June 22, 2009: Tax amnesty revenue postpones budget vote

Just hours before the New Jersey Legislature was set to vote on the FY2010 budget, it was announced that the budget would be recommitted to the Senate and Assembly Budget Committees in order to take into account $400 million in unexpected tax amnesty revenue. Governor Corzine stated that money should be directed to property tax relief.

The New Jersey Tax Amnesty program was enacted in March as part of a series of solutions to close a shortfall in the FY2009 budget. From May 4 through June 15, the state waived penalties and half the interest owed on unpaid taxes for tax returns due between January 1, 2002 and February 1, 2009. At the time of enactment, collections were projected at $100 million.

But with thousands of envelopes still to be opened and processed, revenue projections now anticipate the state collected as much as $700 million. The largest percentage of collections so far has been from the corporation business tax, which accounted for 56 percent of the total amount. The CBT was followed by the sales and use tax at 23 percent and the gross income tax at 14 percent.

Property tax relief for low- and middle-income New Jersey residents is certainly welcome news. But for the state’s neediest residents, proposed cuts to health care programs, after-school programs and job training will harm families who are already struggling during this economic downturn.

The tax amnesty revenue is a one-shot deal. The state must seek other ways to raise its coffers so that important programs are not cut; for example, tripling fees on gas guzzling cars, vans and SUVs that weigh over 5,000 lbs and increasing the current corporate business tax surcharge.

A final floor vote on the budget is expected to take place June 25. Because revenues will likely lag behind what they were before the recession for years to come, New Jersey should make sure that the state’s most vulnerable citizens are protected now and in the future.