Category: Blog

A Proposal to Fix the Federal Tax Code for Working Families

Posted on by Sheila Reynertson

A new proposal introduced last week by Senator Sherrod Brown (D-OH) would help fix the tax code and provide relief for low-paid workers as they support themselves and their families by putting money back in their pockets for basic necessities like home repairs, car maintenance, or in some cases, additional education or training to get a better, higher-paying job.

The bill, aptly named the Working Families Tax Relief Act, would substantially expand both the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), boosting the incomes and economic security of 46 million households nationwide, including 1,049,000 million households in New Jersey. The EITC and CTC are widely recognized as some of the most impactful policies that help working people with low-paid jobs make ends meet, reduce poverty, and improve children’s opportunities and outcomes later in life.

Specifically, the bill would:

  • Increase the EITC for families with children by roughly 25 percent
  • Substantially increase the EITC for workers not raising children and lower the eligibility age to 19
  • Make the full $2,000 CTC available to all low- and moderate-income families
  • Create a new Young Child Tax Credit that would provide families with children under 6 years old an extra $1,000 per child (for a total of $3,000 per child)
  • Make the CTC equally accessible to families in Puerto Rico and expand Puerto Rico’s EITC

Addressing the upside down tax code and 2017 federal tax cuts

Working families have seen their incomes stagnate for decades — through no fault of their own — without much relief from the federal government. Instead, recent tax law changes have exacerbated inequality and skewed the tax code to further benefit already wealthy individuals and corporations. This is exemplified by the deeply flawed 2017 federal tax cuts, which delivered large cuts to the wealthy and profitable corporations, yet failed to strengthen the EITC and left more than 11 million children in low-income working families with either no CTC increase or a token increase of $75 or less. The Working Families Tax Relief Act  would begin to fix the upside down nature of the tax code in three important ways. It would strengthen the EITC for working people not raising children, ensure that millions of poor children aren’t left out of the Child Tax Credit, and target additional income support to low-income families with very young children.

Boosting the incomes of working-class people across racial and ethnic backgrounds

Working-class households of all races — especially those with working-age people without a college degree — have enjoyed only small income gains in recent decades. Many of these working people have low-paid jobs that do not allow them to meet their most basics needs. The problem of low wages is further compounded in communities of color, where many people face barriers like housing discrimination. Under the Working Families Tax Relief Act, a single mom of two earning $20,000 a year would get a $3,700 annual boost. A married couple with two young kids making $45,000 a year would get a $3,500 boost. This is real relief for families that need it the most — and it would have a ripple effect throughout the broader economy.

Lasting benefits for millions of children and their families

The Working Families Tax Relief Act recognizes that the best investment a government can make is in its children. Refundable tax credits like the CTC and EITC have many direct and indirect benefits for kids, as parents who have higher incomes from tax credits tend to get more prenatal care, experience less maternal stress, and have healthier babies. Research also indicates that children receiving tax credits do better in school and are more likely to attend college. This improves kids’ economic prospects well into adulthood through more years of schooling, higher skills, and thus higher earnings. Kids whose families receive tax credits are also likelier to avoid the early onset of illnesses associated with child poverty.

It’s time to fix the federal tax code for working families

Many of America’s low-income working families are struggling to stay afloat as decades of stagnant wages have not kept pace with rising costs of living. This has resulted in far too many parents with low-paying jobs struggling to provide for themselves and their families. The Working Families Tax Relief Ac would begin to fix the federal tax code to better serve working people and help those struggling to keep their heads above water and give their children a good start in life.

Millionaires Tax is the Right Policy at the Right Time

Posted on by Brandon McKoy

The millionaires tax will help tackle growing inequality and provide much needed revenue for critical investments in state assets.

In his fiscal year 2020 budget, Governor Murphy has once again proposed a true “millionaires tax” to ensure the richest households in New Jersey pay their fair share in taxes. Raising the marginal income tax rate on annual earnings over $1 million is a fair and modest policy — and it comes at a particularly important time. Income inequality in the United States, and New Jersey, is at a dangerously high level. Disparities between those at the top and everyone else are growing every day as the wealthy and well-connected take advantage of rigged federal and state tax codes to enrich themselves at the expense of others.

