Following Gov. Chris Christie’s State of the State Address on Tuesday where he promised a 10 percent cut in state income taxes for all residents, South Brunswick officials are taking a wait-and-see approach to the governor’s proposal.
In the coming year, Christie said he would fulfill a promise he made in 2009 that “every New Jerseyan,” regardless of income, will see a tax reduction.
The question remains whether the proposal is economically feasible in light of figures released by the Treasury Department, which showed that tax collections for the first six months of the fiscal year are $325 million less than projected.
“It bothers me to hear (Gov. Christie) say we’re in good shape when we’re going to be down $325 million for the first half of 2012,” said South Brunswick Mayor Frank Gambatese. “Where are we going to get that money from?”
The 10 percent cut in the income tax rate is to be phased in over three calendar years (2013-2015), which would spread the impact over the next four budgets, because the state fiscal year runs from July 1 to June 30.
“When the majority of the people in this state make $50,000 to $60,000 a year that reduction is miniscule,” Gambatese said. “I don’t think that it’s good, sound financing when the state is not out of the problems we’re facing yet. I don’t understand what this does, other than create a revenue stream for people who make more than $1 million a year.”
Gambatese added that for a family earning $50,000 a year, the income tax cut would amount to a reduction of about $80 per year.
“A reduction sounds good to me but the devil is in the details,” Gambatese said. “There are other items that are more important than a tax reduction that won’t affect the majority of people in the state. It’s great for people who make a lot of money, but I can’t do much with an extra $80 to $90 each year.”
Gov. Christie also spoke of the success of the 2 percent cap on property tax growth and interest arbitration awards that were causing higher taxes. ?A recent report in the Star-Ledger noted that property taxes had risen 2.4 percent with the cap in 2011, which was the smallest increase in two decades. However, Gambatese said the cap has not been the cure-all it’s been made out to be.
“This 2 percent cap is not the panacea that everyone thinks it is, because there are a lot of items excluded from that 2 percent,” Gambatese said. “I had a resident write me an email claiming that we were over the cap and I said no, we’re within the 2 percent cap, but if you took things that are excluded like pension costs, then it goes over the cap.”
Over the last two years, South Brunswick’s pension costs increased by about $2.2 million, while the cost of health insurance increased by about $700,000. Those two line items alone amounted to a 7-cent tax increase. Last year South Brunswick also had a 4.3 percent drop in the township’s total assessed value to approximately $3.7 billion.
“Things like this boggle my mind when (Christie) involves himself in municipal financing when he doesn’t know what we’re facing,” Gambatese said. “We have a reduction in the amount of taxes we’re taking in due to tax appeals, and the ratables we used to have aren’t there anymore, but our expenses keep going up.”
During the State of the State Address, the governor said the state has turned a corner from the “dark days of 2010,” and touted some of his accomplishments, which included lowering the unemployment rate and scaling back benefits for public workers.
Gambatese praised Christie for tackling some of the tough issues facing the state, but said there has yet to be a significant impact for New Jersey’s municipalities.
“Some of the things he has addressed needed to be addressed and I will give him that,” Gambatese said. “These are important items too, pension contributions and having people pay more for health costs. He initiated them, so that’s been good. But overall, I haven’t seen any great improvement, nor have I seen a reduction in taxes. He’s facing the same problems that our prior governors faced, but he’s trying to address them.”
Gambatese also disputed the notion that people are moving out of New Jersey in droves.
“Yes our taxes are high, but the services we perform are also great, so that needs to be looked at. If you want to reduce taxes then you need to cut services and that’s not easy because people like the services we perform,” Gambatese said. “But people are not leaving the state, in fact we had more people move into the state last year than we lost. The people who are leaving are mostly retirees who want to go somewhere warmer where they money will go further.”
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