Assembly Member Eliana Pintor Marin, the Assembly Budget Committee's chairwoman, said that her proposal to authorize $5 billion in state borrowing could help stave off difficult cuts as the state faces a budget crisis. (AP)
Sponsored by Assembly Member Eliana Pintor Marin, D-Newark, the Assembly Budget Committee's chairwoman, the bill passed on a 51-28 vote.
Pintor Marin noted that Democratic Gov. Phil Murphy's administration had already proposed $5.3 billion in cuts for the state but said the borrowing bill, supported by Murphy, would help stave off even more difficult cuts as the state faces a $10 billion budget deficit.
"The scope of this budget crisis cannot be understated and requires us to consider every possible solution," Pintor Marin said.
As of Thursday, the measure didn't have a companion bill in the Senate, which like the Assembly is controlled by Democrats. The office of Senate President Steve Sweeney, D-West Deptford, didn't immediately respond to requests for comment Wednesday.
The possible tax laid out in the bill would be assessed, levied and collected in the same way and at the same time as other real and personal property taxes, the bill said. The tax would be paid to county treasurers by Dec. 15 annually and sent to the state treasurer by Dec. 20.
During debate on the bill, Democrats argued the language referring to potential taxes was boilerplate and had appeared over the years in various bonding bills that Republicans have sometimes supported. But Republicans argued that because of the severe circumstances of the state budget and the unknown effect of the COVID-19 pandemic on the state's ongoing tax revenue and the economy, there was a greater chance the state might not meet its debt obligations. That could trigger clauses in the bill for a real property tax, or even a wealth tax, to pay back debtors, Republicans said.
Speaking on the floor, Assembly Majority Leader Louis Greenwald, D-Burlington, said Republicans were being hypocritical in citing the likelihood of the tax measure being triggered, given their past votes in favor of bonding measures with the same language.
"It should be pointed out for historical record that throughout the time of the state and the state's ability to borrow and bond, that clause has never, ever, not once been enacted," Greenwald said.
Assembly Republican Leader Jon Bramnick, R-Westfield, questioned whether the measure in the bill might not lead to tax increases. He and other Republicans said that instead of borrowing and bonding, the state should consider further cuts, speeding up the reopening of businesses to generate more tax revenue and waiting to see if there would be more federal help.
"We are deeply concerned that this bill, which does have language that existed in prior bills, is a clear launching pad for some horrific new tax this state cannot afford," Bramnick said.
Greenwald said implying that the passage of the bill would lead to an increase in property taxes was misleading. The bill, he said, would help the state pay for schools, higher education, hospitals and other needs that localities otherwise might not afford.
"The purpose of this bill is to avoid crippling tax increases to every corner of this state, devastating cuts to programs of our most vulnerable, which could very well lead to dramatic health care costs' spikes, which would strain our health care system," Greenwald said.
Murphy's office didn't immediately respond to requests for comment. But during a news conference Thursday, Murphy called the passage of the bill a huge step and a way to prevent revenue losses that could affect front-line workers during the pandemic. He called the notion that the measure would raise property taxes "laughable" and said it would help prevent that instead.
"This not only has nothing to do with raising property taxes, this is the one weapon we have in our disposal to prevent that, in fact, from happening," Murphy said. "I've heard a few voices on the other side of the aisle raising this — that it's in the bond. Guess what? It's boilerplate that's been in every bond the state has done for decades."
In a statement after the bill's passage, Assembly Speaker Craig Coughlin, D-Woodbridge, said the measure comes as the state faces looming revenue losses because of measures to stop the spread of COVID-19, the respiratory illness caused by the novel coronavirus.
"It's an economic tsunami that requires an extraordinary action," Coughlin said. "While not ideal, I support the borrowing of necessary funds through bonding, provided the sacrifice is spread evenly and that proper legislative oversight is included, to ensure our economic position is strengthened for both the present and future."
Jared Walczak, director of state tax policy for the right-leaning Tax Foundation, told Law360 that states once relied heavily on property taxes but that such taxes have become almost exclusively the realm of local governments.
"A temporary statewide property tax creates fewer economic distortions than most other taxes the state could impose to pay off debts incurred during the COVID-19 crisis," Walczak said. "But policymakers should be aware of how large that temporary tax increase could be. Just repaying principal would result in a 15% property tax increase if accomplished in one year; interest would be on top of that."
--Editing by John Oudens.
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