TRENTON — Democratic leaders in the state Legislature have reached agreement on a budget deal that raises taxes on businesses and income above $1 million, The Star-Ledger has learned.

The deal between Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto would raise more than $1.3 billion in new revenue and use that money to make the full payment required by law next year for the state pension system — $2.25 billion, instead of the $681 million Gov. Chris Christie is proposing.

Two Democratic sources with knowledge of the deal confirmed the details on the condition of anonymity, saying they were not authorized to announce them today. A budget draft will get hearings Tuesday in the Assembly and Senate budget committees, with final passage expected on Thursday in both houses, the sources said.

Later in the day, Assemblyman John Burzichelli (D-Gloucester) confirmed the details of the deal but said a few minor kinks remain to be ironed out in budget hearings on Tuesday.

"As unpleasant as the whole discussion is, that's the group that has prospered," Burzichelli said of New Jersey's wealthy earners. "The problem is the economy. New Jersey has lagged while our neighboring states have outperformed us."

But the Democrats' budget plan for the fiscal year beginning July 1 is unlikely to become law. The Republican governor has said repeatedly that he will veto any business or income tax hikes. With his line-item veto power, Christie could also reduce the size of any pension payment Democrats include. And the Democrats lack enough votes in either house to override the governor's vetoes.

The question is whether a court hearing set for Wednesday will upend the competing budget plans by Christie and the Democrats. More than a dozen unions and financial managers for the state's pension funds are challenging Christie's pension maneuver, which would cost taxpayers nearly twice over five years.

After rolling out slightly different budget plans last week, Sweeney (D-Gloucester) and Prieto (D-Hudson) essentially combined their proposals. Under the Democrats' budget:

• The marginal tax rate on income above $1 million would rise from 8.97 percent to 10.75 percent, retroactive to January of this year, netting $667 million.

• The corporate business tax would rise from 9 percent to 10.35 percent, yielding $375 million.

• The Business Employment Incentive Program (BEIP) of tax abatements would be suspended for a year, freeing up $175 million.

• A tax hike on income between $500,000 and $1 million that Sweeney had proposed would be scrapped, as Prieto suggested.

In addition, some new taxes or fees Christie proposed would be folded into the Democrats' budget, such as a penalty for making bad electronic payments ($25 million) and a move to subject all online retailers to the state sales tax ($25 million).

Taxes Christie proposed on electronic cigarettes and the Urban Enterprise Zone program would be cut out of the budget under the Democrats' deal.

Prieto had pushed to restore funding cuts for the Earned Income Tax Credit, women's health care centers, nursing homes, anti-domestic-violence programs, cancer research, legal services for the poor, and other items. The budget deal includes funding for all of those.

Assembly Republicans blasted the tax hike proposals at a news conference earlier today, saying the state already faces one of the highest overall tax burdens in the country, is mired in slow economic growth, and would be risking even more stagnation if it were to raise taxes.

"It would be suicidal to New Jersey and New Jersey's economy," said Assemblyman Declan O'Scanlon (R-Monmouth), the Republican budget officer in the Assembly.

"None of these taxes are just on millionaires," he said, because it is likely that employers will tighten their belt in response to any tax increase, and pass along some added costs to their workforces.

"This is a play to a special constituency, not a play for the average taxpayer," said Assembly Minority Leader Jon Bramnick (R-Union), who said the way to dig out of the state's financial hole is to pass a constitutional amendment that would allow the Legislature to override court rulings mandating a certain level of school funding in urban districts.

Some districts spend $25,000 to $30,000 per student in those districts, with no good results, Republicans said. By capping school aid to districts at a lower level, the state could find the money to pay its quickly rising bills, they said.

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