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5 N.J. cities see sales tax hike as Christie sits on bill

Wednesday, January 4, 2017   (0 Comments)
Share | 01/04/17

Starting Jan. 1, shoppers across New Jersey began enjoying a slight cut to the state's sales tax thanks to a deal brokered by Gov. Chris Christie and top Democratic lawmakers. But five cities in the Garden State actually braced for the opposite that day: nearly double the sales-tax rate people were used to paying at some businesses, thanks to the elimination of a longtime break.  And more cities could see the same in coming years if Christie and lawmakers don't come to a compromise regarding the future of a three-decades-old program on the brink of extinction.

For years, businesses in dozens of municipalities have been allowed to levy only half the state's sales tax on their products thanks to the Urban Enterprise Zone program, which aims to boost the economy in urban areas through tax incentives. But the program expired at the beginning of the year for the first five cities who took part in the program when it debuted in 1986: Bridgeton, Camden, Newark, Plainfield, and Trenton. That means many businesses suddenly went from being allowed to offer a 3.5 percent reduced sales tax to being required to offer the state's full 6.875 percent sales tax. The latter is the new state rate, down from 7 percent, which took effect Jan. 1.

The issue? Last year, Christie, a Republican, conditionally vetoed a proposed 10-year expansion, saying the UEZ is a "failed 30-year experiment" that has cost the state revenue. Instead, the governor called for a study to find an alternative way to help cities.  Democrats responded by passing a bill last month that would authorize such a study but also extend the program for those five cities for two years. Christie, though, has not taken action on the measure, leading the UEZ program to run out in those cities as 2017 arrived. It's still unclear whether he will eventually sign or veto the bill.

State Sen. Jeff Van Drew (D-Cape May), another co-sponsor, said the idea of the two-year extension plan (S2670/A4189) is to comply with Christie's call for an alternative program but without cutting off the sales-tax lifeline to cities in the meantime. The nonpartisan state Office of Legislative Services said in a fiscal estimate that the state could lose between $35 million and $39 million in sales-tax revenue over that period by keeping the break in place.

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