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Business may get tax cuts at a cost

Advocates may be caught in the crossfire as Christie, Legislature start dueling

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The budget brouhaha last week in Trenton over legislative Democrats' refusal to include a tax cut in their budget plan put businesses in an awkward position.

While association leaders have made no secret of their love for the governor, they work closely with the Legislature to advocate for bills — and the loud clamoring for a tax cut could complicate that relationship.
But the leaders of the state's largest business groups said they're in the right, and that without such cuts, New Jersey risks losing the momentum it's built since Gov. Chris Christie and a new set of Democratic legislative leaders took office.

Until this point, Democratic legislators have publicly aligned themselves with the "non-millionaire class" while agreeing with Christie on bills backed by business groups, said Brigid Harrison, a political scientist at Montclair State University. She said stepped-up opposition from Democrats over Christie's agenda could have negative consequences for businesses.

"The fact that they're now apparently willing to do war with the governor means the business community might receive some collateral damage," Harrison said.

While there have been public differences between Democratic legislators and business leaders — particularly over the so-called millionaire's tax, a surcharge on the state's wealthiest residents — this year marks the first time since Christie was elected that business groups and the Legislature differed over a large tax cut.

"It seems to me that the outcome is going to be some form of tax cut," Harrison said, referring to Democrats' plan to have a tax cut based on state revenue meeting certain benchmarks. "The question then becomes if it's worth it for the business community to put the relationships that they have fostered over the last several years in jeopardy going to bat for the governor's proposal rather than what the Legislature has passed."
How this affects the long-term effect on business-legislative relationships, Harrison said, will depend on whether Christie and legislators make peace.

"Certainly there is a desire not to appease the governor in the way they have over the last two and half years," Harrison said of Democratic lawmakers.

New Jersey Chamber of Commerce President Thomas A. Bracken said he had hoped the Legislature would adopt a tax cut before July 1. At press time, Christie had yet to take action on the $31.7 billion budget Democrats sent to his desk June 25.

"It's a negative for the state," Bracken said. "We've had a lot of good news and a lot of good momentum, and negatives have a tendency to slow that down."

Business leaders have been careful to praise Senate President Stephen M. Sweeney (D-West Deptford) and Assembly Speaker Sheila Y. Oliver (D-East Orange) — as well as Christie — during each of their major agreements since 2010. These include a series of business tax cuts enacted last year, as well as new limits on local property taxes and public employee pensions.

But they were palpably disappointed with Democratic legislators over the absence of a tax cut last week.
Bracken said business groups will continue to make their case to legislators, but the tax cut differences were significant.

"The whole idea of compromise and cooperation (between the Legislature and Christie) has been given a big gut shot here," Bracken said. "If they're going to be hell-bent in opposing anything that he wants, then we're going to have a real hard time" influencing legislators.

Bracken said part of the benefit of compromises to reduce taxes and regulation was that they held the promise of further reductions.

But Assembly Budget Officer Vincent Prieto (D-Secaucus) has said the budget will benefit the economy.
"This is a fiscally responsible plan that continues our effort to build a strong foundation to reinvigorate our economy," Prieto said in a statement. "This must be a priority, considering New Jersey ranked 47th last year in the nation in economic output.

"We all support tax cuts, but tax cuts must be focused on property tax relief and they must be ones we can afford," he said. "Irresponsible Republican tax cuts have helped create the economic morass we face in this state and nation, and we are not going to make their same mistake."

New Jersey Business & Industry Association President Philip Kirschner also expressed concern, saying business owners feel tax cuts should come before other items included in the budget.
"The feelings toward state government have really improved from the business community, and they improved because they got things accomplished," Kirschner said. "In this important case, they could not do that, and I think there will be disappointment in the process."

Ben Dworkin, director of Rider University's Rebovich Institute for New Jersey Politics, said pressure from Christie may prove decisive.

"The governor always wins these fights with the Legislature — not just this governor, but any governor," Dworkin said. "You're talking about an individual taking on an institution."
Dworkin said a larger impact from the business community could result if the state misses its revenue targets, including the loss of funding for infrastructure projects.

"If 7.3 percent growth doesn't materialize, then I think we're facing a very uncertain situation," Dworkin said.
Chamber of Commerce Southern New Jersey Executive Vice President Kathleen A. Davis expressed hope that the tax cuts will be enacted soon. She said the Legislature sent executives the wrong message when it passed a millionaire's tax in the face of Christie's veto promise.

"On the one hand you're increasing taxes — and in many respects, these increases are on the decision makers in the companies — and then again, you're not looking at the tax cuts that are needed to stimulate the economy," Davis said.

E-mail to: andrewk@njbiz.com
On Twitter: @Kitchenman

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