Runaway inequality is widely recognized across the political spectrum as one of the defining economic and political issues of our time.  And yet, Governor Murphy’s proposal is receiving the cold shoulder from members of the legislature — even among those who voted for the same exact policy five times during the Christie administration. This reluctance to make the tax code fairer persists despite the millionaires tax being incredibly popular with voters; despite the so-called “millionaire tax flight” myth being repeatedly debunked; and despite the serious and almost universally accepted need for increased investments in New Jersey’s critical assets and rainy day fund. But, before we go too far into the politics of the situation, it’s important to lay out the details of what the governor has proposed.

The Millionaires Tax as a Tool to Combat Income Inequality

Governor Murphy’s millionaires tax proposal is not a new tax, as it would simply apply the top 10.75 percent income tax rate to all annual earnings over $1 million. Right now, only annual income over $5 million is taxed at this rate, while income between $500,000 and $5 million is taxed at a rate of 8.97 percent. Legislative leaders have already indicated their opposition to a true millionaires tax, claiming it would result in New Jersey’s highest earning families moving to states with lower income tax rates. Given how critical this policy is in mitigating income inequality and fully investing in public programs, services, and infrastructure we all rely on, separating fact from fiction is vital.

First, it’s necessary to note that New Jersey’s income tax is a marginal tax. This means that the 10.75 percent tax rate on people who earn over $5 million doesn’t apply to their entire income — it only applies to earnings over $5 million. All earnings over $500,000 and up to $5 million are taxed at the 8.97 percent rate. Oftentimes, opponents of tax fairness like to confuse the  public by implying that the higher tax rate would apply to an individual’s entire income, but that is simply untrue.

In order to be in the top one percent in New Jersey, you have to make at least $588,575 in annual income. Considering this, millionaires are easily in the top one percent of earners in the Garden State. Compared to the rest of the state — the bottom 99 percent — those in the top one percent are doing exceedingly well. Their average income is $1,581,829, whereas the average income for the bottom 99 percent is $65,068. Simply put, on average the top one percent of New Jerseyans makes 24.3 times more than the bottom 99 percent. This level of inequality ranks New Jersey as 9th worst in the nation.

Source: Economic Policy Institute, The Unequal States of America

When measuring the collective income of all workers in New Jersey, the top one percent take home nearly one fifth — 19.7 percent — of the entire sum. This is not far off from the state’s historic high, which peaked just before the Great Depression. When economic inequality was at its lowest — between the 1950s and late 1970s — the share of total income that the top one percent of New Jerseyans owned was less than 10 percent. The top one percent owning this much of New Jersey’s total income should act as a bright red flag that inequality is out of control and now is an opportune time to implement measures that promote tax fairness, including the millionaires tax proposed by Governor Murphy.

And while there are many factors that contribute to rising inequality, New Jersey’s tax code isn’t helping. Under the current tax code, New Jersey’s middle-class families pay a greater share of their income in state and local taxes than the top 5 percent of households do. This is unfair, exacerbates income inequality, and makes it harder for middle class families to thrive. Increasing taxes on top earners will make New Jersey’s tax code more progressive and help ensure future state budgets are no longer balanced on the backs of middle class families. And because New Jersey’s income tax is dedicated to the Property Tax Relief Fund, this revenue will help to reduce property taxes throughout the state while also freeing up other revenues to invest in state assets.

Source: Institute on Taxation and Economic Policy, Who Pays? 6th Edition

Dispelling Myths and Respecting Public Support

The need for a millionaires tax is clear. Inequality is dangerously high and continues to grow.  The state’s tax code is still not as progressive as it could and should be. But, despite mounting evidence that this proposal is necessary and fair, opponents of a millionaires tax contend that such a move would cause the state’s wealthiest residents to flee for lower-tax pastures, an argument known as “millionaire tax flight.” It’s a common misconception built on decades of misinformation and anecdotal evidence. Luckily, there’s plenty of research and data to show that “millionaire tax flight” is a total myth.

New Jersey Policy Perspective has repeatedly busted the myth of “millionaire tax flight,” and our research echoes similar findings of  researchers at independent, national policy organizations and peer reviewed research institutions. The tax flight myth has been busted by the Center on Budget and Policy Priorities, Tax Policy Center, and Stanford University. And if you’re looking for a longer read on the subject, Cornell University professor Cristobal Young wrote the book on it. And yet, despite NJPP repeatedly publishing and sharing comprehensive analyses showing that high tax rates do not cause the wealthy to move, elected officials have continued to buy into the lie and use it as an excuse to protect the wealthy from fair and proper taxation.

