Senate President Steve Sweeney is leading the charge once again for imposing a millionaires tax in New Jersey. He says the state really needs the revenue, particularly because it owes more money into the pension system. NJ Spotlght Budget and Public Finance Writer John Reitmeyer told NJTV News Correspondent Michael Hill that it’s unlikely Sweeney’s proposed millionaires tax will make it into law.
“When Gov. [Jim] Mcgreevey put the current top end income tax rate in in 2004, it was sold as a millionaires tax,” said Reitmeyer. “The logic being that if you made $500,000 — which is the new top end rate — that you were probably a millionaire if you were making that much annually. But what’s been proposed since then, numerous times here in Trenton, would be a true millionaires tax rate. Meaning a different rate only on earnings that go above that $1 million threshold.”
When asked how much revenue the millionaires tax proposal would actually raise, Reitmeyer said that Sweeney is estimating $675 million in the first year. Reitmeyer said that there is another provision of the bill that is a little bit more technical but that it would restore the earned income tax credit. He said that the earned income tax credit would go to a higher level than it has been since 2010. That cut was enacted by Gov. Chris Christie during the recession, said Reitmeyer. The earned income tax credit is earned by the state’s lowest wage earners. Reitmeyer said that would end up costing the state about $60 million in revenue.
“So when you take the $675 million that we would gain from the higher tax rate on earnings over $1 million, combine it with a loss of $60 million from the EITC restoration, it would be a net of $615 million. So a nice chunk of revenue there,” Reitmeyer said.
On how Sweeney’s proposal differs from the one former Gov. Jon Corzine proposed, Reitmeyer said that Corzine’s was more aggressive. He said that Corzine’s proposal wanted the tax to begin at the $400,000 mark. Sweeney is proposing that the millionaires tax be applied to earnings over $1 million and only at the 10.75 percent rate, said Reitmeyer.
Whether Sweeney’s millionaires tax proposal is likely to become law, Reitmeyer said that it is something that has been put forward four times and that the governor has vetoed it four times in a row.
“I think the outlook is very unlikely. At the same time there are some different dynamics this year,” he said. “The governor’s popularity has sagged and we are facing tremendous pressure to come up with revenue for the pension system and a court decision that’s still looming. So the circumstances are a little bit different this year but still I think it’s a steep hill to get that bill passed.”