Sales Tax Battle Shuts Down New Jersey

As politicians in the state capital haggled over how to fill a $4.5 billion budget deficit, New Jersey's fiscal crisis was being felt across the state — casinos were closed, state offices were shuttered and many state employees stayed home.

Although Atlantic City's hotels remain open, as much as 50 percent of the room reservations have been cancelled, reports CBS News correspondent Sharyn Alfonsi.

About 45,000 state workers and 36,000 casino workers are out of work. Unions representing both groups planned rallies in Trenton on Thursday to demand action to end the stalemate.

Gov. Jon S. Corzine, a Democrat, scheduled his third address in as many days to try to quell dissent from lawmakers in his own party who oppose his plan to raise the state sales tax.

Corzine wants to increase the sales tax from 6 percent to 7 percent to help overcome a $4.5 billion budget deficit and ensure reliable revenue to avert future budget woes.

But several Senate Democrats and most Assembly Democrats, led by Speaker Joseph Roberts Jr., oppose the sales tax increase, saying it's regressive and unnecessary.

Assembly Democrats on Wednesday laid out a $30.7 billion budget plan relying on a tax on other services, extending casino taxes and creating a new corporate income tax. The Assembly Budget Committee was scheduled to take it up Thursday after Corzine's speech.

The state's problem began when lawmakers missed a July 1 deadline to pass a budget. Without it, New Jersey can't pay state employees, meaning casinos can't legally operate without state inspectors.

Corzine furloughed more than half the state's employees. Only about 36,000 people in vital roles such as child welfare, state police and mental hospitals remained on the job, and they were working without pay.

But the state casino inspectors are among those furloughed. No inspectors, no gambling. Atlantic City's 12 casinos stand to lose more than $16 million a day, and the state $1.3 million a day in taxes from them.

Dealers were sent home in mid-shift, gamblers cashed in their chips before being ushered to the exits, and janitors locked the doors behind them.

While gambling ceased, the buildings — which also have restaurants, showrooms, stores and meeting space — stayed open. But many gamblers headed for the exits rather than stay around.

"What do you do in Atlantic City if you don't gamble?" shrugged one gambler. There's nothing to do in "Atlantic City!"

Mayor Robert W. Levy may have the toughest job in the world: convincing visitors to take another view of Atlantic City.

"Come on down and enjoy the great weather" on the boardwalk and the beaches, Levy said.

"It smells like death. It's a horrible stench. It's a foul odor," disappointed gamblers told Alfonsi.

At Trump Taj Mahal, 150 people had canceled room reservations by mid-afternoon. Spokesman Tom Hickey said about 2,500 people would be out of work at the three Trump casinos.

"Nobody thought a thing like this would happen," said casino mogul Donald Trump.

"Las Vegas is laughing ... I think it's a sad day for Atlantic City," Trump told the New York Post.

Connecticut's Indian reservation casinos were laughing, too, and reaping the benefits. They're about the same distance from New York City.

Based on the number of telephone inquiries alone, Bob DeSalvo of Foxwoods told WCBS-AM's Fran Schneidau he expects a boost in business of about 10 percent.

"I would expect that we could pick up an additional three, four, five thousand visits per day," DeSalvo said. "On a busy summer day we typically do about 40- to 45,000."

New Jersey's horse racing tracks did not open for business Wednesday, and state parks and beaches also were closed because of lack of staff. But overcast skies and rain kept most visitors at home anyway.

In Jersey City, Felix Morales showed up at the gate of Liberty State Park with his family to go fishing, but was turned away. "Why should the citizens pay for something that the government should have fixed before it got to this point?" he asked.

The effects of the budget stalemate have frustrated the state's plan to stockpile influenza medicine in case of a flu pandemic. Officials reserved 907,000 courses of antiviral drug Tamiflu from a federal stockpile, but can't order or pay for the drugs without a budget, said Dr. Fred Jacobs, the state health commissioner.