After the 2017 federal tax changes, some legislators expressed concern that implementing a millionaires tax now would be a mistake, claiming that wealthy households in New Jersey couldn’t afford an increase in their income taxes because the federal changes negatively affected them. These fears are unfounded. When accounting for the federal tax changes along with a state millionaires tax, New Jersey’s top one percent of tax filers still receive a net tax cut of approximately $3,200.

And when legislators aren’t knocking the merits of a millionaires tax, they often claim it’s unpopular and their constituents don’t support it. This perspective is particularly hard to believe considering the recent federal election where progressive and liberal candidates, running on platforms that included fair taxation and policies to tackle income inequality, came within one seat of sweeping the state’s congressional races. But this isn’t a matter of opinion — there are mounting statewide polls that show Governor Murphy’s millionaires tax is incredibly popular.

When Governor Murphy first proposed a millionaires tax during last year’s budget negotiations, polls conducted by Rutgers University, Stockton University, Quinnipiac University, and a poll commissioned by NJPP, all came to the same conclusion: a millionaires tax has broad, bipartisan support across the state. The polls found that up to 75 percent — and no less than 68 percent — of voters support a millionaires tax. These polls should provide relief to legislators who fear the political consequences of taking on growing inequality. If anything, failing to support the millionaires tax would be more dangerous with three in four New Jerseyans supporting it. Combine this with the reality of growing inequality and bold proposals from 2020 presidential candidates to fairly tax the nation’s wealthiest residents and it’s clear that tax policy is becoming a more important issue in future elections.

The Legislature Must Finish the Job it Started in 2010 and Pass the Millionaires Tax

While many legislators are expressing opposition to implementing a millionaires tax — despite all of the evidence that it is extremely popular with voters and doesn’t cause the wealthy to flee — you don’t have to go too far back in history to a time when they were fully supportive of the idea. Under Governor Christie, the full legislature passed a millionaires tax  five times (in 2010, 2011, 2012, 2014, and 2015). Of course, the governor vetoed their efforts every time, but legislators took a bold stance, on the record, in support of tax fairness with each vote. In fact, in 2014, legislative leadership proposed putting the millionaires tax on the ballot as a constitutional amendment to help increase state revenues for critical investments and make the tax code more fair. All of this created anticipation and expectation that if a governor who supported the policy took office after Governor Christie, the legislature would gladly work with them to implement something that they tried and failed to do five times previously. Now with Governor Murphy including the proposal in his budget, the legislature would be wise to join him in completing the task.

Since those failed efforts by the legislature under the previous administration, income inequality has only gotten worse and state assets are still in desperate need of increased and reliable sources of funding. Many state departments continue to struggle with funding levels no higher than they were under Governor Christie, our institutions of higher education still have less general operating support than they did prior to the Great Recession, and New Jersey Transit — while better than it has been in recent years — remains in need of more funding so it can modernize its system and meet the daily needs of New Jersey commuters.

To summarize: there is no such thing as millionaire tax flight and the 2017 federal tax changes were a massive boon to wealthy earners, so concerns about the welfare of the rich have no basis in reality; voters have always shown high levels of support for a millionaires tax, so any worries by lawmakers that passing the policy on to the governor’s desk would have political consequences are completely unfounded; and the state’s assets still require significant investments after eight years of cuts.

The bottom line is a millionaires tax is a critical budgetary tool that will help New Jersey meet its needs. Lawmakers should have passed it last year when the governor proposed it in his first budget and they have even more reason to do so now. It’s far past time to take this important step and bolster our budget, make our tax code fairer, and respect the wishes of the state’s voters. Pass the millionaires tax now and make New Jersey a fairer and better place to live.

Budget Address FY 2020: Rapid Reaction

Posted on by Louis DiPaolo

Welcome to NJPP’s Budget Address FY2020: Rapid Reaction, your source for commentary and data analysis on Governor Murphy’s address. The transcript below was taken from a conversation in NJPP’s conference room — over half eggplant, half plain pizza — and has been lightly edited.

Lou (Louis Di Paolo, Communications Director): Earlier today Governor Murphy kicked off the start of “budget season” with the unveiling of his fiscal year 2020 budget proposal. In his address, the governor outlined his $38.6 billion spending plan and renewed investments in public education, NJ Transit, affordable homes, and much, much more. The proposal also makes the largest pension payment in state history.

The governor’s budget is grounded in big savings in public employee health care benefits and new revenue in the form of a true millionaires tax. As Sheila Reynertson states in NJPP’s response statement, this budget is a “fiscally sound vision that invests in New Jersey’s greatest assets while lifting up the most vulnerable families in the state.”

