Stephen Sweeney | Pension360

Top New Jersey Lawmaker Calls for Tax on Millionaires to Help Fund Pensions

A New Jersey court ruled last month that the state acted illegally in cutting its pension contributions over the last two years.

As a result, the state will need to pay its full contribution in 2015 – which means New Jersey will need to come up with about $1.6 billion that hasn’t yet been budgeted for.

In lawmakers’ search for new streams of revenue, one idea has come to the forefront.

New Jersey Senate President Stephen Sweeney is proposing a tax on millionaires.

The policy would boost the income tax on earnings over $1 million and could raise $600 million in revenue in its first year, but Gov. Chris Christie has historically been opposed to the measure.

More from NJ Spotlight:

Senate President Stephen Sweeney (D-Gloucester) said [a millionaire’s tax] would help the state make “a good-faith effort” while giving public-worker unions an incentive to cooperate with government to make benefits more affordable.

“In my mind that means a millionaires tax, it really does,” Sweeney said in an interview with NJ Spotlight.

Though a bill hasn’t been crafted yet, he envisions something similar to the legislation lawmakers sent Christie last year that would have temporarily upped the income-tax rate on earnings over $1 million from 8.97 percent to 10.75 percent.

[…]

According to the Tax Foundation, a Washington, D.C.-based organization that tracks state tax policies, New Jersey’s 8.97 percent top-end income tax rate is the sixth-highest in the country, behind California, 13.3 percent; Hawaii, 11 percent; Oregon, 9.9 percent; Minnesota, 9.85 percent; and Iowa, 8.98 percent.

[…]

The New Jersey Office of Legislative Services, the nonpartisan research wing of the state Legislature, said last year when it analyzed Sweeney’s proposal that boosting the top-end rate on earnings over $1 million would generate an estimated $580 million to $615 million in the first year.

Another concern Christie raised last week was that increasing the tax rate on millionaires could send more of them packing to states that already offer lower income tax rates, or levy no income tax at all.

That’s because the top 1 percent of tax filers typically cover roughly 40 percent of the total income tax haul for New Jersey, according to Department of Treasury figures…

It’s likely that the majority of New Jersey residents would be supportive of a millionaire’s tax. In a 2014 poll by Monmouth University’s Polling Institute, 66 percent of residents said they supported a tax on high earners, with revenue going toward pension contributions.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

New Jersey Lawmaker Wants to Reduce Pension Tax to Keep Retirees From Leaving State

In light of a recent poll that found 25 percent of New Jersey residents are “very likely” to leave the state when they retire, one lawmaker wants to reform the way the state taxes pension benefits.

The goal is to keep middle-class retirees in New Jersey.

More details from the Burlington County Times:

New Jersey Senate President Stephen Sweeney says he’s interested in changing the way the state taxes pension income to help keep retirees from leaving New Jersey for less expensive states.

New Jersey does not tax Social Security or military pensions, but requires residents to include pension income when they file their income tax returns.

Residents age 62 or older can qualify for a pension tax exclusion of up to $20,000 of their income for couples or $15,000 for individual filers, provided their gross income doesn’t exceed $100,000.

Speaking to seniors during a telephone town hall meeting hosted by AARP-NJ, Sweeney said he was interested in reforming the pension tax to help entice residents to remain in New Jersey during their retirements.

“We’re looking at raising the threshold to keep people in New Jersey,” Sweeney, D-3rd of West Deptford, said Tuesday.

[…]

The issue of seniors fleeing New Jersey has prompted several lawmakers to propose repealing the state’s inheritance tax or raising the state’s threshold for paying an estate tax from $675,000 to the federal level of $5.34 million.

Sweeney didn’t dismiss those proposals during the town hall, but said he also wanted to pursue changing the pension tax because it would assist more middle-class retirees.

“It really hits the middle class hard,” he said.

New Jersey taxes pension benefits at a rate of 3.6 percent; that number has grown from 3.1 percent since 2000.

But it’s not the only reason retirees are thinking about leaving. The state’s housing costs for seniors are the highest in the country, and healthcare costs are the third-highest.

Christie’s 2017 Challengers Already Forming Pension Policies

New Jersey’s next gubernatorial election is still three years away – but Christie’s potential Democratic challengers are already meeting with stakeholders and gearing up their pension policies.

Those potential challengers include Senate President Stephen Sweeney, Assemblyman John Wisniewski, former U.S. ambassador Philip Murphy and Jersey City Mayor Steve Fulop.

They all have one thing in common: they believe pensions will be a big issue in the 2017 election, and Christie will be on the wrong side of it.

From NorthJersey:

Although the contest is still three years away, several Democrats are already conducting a fierce, behind-the-scenes pre-primary.

And, for the time being, the best way of wooing unions representing police, firefighters and thousands of government workers appears to be to trumpet one of labor’s bottom-line demands: Unless Governor Christie reverses course and makes his promised payments to the pension system, any further discussion of more changes, including a call to scale back workers’ benefits, is dead in the water.

“The employees are paying their share, [Christie] should do the same,’’ said state Senate President Stephen Sweeney.

Christie’s reform push — a public tour over the summer and creation of the 10-member panel of experts who issued last month’s report — looks like it may run smack into the Democratic Party’s solidarity with public employee unions.

That unity will most likely be seen in the Senate, where Sweeney, a Gloucester County Democrat, has the power to derail Christie’s agenda when it suits him. Sweeney has cooperated with Christie on a whole range of deals — including the hotly contested 2011 reforms that forced public workers to pay more for pension and health care benefits, raised the retirement age and cut cost-of-living adjustments. Sweeney is not cooperating this time.

Other potential Democratic candidates in the 2017 race are also lining up behind the union position.

“We have no credibility as a government unless we stand up and meet our obligation to the pensioners,” said Philip Murphy, who served as a U.S. ambassador to Germany and led the Democratic National Committee’s fundraising from 2006 to 2009. “I think it’s very hard to go back to the well until the state can prove that it’s a reliable partner in this.”

Assemblyman John Wisniewski, D-Middlesex, who opposed the first round of benefit changes in 2011, also toed the union line. “Why would anybody believe assurances about any new set of promises about the pension fund when the promises that were made under heavy skepticism to begin with have not been lived up to?”

Unions were angry when Christie cut the state’s pension payments and used the money to plug budget shortfalls elsewhere. Union leaders said that workers were doing their part by contributing money, but the state was shirking its responsibility. From NorthJersey.com:

“We can’t take anyone seriously who talks about fixing the pension system without putting in additional resources,’’ said Ginger Gold Schnitzer, director of governmental relations for the New Jersey Education Association, the powerful teachers union. “It’s ridiculous to think a pension system can survive without regular [state] contributions. Our members have made those contributions.”

According to a recent report from the New Jersey Pension and Benefit Study Commission, the state if shouldering $37 billion of pension liabilities. That number has tripled since 2005.