Corzine announced his budget proposal yesterday which has many NJ residents very upset and speaking out against the proposed changes. From the article in the Courier Post: Corzine's budget seeks tax hikes, cut in rebates
Gov. Jon S. Corzine is proposing a $29.8 billion state budget for the upcoming fiscal year that includes tax hikes of more than $1 billion, including the suspension of most homeowners' ability to deduct property taxes from their income taxes.
Corzine said the deep recession requires difficult choices, including ending property tax rebates for households with incomes over $75,000 and more than a half-dozen increases in taxes. He said the budget's $7 billion structural deficit is addressed mostly through $4 billion in spending cuts and $2.2 billion in federal stimulus aid.
"Make no mistake: Because of where the world is right now, we must move in directions we might not otherwise choose," Corzine said.
The tax changes include raising the tax rate on incomes over $500,000, taxing lottery winnings over $10,000, extending a 4 percent surcharge on corporate taxes, increasing cigarette taxes 12.5 cents a pack and boosting taxes on liquor and wine by 25 percent.
Most surprising was Corzine's proposal to suspend, except for seniors, taxpayers' ability next year to deduct their property taxes from their income taxes. The one-year move would cost taxpayers an estimated $400 million, the administration says.
Businesses will face an increase in payroll taxes:
Payroll taxes would be increased on businesses, despite deposits by the state and federal governments into the depleted unemployment fund. New Jersey will put in $150 million, not the $270 million announced last month. Corzine said it would take a deposit of $500 million or more to avoid a payroll tax increase but that the money being put in will help limit the increase.
State workers will have to contend with one of two scenarios:
Corzine said he wants to reduce personnel costs by $400 million by freezing state workers' wages and furloughs throughout fiscal 2010. The alternative, he said, would be to lay off as many as 7,000 workers. College employees' salaries would also be frozen.
A number of other tax hikes on various goods were also mentioned. In regards to the homeowner's rebate cuts NorthJersey.com's article posted this analysis:
Although many budget details had leaked in advance, the lost tax write-off caught many off guard. Corzine would remove the property tax deduction on income taxes for all but senior citizens, and eliminate property tax rebates for non-senior households making more than $75,000 a year. Non-senior households earning $50,000 to $75,000 would see their rebate check from last year slashed by a third. Last year's program offered staggered rebates for households making up to $150,000.
That could translate into a double whammy for non-senior homeowners earning $75,000 to $150,000. They lose their rebate and hundreds of dollars from the deduction.
A homeowner earning $95,000, for example, would not only lose a $1,000-plus rebate. Scrapping the property tax deduction would take away another $350 or so, according to state figures.
"The loss of the deduction would make homeownership even harder for New Jersey residents who are struggling to make ends meet during this recession," said Senate Minority Leader Tom Kean Jr., R-Union.
The revenue raised by eliminating the property tax deduction would help pay for the preserved rebates, Corzine said, adding that he wants to restore rebates to higher income families "as soon as the recovery of state revenues allows."
If it passes would the unintended consequences be actually forcing stuggling homeowners into selling their homes (increasing inventory even more) or foreclosure which would then result in even less revenue generated for the state? These changes would also impact future home buyers ability to afford to purchase a home and as a result home sellers would be forced to reduce home prices further to make up for the additional tax expense for the state.
What are your thoughts on Corzine's budget proposal?