But that’s enough from me — let’s jump right into it. What did everyone think about Governor Murphy’s budget address? Let’s start with Ray since he has to leave us soon for a meeting.

Ray (Raymond Castro, Health Policy Director):  I’m very impressed that Governor Murphy is so concerned with the most vulnerable people in New Jersey. However, it is also clear that much more needs to be done in a state with one of the highest costs of living in the US.

Lou: Definitely a fair assessment, but can you elaborate more on that? Two part question: what do you think this budget does especially well, and where does it come short?

Ray: It makes improvements in housing assistance, preschool funding and maternal health. However, we also need to expand NJ FamilyCare to all of the remaining 78,000 uninsured children in New Jersey and continue to partially restore the massive cutbacks in Temporary Assistance to Needy Families which helps about 25,000 poor children.

Lou: Those are important caveats and points I’m sure we’ll be flagging for legislators throughout the budget season. What are your thoughts, Sheila and Brandon?

[Ray has left the chat]

Sheila (Sheila Reynertson, Senior Policy Analyst): It is clear to me that fiscal responsibility and creating opportunities for those who are struggling to get by in the Garden State are top priorities in this year’s budget. From growing the state surplus to securing sustainable savings in public employee health care delivery to weaning the state off raiding of dedicated funds, this proposal is obviously laser focused on improving the fiscal health — and the credit ratings that come with it — of state government.

But equally, it is a proposal that takes seriously the role government can play in investing in all New Jersey families. Increased investments in education, college tuition aid and community college grants were expected, but it was thrilling to hear about state dollars being used to improve access to long-acting birth control and support efforts to reverse New Jersey’s dismal infant mortality rates among Black women.

Brandon (Brandon McKoy, President): Like Sheila, I’m very happy to see this budget include a significant surplus. This will make two straight years of NJ budgets having a surplus, something that hasn’t happened in a long while. It’s really important that as the budget goes through the legislature, the surplus is protected. Oftentimes legislators will look at such a large amount and try to skim some of it for other purposes, so we’re going to be working hard to keep this surplus intact because it will help our long-term fiscal standing.

Lou: Can we talk more about the budget surplus? It’s not exactly a sexy topic, so can one of you explain why this is so important for New Jersey’s fiscal health? Also, bummer Ray left for his meeting right before the pizza showed up.

Sheila: It’s great to see the governor budgeting a $1.1 billion surplus for this fiscal year. It gives the state a healthy cushion against unexpected budget gaps and a hedge against a potential national recession or another Superstorm. The governor asked the audience “to find the last time we had consecutive years of billion-dollar-plus surpluses.” The answer? 2009 – but it was quickly wiped out in reaction to the Great Recession. And despite a slow recovery, New Jersey has failed to replenish the surplus reserve fund. Instead the previous administration leaned on it to fill budget gaps year after year. By the end of Governor Christie’s term, New Jersey didn’t have enough reserves to last a single day compared to the US median of 20.5 days.  

Brandon: I love surpluses, but can we talk about the millionaires tax already?

Lou: No, we can’t. Just kidding, of course we can.

Brandon:

Sheila: You should just copy and paste your twitter thread, Brandon. It’s not like anyone read it.

Brandon: Hey! Lots of people read my twitter thread. Here’s the proof!

But in all seriousness, the governor’s proposal to apply the millionaires tax to — wait for it — all millionaires is totally appropriate and really modest, especially when you take into account the high rate of economic and racial inequality that exists in New Jersey. For context, last year the state implemented a 10.75% tax rate for earnings over $5 million a year. Now it’s time to make sure all millionaires pay that tax rate. They’re all easily in the top 1% in New Jersey, and right now that group is taking home 19.7% of all income earned in the state, averaging an annual salary of $1.6 million. Meanwhile, those in the bottom 99% earn just $65,068 per year, on average.

Applying the millionaires tax to all millionaires would certainly help raise sustainable revenues that help us invest in our assets, but even more importantly it helps tackle the high level of economic inequality in the state. New Jersey ranks 9th worst for economic inequality nationally, so there’s definitely lots of space for improvement and we need to do more to address the issue.

