About that 10 percent income tax cut that Gov. Christie promised us yesterday … don’t start planning that dream vacation quite yet.
Despite polls that show New Jersey voters expecting a median savings of nearly $750 from the cut, the true savings are much, much less.
For someone earning $60,000 a year, which is pretty close to half of all workers, the cut will amount to income tax savings of less than $35 in 2013. It would double to $70 in 2014, before finally hitting the full $105 – or about $2 a week — in 2015.
What’s more, there will actually be no income tax cut this year. Instead, taxpayers will have to wait until they file their 2015 taxes in 2016 to get all of what the governor is promising – and even that won’t amount to much for most of us.
The income tax proposal put forth by the governor doesn’t become “operational” until January 1, 2013, according to a footnote in the Department of Treasury’s Budget in Brief, a 150-page document that adds detail to the budget proposal outlined in Tuesday’s speech.
So while the governor unabashedly refers to his plan as a “10-percent income tax cut,” it’s really more like a “3.3 percent, and you-gotta-wait-til-next-year-to-get-it tax cut.”
And here’s the kicker: over three years, this cumulative pittance in individual tax savings will end up costing the state $1.7 billion in revenues. Quite simply, in this economy and given the devastation caused to services in the past two budgets, the state can’t afford to give up those revenues.
The governor’s solution to that issue is to create the illusion of more money. His economic advisers are forecasting 7.3 percent growth in the state’s tax collections next year – a $2.2 billion windfall that the state hasn’t seen since pre-recession days, when the economic bubble was being stretched to bursting.
“Revenue growth will primarily result from the continued improvement in the state’s economy,” according to the Budget in Brief.
The governor’s budget numbers are incredibly optimistic, even though New Jersey lags the rest of the nation in economic recovery with a 9 percent unemployment rate, and even though the state is expecting revenues for this year to fall short of projections by 3.2 percent, or $325 million.
In the end, this budget is a dog. The revenue numbers are suspect. The promise of a 10 percent tax cut is false. And the political narrative of a “New Jersey comeback” is just so much fiction.
It is now incumbent on the legislature to draft a budget that includes realistic revenue numbers that will adequately fund some of the good priorities the governor did lay out in his speech – increased school aid, restoration of the state Earned Income Tax Credit and expansion of drug courts.
That budget must include increasing the top tax rate and demanding that the wealthiest one percent share in the burden that the other 99 percent have endured the past two budgets.
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