sales tax would cost $376 million in the
first year and $1.7 billion annually by 2021, according to the
Office of Legislative Services.
The legislation would also expand income-tax exclusions and
credits for retirees at a cost of $75 million in the first year and
about $100 million annually after five years.
The gas-tax increase, which would take effect Friday, would
generate about $1.2 billion a year through 2022, according to state
projections. That money would go to the state's depleted
transportation trust fund to pay for maintenance and repairs to the
state's roads and bridges.
The increased gas-tax revenue wouldn't cover the revenue lost
through the proposed tax cuts, which by fiscal 2021 would create a
$1 billion budget hole under the Senate plan and $1.8 billion under
the Assembly proposal.
Those costs would be partially offset by $346 million in annual
savings New Jersey would see from not having to subsidize its
transportation fund with sales-tax revenue, as is the current
practice, said Mark Magyar, director of policy and communications
for the Senate Majority Office.
"Basically yes we're going to have a number to deal with, but we
believe it's a number that we can deal with," Mr. Magyar said.
Assembly Minority Leader Jon Bramnick, a Republican who
participated in the late-night negotiations, said the Assembly's
bill offers a major tax break while remaining politically
viable.
Jon Carnegie, executive director of the Alan M. Voorhees
Transportation Center at Rutgers University, said it wasn't
immediately clear whether the proposed gas-tax increase would pay
for all of the state's transit and road needs. That would depend on
timing and future spending decisions, he said.
Without an increase in funding for the transportation trust
fund, New Jersey would be left with only enough money to pay for
existing debt service and be in danger of losing federal
subsidies.
"It certainly is a step in the right direction in providing a
stable source" of funding for transportation, Mr. Carnegie
said.
--Andrew Tangel contributed to this article.
Write to Kate King at Kate.King@wsj.com
(END) Dow Jones Newswires
June 28, 2016 21:28 ET (01:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.