Sheila: No way to top that. Except to say that using the new federal limit on the deductibility of state and local taxes (SALT cap) as an excuse NOT to increase income tax on earnings over $1 million ignores the facts.The truth is New Jersey’s highest-income households – those with annual incomes over $1 million – get a windfall from the new tax plan, even with the limit on SALT deductibility. That’s because for New Jersey’s wealthiest families, the average federal tax cuts from other changes in the law are notably larger than the average size of the impact from the loss of SALT deductibility (looking at you, massive CBT cut). There is no reason for legislative leaders to back off of long-held plans to make New Jersey’s income tax fairer and raise much-needed new revenue to invest in schools and property tax relief, especially after a decade of major tax cuts that disproportionately benefit the wealthiest.

Lou: For the folks at home who don’t follow New Jersey budgeting as closely as we do, can one of you briefly explain why having new sources of revenue is so important?

Sheila: The short answer is New Jersey has suffered from years of trickle-down economic policies. In just the last decade, New Jersey dolled out $13 billion in tax cuts for the wealthy and corporations on top of $11 billion in tax subsidies to corporations who promise to move into or expand in the state. That means less dollars for vital services. The state should be an active participant in helping the economy grow and flourish – something it can’t do if left to struggle with keeping the lights on or keeping up with rising costs. And that hurts everyone. See more on this history of disinvestment in my blog post from Monday.

Lou: But what about all the millionaires fleeing New Jersey to go to low tax states? I heard this trope in at least one of the televised responses to the governor’s address.

Sheila: Yeah, that’s not a thing.

And when I ask for concrete evidence on “tax flight” I generally get nothing or worse… *anecdotes*. Meanwhile, several comprehensive studies on whether tax policy affects relocation decisions draw the same conclusion: millionaire households overwhelmingly choose to live where they have family connections, work and business opportunities, and an established social network. State income tax rates have only a very limited impact on their residence decisions.

Brandon: It’s all about quality assets. That’s why we constantly advocate for the state to increase revenues — not just as a means to address income inequality, but also to invest in our unique and critical assets. Like Sheila says, people come to New Jersey to make their fortunes and wealthy people stay here because we have the assets and features that are central to them being successful. That’s why we need to do all we can to make sure that NJ Transit is fast and on time, that our public schools continue to be top notch, that our communities are attractive and affordable.

We already have a location that is the envy of the country, we’re smack dab in the middle of the most productive economic region in the world. Under the previous administration, transit, public education, and property tax relief were all cut significantly. We need to learn the lesson from those mistakes and secure a budget that enables those necessary investments to be made — this budget helps us get there in a big way.

Lou: All great points.

Sheila: Can you tell we talk about this a lot?

Lou: Not one bit. But you having Cristobol Young’s “The Myth of Millionaire Tax Flight” prominently displayed in your office bookshelf definitely gives it away.

Sheila: That picture is shockingly on brand.

Lou: It definitely is. But here’s my follow up question: if people decide to stay here based on the states assets, does the governor’s budget put enough funding behind them? I’m thinking of early and college education, housing, transit, etc. — you name it.

Sheila: Well, we know this budget builds on last year’s commitment to rebuild investments in K-12 education with an additional $200 million, $68 million more for pre-K expansion and NJ Transit with another $100 million. These are all smart moves. The proposal also restores $59 million for the Affordable Housing Trust Fund and gives the new free community college fund a $33.5 million bump. It was good to see pumps for both Tuition Aid Grants and the Educational Opportunity Fund too. These may seem like small potatoes in a $38.6 billion budget but one can’t underestimate how much of an impact they make in people’s economic future.

Lou: It seems like we generally like this budget, but where does it fall short? I know that it doesn’t go nearly as far as we’d like in terms of taxing wealthy — looking at you, estate tax — but what else is missing?

Brandon: Yea, so while we like the proposal to apply the top income tax rate of 10.75% to all millionaires, it’s fair to say that there should be separate brackets above (and even slightly below) $1 million. I’d suggest having those at $1 million pay 10.75%, then add another bracket at $2.5 million and another bracket at $5 million. This would help address income inequality even further and raise more revenue for investments. The millionaires tax proposal is good, but these changes would make it even better.

Sheila: We could even add brackets at $250,000 and $750,000. It’s insane that $75,000 in earnings is taxed at the same rate as $499,999. Really?

Lou: What about on the spending side? What could be better? And for this, let’s make it a rapid fire round: ready, set, go!

Sheila: There’s a small increase in funding for universal representation, which is a program that provides legal representation for undocumented New Jerseyans facing deportation. The bump is to $3.1 million this year, up from $2.1 million last year, but to fully fund the program would require about $18 million and we’d like to see that full investment made.

