Bloomberg News

Christie May Cede Tax Cut to Rebuilding in Election Year

November 13, 2012

New Jersey Governor Chris Christie, who says he’s uncertain whether he’ll pursue the tax cut he championed before Hurricane Sandy, may find rebuilding his battered state is the bigger priority.

Christie, a first-term Republican, spent much of the year campaigning for his “Jersey Comeback”, which relied on lower income taxes to stimulate the economy. He told reporters yesterday that Sandy, which walloped shore areas Oct. 29, may have hurt October and November revenue enough to throw a tax cut into doubt, though rebuilding may cause a burst of spending.

“I still have to work with the treasurer on that,” he said.

Treasurer Andrew Sidamon-Eristoff told reporters today that he was “continuing to work on the numbers” and that any tax- cut decision will be Christie’s. He said the administration won’t issue a damage estimate “until we have all the data.”

New York Governor Andrew Cuomo, 54, a Democrat, said Sandy had cost his state $33 billion, and he would seek $30 billion from the federal government for physical and economic damage.

’Big Splash’

“The governor of New York made a big splash with his numbers,” Sidamon-Eristoff said during a break at an economic forum in Trenton. “I want to be sure that when we offer up numbers here from New Jersey, that they’re well-informed, well- substantiated, well-documented and well-thought-out.”

Christie touted the tax reduction as part of the solution to turn around New Jersey, which has the fourth-highest unemployment rate among U.S. states, at 9.8 percent, and was ranked 47th for economic growth in 2011, according to the U.S. Commerce Department. Next year, Democrats and Republicans, and perhaps Christie, will be lining up campaigns for governor and all 120 seats in New Jersey’s Legislature.

“Everyone would love to afford a tax cut if it was possible,” said Ben Dworkin, director of the Rebovich Institute for New Jersey Politics at Lawrenceville’s Rider University.

“Sandy changes the equation,” Dworkin said. “The governor’s legacy, assuming he runs for re-election and can win, and the Legislature’s legacy, will be the rebuilding of New Jersey. That is the priority even before tax cuts, and if they’re successful, that’s what they’ll be remembered for.”

Choked Flow

The Democratic-controlled Legislature set aside $183 million in the $31.7 billion budget for the current fiscal year to cover Christie’s lowered taxes, and has refused to release it unless he meets his revenue targets. Christie said he won’t decide on renewing his push until collection figures come in.

“These past two weeks, I’m sure we’ve experienced the diminution of revenue,” Christie, 50, told reporters in Lincroft yesterday.

Christie’s forecasts have been challenged by Democrats and by Standard & Poor’s, the New York-based credit-rating company that in September changed its outlook on state debt to negative from stable. It grades the state’s general-obligation bonds AA-, three steps from the top mark.

Collections for the first three months of the fiscal year that began July 1 missed the governor’s forecast by 4 percent, putting revenue about $175 million short of his targets.

Rebuilding Phase

Furthermore, the penalty paid by New Jersey on 10-year bonds versus AAA securities has widened to 0.57 percentage point from 0.47 percentage point at the start of the year, data compiled by Bloomberg show.

Now, the state must confront the storm’s aftermath.

Sandy, which caused at least 100 deaths in the U.S., smashed entire New Jersey communities with hurricane-force winds and surging floodwaters, leaving more than half the state in the dark.

“Rebuilding is going to require the purchase of enormous amounts of supplies, the employment of people who would not have been otherwise, presumably, which means more taxes from them,” Christie said. “And it would mean businesses have an opportunity to, responsibly and within the law, make more money than they would otherwise.”

The matter may be complicated by some property owners’ appeals for lower assessments on parcels where homes have been wiped out, according to Patrick Murray, director of the Monmouth University Polling Institute in West Long Branch.

“It’s a loss of revenue for towns, and there’s certainly going to be political implications,” Murray said.

Sandy helped to underscore why a wait-and-see approach toward a tax cut was prudent, said Assemblyman Vincent Prieto, a Democrat from Secaucus who is head of the Budget Committee.

“Although we’re going to get a lot of money from the federal government, there’s probably going to be a price tag for us,” Prieto said yesterday. “Right now is not the time to be talking about a tax cut.”

To contact the reporter on this story: Elise Young in Trenton at eyoung30@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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