Op-Ed

Op-Ed: How to Counter the GOP Tax Plan with Bold Action


With new federal tax cuts favoring the wealthiest it’s time to make tax changes of our own.

Published on Feb 14, 2018 in Tax and Budget

This op-ed appeared in the February 14, 2018 edition of NJ Spotlight.

The new federal tax law has generated a lot of press, sparked a fair amount of outrage and led many elected officials scrambling to respond with sound policies.

Unfortunately, there seems to be widespread confusion about the winners and losers under the new law – confusion that is complicating efforts to clean up New Jersey’s tax code and raise new resources to invest in critical public services.

The facts are well-established about what this tax plan really does. It disproportionately benefits those at the very top, providing a windfall for corporations and the wealthiest households and peanuts for the working people of New Jersey. To wit: New Jersey’s families with annual incomes over $1 million will see an average annual tax cut of $30,440 under the new law, whereas the bottom 60 percent (those with incomes of $80,000 or less) can expect a whopping $520.

In response to the tax law, Senate President Steve Sweeney has called for a top-to-bottom review of New Jersey’s tax structure. This is not a bad idea on its surface, but any such examination needs to include all the relevant facts.

Here are some worth considering.

Under the Christie administration, New Jersey sharply cut taxes for the best -off families, wealthy heirs and businesses, draining billions of dollars a year from the state’s coffers at a time when public services and investments were already suffering from cuts to essential services and neglect of critical asset. It’s no surprise, then, that two-thirds of New Jersey voters say the wealthiest families and large corporations are paying “too little” in taxes.

And despite persistent political promises, prosperity has not trickled down. In fact, the lack of state dollars to fund critical priorities has led to huge backdoor tax hikes that have disproportionately harmed working and middle-class families.

Take public higher education, for example, which helps to ensure an educated workforce and a thriving business climate. State operating support has been slashed by more than 21 percent since 2008 – a big reason why, over the same time, average tuitions have risen by 17.5 percent, leading to an explosion in student loan debt.

Or take public transportation. NJ Transit is one of the state’s most enviable assets and a key to economic vitality. Yet, New Jersey has slashed operating support by 59 percent between 2005 and 2017, forcing the transit system to make up the difference through punishing fare hikes, including the largest (25 percent) in the transit agency’s history in 2010 and another 9 percent hike in 2015. The fare increases between 2009 and 2017 have been about double the rate of inflation, creating a real hardship for many commuting families and depressing overall growth. Public transit is essential for a more sustainable and efficient economy, but not if it becomes plagued by broken-down trains and a shrinking ridership.

The list goes on. Without adequate funding, public services and investments like these have suffered causing the state economy to remain stagnant. And when state finances are depleted like this, it’s the most vulnerable who pay the biggest price. Child poverty remains higher than it was before the Great Recession. Nearly half of young adults are living with their parents, the highest percentage in the country. And, the median household income remains stagnant while income inequality in the state is at its highest level ever.

Meanwhile, the state’s tax code is already upside-down. New Jersey’s bottom 20 percent of families pay an average of 10.7 percent of their annual incomes to state and local taxes, while middle-income families pay 9.1 percent and the wealthiest 1 percent of families pay just 7.1 percent.

There are sensible ways to reverse course. Chief among them:

  • Raise the income tax rate on the state’s wealthiest 5 percent of families to generate over $1 billion in new funding for property tax relief and K-12 education. This policy change – modeled after California’s 2012 tax overhaul and similar to legislation introduced last session by Senator Ray Lesniak – is supported by 3 in 4 New Jerseyans.
  • Enact legislation to close corporate tax loopholes. Following the lead of 25 other states and limiting multi-state corporations’ ability to use accounting tricks to dodge state taxes – as proposed by Senate Budget Chairman Paul Sarlo – would level the playing field for New Jersey’s small and local businesses and raise up to an additional $290 million a year.
  • Reverse the tax cut that no one asked for, and that 60 percent of New Jersey voters say hasn’t helped them or their families, by restoring the sales tax to 7 percent so the state regains about $600 million for critical investments.
  • Restore New Jersey’s estate tax on heirs of fortunes worth $1 million or more – as supported by 62 percent of New Jersey voters – and bring back over $500 million a year in lost revenue.

With enormous federal tax cuts clearly favoring the wealthiest now taking hold, it is time to act – not retreat – by enacting smart tax policy and making long-overdue investments in the building blocks of a strong state economy.

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