Under pressure from unions, New Jersey Democrats are expected to propose a so-called “millionaire’s tax” to fund the $900 million in pension payment cutbacks that Gov. Chris Christie (R) proposed this year to balance the state’s budget. Coming less than two weeks before the budget deadline, the proposal could be nothing more than a statement of support to unions; Christie is expected to veto the proposal and Democrats in the state legislature don’t have the votes to override a veto.
The tax would increase state rates for income over $1 million from 8.97% to 10.75%, with other increases for incomes starting at $350,000. The intent is to raise $850 million. As a concession to Republicans, the proposal would eliminate New Jersey’s estate tax.
Facing $51 billion in unfunded liability by 2018 and a lawsuit by unions against Christie over his proposed pension cuts, Democrats are under increasing pressure by unions, whose members face an uncertain future.
The bottom line: Facing unfunded liabilities and diminishing revenue, states and municipalities — with a total of $5.6 trillion in assets but as much as an estimated $4 trillion in unfunded liability — have two alternatives: raise taxes or lower benefits. Or they could just kick the can down the road — but not if their state constitution requires a balanced budget by the end of June, as is the case in New Jersey.
