TRENTON, N.J. (AP) - The uncertainty over what Congress will do with taxes is having a ripple effect in New Jersey.
The GOP-led Congress this week is getting back to considering a tax overhaul carrying a roughly $1.5 trillion cost over a decade. New Jerseyans could feel the pinch if Washington decides to get rid of deductions for state and local taxes and property taxes.
Those proposals have led New Jersey’s Democratic leaders to question moving forward with an increase on state income taxes on millionaires that was a key plank in Democratic Gov.-elect Phil Murphy’s campaign.
Murphy and the Democrats are also keeping quiet over the pending expiration of a 2 percent cap on what police and fire officials can earn when labor contract disputes get settled through arbitration. Republican Gov. Chris Christie says the cap produced hundreds of millions in taxpayer savings.
The uncertainty has also produced some proposed horse-trading over a Democratic bid to raise the minimum wage.
Senate President Steve Sweeney, a Democrat, said the day after the election that raising taxes on millionaires would be the first bill passed in January when Murphy takes over from Republican Gov. Chris Christie.
About a week later, Sweeney said that “everything” including the millionaire’s tax should be re-evaluated in light of the GOP tax plan.
“It’s problematic,” Sweeney said. “We’re all in favor of advancing, but with what’s going on in Washington we have to take everything (into account).”
The tax on incomes over $1 million featured prominently in Murphy’s election pledges and is the keystone in roughly $1.3 billion in new revenues Murphy outlined to finance pension payments and increased aid to the state’s more than 600 school districts.
Lawmakers estimate the tax could bring in up to $600 million. Murphy has not identified additional revenues to make up that difference and said last week that he’s not reconsidering the tax “at this moment.”
The Republican-led U.S. House has passed a measure that eliminates state and local deductions and caps the property tax deduction at $10,000. A Senate version of the bill entirely eliminates the deduction for property taxes. New Jersey ranked No. 3 in 2015 for the percentage of federal filers who claim the state and local tax deduction and its property taxes are the highest in the country.
New Jersey Republicans, who will have even smaller minorities in the Assembly and Senate next year, called on Murphy and Democrats to give up on raising the tax on millionaires, in light of the possible increasing tax burden thanks to the federal overhaul.
Minority Leader Tom Kean Jr. is offering Democrats a deal to raise the minimum wage in return for a tax cut on families making $110,000 or less. Sweeney shot the idea down last week.
The federal and state income tax issues are hitting as New Jersey inches toward the expiration of a 2 percent cap on what police and fire officials can earn when labor contract disputes get settled through arbitration. The cap, the Christie administration says, has saved taxpayers $530 million since it was enacted in 2010.
Police and fire salaries are frequently the highest line item in town’s budgets, which are financed by property taxes.
Murphy and Democrats have not said whether they would renew the cap, which was re-upped in 2014.
Murphy says he’s waiting for the report of a bipartisan task force required by law to examine the cap’s effects. The GOP and Democratic members of the committee were deadlocked, with Republicans issuing their own report backing the cap. The Democrat-appointed members of the commission say they oppose it.
A final report with GOP and Democratic support does look likely, said Dominick Marino, a Democratic-appointed task force member and fire union official.
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