Op-Ed: Latest Transportation Funding Proposal Fails the ‘Fairness’ Test

This op-ed appeared in the April 24, 2016 edition of the Bergen Record.

NJPP Op-EdThere’s good news and bad news when it comes to securing funding for critical improvements and modernization of our roads, bridges, train lines and other transportation assets.

The good news is that there is a strengthening consensus that a significant investment is required within the next few months to salvage the near-broke Transportation Trust Fund. The best source of funding for this investment is raising New Jersey’s taxes on gasoline, which haven’t been increased for 26 years and are the second-lowest in the nation (after oil-rich Alaska).

No one relishes the idea of paying more at the pump. But we either pay there, or we pay more elsewhere: in additional car repairs, in higher transit fares and in countless hours lost to commuting.

And when faced with the dire need to invest in New Jersey’s greatest economic asset – the transportation networks that capitalize on our unmatched location – it’s clear that some leading lawmakers understand the need to fix the problem, and to do it right.

The bad news is that political wheeling and dealing – in the name of so-called “tax fairness” – is getting in the way, with potentially damaging consequences for all of us.

The latest proposal, from Senate Budget Chairman Paul Sarlo, would raise a significant amount of new revenue to pay for transportation investment from a sizable increase in the gasoline tax.

But Sen. Sarlo’s plan also includes big tax cuts that would mostly help the well-off while jeopardizing essential public services and property tax relief:

  • Eliminating the estate tax, which state officials estimate would drain $550 million a year from the general fund
  • Raising the exemption level for income taxes paid on retirement income, which state officials estimate would equal 125 million fewer dollars available each year for property tax relief
  • Creating a state income tax deduction for charitable giving, which – depending on how it is designed – could cost up to $300 million in dollars currently being dedicated to property tax relief

Pairing tax cuts that mostly benefit the wealthy with a tax hike that will hit the poor and working class the hardest is an odd definition of “tax fairness.” It would also make New Jersey’s already precarious financial condition even worse.

Here’s why.

Behind the current push on “tax fairness” is an acknowledgment that many New Jerseyans feel like their taxes are too high. So the idea is simple: raise one tax, cut some others and call it “fair.”

But, like every simple idea, the devil is in the details. Lawmakers are proposing to raise a tax that’s dedicated to funding transportation improvements and “even it out” by cutting taxes that pay for current services and property tax relief. The end result is fewer available dollars to meet the needs of New Jerseyans across the state.

New Jersey already can’t meet its financial obligations, or provide critical services and opportunities for the millions of our neighbors who have fallen on hard economic times. And nearly all of our shared priorities – from good schools to affordable college to clean water and air – are at risk due to chronic underfunding. In this context, the math is simple: There’s no way that New Jersey’s essential services would come out of Sen. Sarlo’s plan unscathed. Whether the end result is higher transit fares, fewer garbage pickups in your town, larger class sizes or an ever-increasing property tax bill, it’s clear that something has to give.

Sen. Sarlo’s counterpart in the lower house, Assembly Budget Chairman Gary Schaer, said it best this week.

“Pensions are underfunded, K-12 public education is underfunded, the Transportation Trust Fund is not funded at all, higher education is underfunded. The list goes on and on and on,” he said, adding that losing the estimated $550 million in revenue from the estate tax would “be extraordinarily disruptive not only to the poor of this state but to the middle class as well.”

The biggest irony here is that if lawmakers were looking for true “tax fairness,” it’s much easier, and far less costly, than what Sen. Sarlo and others have been proposing.

Low-income New Jerseyans would lose much more of their incomes to any significant gas tax increase than the rest of us. That’s because the gas tax is regressive, meaning that lower-income households pay greater shares of their income to it.

The bottom 40 percent of New Jersey households – those with annual incomes of less than $45,000 – would feel the greatest pinch from the new tax, while the top 20 percent, with incomes of $121,000 and above, would feel the tax hike the least.

The simplest way to right that wrong and create real “tax fairness” for over half a million New Jerseyans is to increase the state Earned Income Tax Credit – which gives low-income working families a modest break on their state income taxes – by 5 percentage points. This would cost New Jersey about $60 million in revenue – less than a tenth of what Sen. Sarlo’s plan would cost. And it would be truly fair; what’s on the table right now is fair in name only.