A Roadmap for True ‘Tax Fairness’ in New Jersey

There are plenty of reasons to have hope that we can advance a tax fairness agenda.

Published on Nov 14, 2016 in Tax and Budget

This is a prepared version of remarks delivered at the New Jersey Working Families Summit on Saturday, November 12, 2016.

“Tax fairness.”

It has such a nice, simple ring to it. But as we learned this year, it can be twisted, turned and perverted by those who will tell us that it’s “fair” to reduce taxes for those who already have the most, and to just wait for the prosperity to trickle down to the rest of us.

We know that doesn’t work, and it’s certainly not “tax fairness.”

So what is “tax fairness” to us, as progressives? And why does it matter?

It matters because we can’t have a just and equal and prosperous state without true tax fairness. On the flip side, tax unfairness perpetuates inequalities and makes all types of social progress – whether we’re talking about the environment or the schools or civil rights or anything else we hold near and dear to our hearts – much, much harder to realize.

True, progressive tax fairness is defined by two key pieces:

  • It has an equity component – ensuring that low-income and middle-class taxpayers are on a level playing field with the wealthy and the corporations;
  • And it has an overall revenue component – ensuring that the government has enough money to pay for essential services, help those in need, make targeted investments that help build a strong economy for all, and foster a vibrant and inclusive state.

So where does the fight for tax fairness stand? Nationally, we are going to be facing harmful proposals to cut taxes for the wealthy and for large corporations – the Trump campaign’s tax cut plan, for example, would deliver about half of its financial benefits to the top 1 percent of households, while the bottom 80 percent of us would get just 17 percent.

That’s bad enough right there, and surely not “tax fairness.” But it gets even worse, because that stat disguises the reality, which is that if these cuts were “paid for” so they don’t increase the deficit, the resulting budget cuts would likely mean that low-income and middle-class Americans would get no financial benefit from the tax cuts, and instead face net losses due to federal benefit cuts. And proposals to turn programs like Medicaid into block grants to the states, or convert to a per-capita cap system, would not only harm low-income people but also represent a massive cost shift from the feds to the states.

That is all very bad news, and we must vigorously fight against these types of plans at the national level. But while we’re doing that we must also lay the groundwork for proactive, progressive change at the state level.

As it stands now, New Jersey has lost a lot of ground in the fight for tax fairness over the past decade. Our political leaders have reduced taxes for the most well-off, cut taxes for businesses and promised extravagant tax breaks to corporations for shifting jobs around the state, all while property tax bills have continued to rise, transit fares have dramatically increased and the cost of college continues to climb into an unaffordable realm.

Perhaps it’s no surprise, then, that the poorest families in the state – those earning $22,000 a year or less – on average pay the largest share of their incomes to state and local taxes, while the top 1 percent, with incomes over $758,000 a year, pay the least.

We need to reverse this trend.

There are many ways to do this. The roadmap, at the highest level, though, is simple:

First, do no more harm. Reject big tax cuts that deliver the bulk of their benefits to the well off while starving the state of resources.

Second, roll back some of the bad stuff. Let’s restore fair and responsible taxation of inherited wealth. Let’s roll back the sales tax cut. Let’s roll back some of the $3 billion in tax cuts that have gone to businesses since 2011.

Third, make corporations pay their fair share. We can close tax loopholes that allow multistate corporations to artificially shift their profits out of the state – a fancy accounting trick that small local business can’t take advantage of. We can start to tame the absolutely out-of-control corporate subsidy programs that are right now a ticking budget time bomb.

Fourth, and last but not least, make our income tax more progressive. Here, in particular, we must think big and bold and aim high.

There are plenty of reasons to have hope that we can win and advance a tax fairness agenda – despite the outcome of the federal elections this week.

Exit polling showed that an overwhelming majority of voters think the economy is rigged in favor of the wealthy; this tracks with what we’ve seen for years: tax fairness is a winning concept that enjoys broad support.

And so it’s not surprising that it won on the ballot this week in several key states as well. Californians voted to extend their trailblazing millionaires tax package for another 12 years, which will take $108 billion out of the trust funds and investment accounts of that state’s wealthiest families and invest it in education, health care and more. And in Maine – yes, Maine – voters approved a significant tax increase on that state’s most well-off families, all to fund K-12 public education.

As we emerge from the 2016 elections, we have to fight vigorously to protect the progress we’ve all made at the federal level, and to protect the most vulnerable and those who face the biggest threats from the next administration. No doubt about it.

But we also must turn our attention to the most fertile ground for progressive change in New Jersey: the State House.

This path has been blocked for us for nearly a decade, but that can change in 2018. If it does, we must be prepared to act to advance a sensible and bold progressive agenda.