Shorter-Term TTF Plan + Much Larger Tax Cut = Bad News for New Jersey’s Future

The outlook for New Jersey’s economic future went from bad to worse last night in Trenton, as legislators hastily pushed forward a tax cut plan that would cost the state about $1.7 billion a year as the price for finally enacting a gas tax increase for essential transportation funding. At a time when the state already can’t meet its current and future obligations, invest in the assets that grow a strong state economy or provide a strong safety net for its neediest residents, blowing a hole of this size in the state’s budget is reckless, short-sighted and – indeed – unfair.

Late last night the Assembly approved a revised omnibus tax bill that raises fuel taxes and cuts New Jersey’s sales tax rate to 6 percent, from 7 percent. The bill no longer includes the elimination of the estate tax, a new charitable deduction exemption, or the increase in the Earned Income Tax Credit. But it does still include an increase in the retirement income tax exemption.

The bottom line: While we are pleased that the estate tax is preserved under this new legislation, that doesn’t disguise the fact that the bill will have larger and far-reaching negative effects on the state’s ability to pay for essential services, contractual obligations and key investments.

In fact, the hole it blows in the budget (approximately $1.7 billion) is twice as large as the hole the previous plan would have created (approximately $870 million).

At the same time, the plan put forward last night is a shorter-term transportation-funding fix (8 years) than the original proposal (10 years).

This proposal, on the surface, is a fairer plan, in that it’s not a tax shift primarily from the wealthy to the working- and middle-class. But that advantage evaporates as soon as the gaping budget hole causes New Jersey to cut vital services, lay off employees or shrink the social safety net.

 

4 Comments

  1. thomas m oneill June 28, 2016 Reply

    So, what should the Senate do with this hot mess? What is the Senate likely to do? What sort of advocacy can close the gap beteeen Question 1 and Question 2? And, finally, do the Assembly Democrats just lie down for Christie or does he have to push them over?

  2. Was this a roll call vote? Curious how my assembly members voted and I can’t find a list on the NJ Legislature website record for the bill.

  3. Jon Whiten July 7, 2016 Reply

    Eric. The vote list is now online on the legislature’s website – the bill # is A-12.

  4. Jon Whiten July 7, 2016 Reply

    Tom: As for what *should* be done, our best take on that is in Gordon’s new op-ed: http://www.njspotlight.com/stories/16/07/01/op-ed-it-s-july-1-and-there-s-no-transportation-funding-fix-what-s-next/

    As for what the Senate *is likely* to do, who knows. It’s pretty unclear at the moment but NJPP and our partners will be keeping up the pressure from our side.

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