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Income tax cut mentioned as way to spur state's growth(Asbury Park Press (NJ) (KRT) Via Thomson Dialog NewsEdge) Aug. 4--Gov. Corzine said Thursday that New Jersey's income taxes are high enough to make the state less competitive with surrounding states, and that he would not support raising income tax rates to offset the state's highest-in-the-nation property taxes. Corzine added that he believed the income tax rates were so high that they were near the point where they could be cut, which in turn might spur economic growth and bring more money into the state's coffers. "I have a . . . view that you could almost lower taxes on income and generate revenue," Corzine told the Asbury Park Press editorial board. "It's kind of hard for a guy who has wealth to make that case, but such a high percentage of our income is coming from high-income taxpayers," Corzine said. "We have to be very, very careful with the income tax." Reports have said New Jersey has lost residents and jobs in high-paying sectors in recent years. Some experts argue the state's taxes and high cost of living are to blame. Corzine indicated Thursday that he was looking at that issue. He said New Jersey's income taxes made the state "less attractive" than Connecticut, and put it at a "competitive disadvantage" with Pennsylvania and Delaware. State lawmakers are now in a special session exploring ways to reduce property taxes or slow their rate of growth. Republicans are calling for large cuts in property tax bills, while Corzine has said he is looking to staunch the annual increases. Some legislative Democrats have offered the idea of hiking tax rates on incomes between $200,000 and $500,000 to raise money for property tax relief. But that idea has received little support. Local governments and school districts levy property taxes. But state aid to those entities helps determine how much local officials must raise from property taxes. Money to offset the property taxes would have to come from somewhere. The state's two largest revenue producers are the income and sales taxes. Income tax rates for the highest wage earners were increased under former Gov. James E. McGreevey in 2004, and Corzine just signed a one-percentage-point increase in the sales tax, which brought it to 7 percent. Corzine reiterated in comments Thursday that he wants to find property tax savings by encouraging municipalities and school districts to share services or even merge. New Jersey's income tax rates are the sixth-highest among the states for high-income filers, at 8.97 percent for those earning more than $500,000 before deductions. Individuals earning between $75,000 and $500,000 pay 6.37 percent. New York lawmakers allowed the state's top tax rates to expire at the beginning of this year, so now the top state income tax there is 6.87 percent, according to the Washington, D.C.-based nonprofit The Tax Foundation. That does not include a New York City income tax. Connecticut's top rate stands at 5 percent and Pennsylvania's is at 3.07 percent. Delaware's top income tax rate is just under 6 percent. Corzine said he did not necessarily subscribe to the economic theory that governments often could raise more money by cutting taxes. "I'm not a supply sider," he said. But Corzine also suggested New Jersey could be losing taxes to other states. "Are you undermining your revenue stream in a competitive context?" he asked. "I think we're very close to that." The state was projected to bring in $10.5 billion from the income tax for the fiscal year that ended June 30, a state spokesman said. The income tax collected $9.5 billion in fiscal year 2005, and $7.4 billion fiscal year 2005, when the higher tax rates took effect. The state budget for the current fiscal year counts on $11.5 billion from the income tax -- roughly one-third of the state's budget -- and $8.7 billion from the sales tax. James Hughes, Rutgers University public policy professor, said higher taxes of all kinds have contributed to the state's loss of high-paying jobs, and Corzine is correct in his comments. "You can't get too out of line with your competitors," Hughes said. "The high-income people are the decision makers for the major economic players, and they make decisions on whether to invest in New Jersey and elsewhere." Hughes said 40 percent of the state's income revenue comes from individuals or households that earn $500,000 or more. Those who earn $100,000 or more pay about 80 percent of the income tax revenue, he said. Assemblyman Joseph R. Malone III, R-Burlington, a frequent critic of state taxes and spending, said Corzine and the Democrats must find a way to significantly cut taxes -- especially property taxes -- if the state's economy is to improve. "If we don't do something to lower tax bills, then what are we really doing?" Malone asked. "The whole structure of the state of New Jersey -- the property taxes, all the taxes -- is leading people to leave." |