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NJ Gov: Hike top income tax, save property relief

NEW YORK, March 20 (Reuters) - Wealthy New Jerseyans should pay even higher income taxes for one year to save a property tax break for middle-class homeowners, who earn less than $150,000 a year, Governer Jon Corzine said on Friday.

The Democrat, running for a second term in November, said in an interview with CBS radio that only 44,000 people whose yearly incomes top $500,000 a year would pay the higher rate.

In 2004, New Jersey increased income taxes paid by the group Corzine has dubbed the “demi-millionares,” to 8.97 percent. The new rate of 10.25 percent is about half a percentage point higher than the 9.72 percent levy Corzine proposed in his new budget plan just last week.

“I heard a lot of pushback,” Corzine said, explaining why he decided to save the homeowners’ property tax relief, which he had initially planned to trim to help close a $7 billion deficit.

Saving the homestead rebate could cost $500 million.

A Corzine spokesman could not immediately say how low the top income tax rate would fall after it expires.

New Jersey, like New York and Connecticut, is home to many wealthy individuals, including Wall Street’s bankers, brokers and traders. The new demi-millionaire rate in New Jersey would nearly match the total rate of 10.5 percent paid by New York City’s wealthiest, counting state and city income taxes.

Connecticut’s income tax rates top out at 5 percent on income over $10,000 a year.

New York state’s highest rate of 6.85 percent on income over $20,000 is about half of the 15 percent rate the wealthy paid from 1969 to 1977. The rate then was gradually lowered.

New York state Assembly Democrats and the Democratic City Council speaker both want to raise income taxes, though New York Mayor Michael Bloomberg warns that would just push millionaires into moving.

Still, a Princeton University study found just 0.2 percent of New Jersey’s millionaires moved after the 2004 increase. (Reporting by Joan Gralla; Editing by Jan Paschal)