Brandon: There’s the Civic Information Consortium, an effort to improve local journalism that’s received a lot of praise from stakeholders across the country. The governor signed the legislation to make the consortium real into law last year, but the $5 million it needs to operate wasn’t appropriated. Making sure it gets that $5 million this year would be a big deal.

Lou: Anything else?

Sheila: The Child Care Tax Credit returns for a second year, but it remains a largely symbolic gesture due to the way it is designed. Right now the tax credit doesn’t really help those who need it the most – low-income families who pay little to no federal taxes. I am thrilled to have this tax credit on the books, I just wish it had more teeth.

Brandon: There’s an increase in the earned income tax credit (EITC) to 39% refundability this year, up from 37% last year. That’s really important and is going to help strengthen the EITC, but it would be even better if we expanded the eligibility of the EITC to more people. Right now you have to be over 25 years old to qualify for it, but there’s a bunch of people under the age of 25, both with and without children, who would benefit significantly from this credit. In fact, New Jersey’s own Congresswoman Bonnie Watson Coleman is proposing federal legislation that would reduce the age eligibility for EITC to 18 years old, something that California has done, so there’s already some precedent.

Lou: I said rapid fire… That’s a very long-winded answer.

Brandon: But EITC is important! It’s the best program we’ve ever had at combating poverty.

Lou: Fair point. I’ll let this one slide. Final thoughts? Anything we didn’t cover?  

Sheila: I appreciated Governor Murphy calling out the awful Title X gag rule proposal on the federal level and positioning New Jersey as a champion of evidence-based reproductive health policy.

Brandon: The governor made quick mention of the need to get the state’s corporate tax subsidy programs under control. He’s made some good proposals for reform, including capping the amount of subsidies that can be awarded in a given year. This would really help us add some more stability and predictability to the state budget, and it would improve our standing with the ratings agencies. The legislature has shown that it’s not too interested in the governor’s proposals, but they would be wise to support them so here’s hoping that they make the right decision.

Lou: Thanks, team! This was fun.

Brandon: There’s 1 slice of pizza left … can I have it?

Lou: Of course, you’re the one who ordered it. Cowabunga, dudes!

It’s Time to Face the Music, Jersey: We’ve Been Robbed

Posted on by Sheila Reynertson

Tomorrow, Governor Murphy will kick-off what is affectionately known as “budget season” with his fiscal year 2020 budget address. It’s the time of year when we at NJPP fire up our spreadsheets, crunch numbers, and engage in a healthy debate about New Jersey’s path to a stronger state economy and more sustainable future.

But let’s be clear about one thing from the onset: Since 2010, New Jersey has had to make do with far less as a result of $13 billion in cumulative tax cuts — that primarily benefited the wealthy and large businesses — by the former governor with an eye on a presidential run and a misguided belief in trickle-down economic policies. Add to that the 2013 overhaul of New Jersey’s corporate tax subsidy program, which handed out an astonishing $11 billion worth of tax credits to corporations with little to no oversight.

Given New Jersey’s outsized spending obligations and lagging revenue, we expect Governor Murphy will make the case for building upon last year’s accomplishments by investing in valuable assets and fixing long-standing disparities in the tax code that exacerbate inequality. In fact, it has now been confirmed that an income tax increase on on earnings over $1 million will be a key component of the Governor’s budget.  

And it should be. Pushing for a bold, progressive budget with new revenue sources and a commitment to New Jersey’s long-term wellbeing is absolutely justified. Here’s why.

New Jersey has not been able to pay all its bills for 15 years straight because it doesn’t collect enough revenue to cover its expenses. In fact, the Garden State currently has the biggest gap between its revenue and expenses of any state in the country. This didn’t just happen by accident. For decades now, New Jersey has turned a blind eye to its financial woes. State leaders raided reserves, took on debt, and deferred payments on its obligations just to make ends meet for another year.

Credit rating agencies took notice and responded by repeatedly “dinging” New Jersey for its over-reliance gimmicky fixes and shameless money grabs of dedicated funds. Those lower credit ratings now make it more expensive to borrow funds for long-term projects.

The Great Recession and Superstorm Sandy certainly didn’t help matters much. And then another tragedy struck.

Just as New Jersey was beginning its laborious journey out of the recession, the wealthiest among us and large corporations were granted gifts that keep on giving — at the expense of the  state’s ability to provide key services and invest in its assets. First, the wealthy were given a $800 million tax cut when the 2008 millionaire’s tax was allowed to sunset. Then, businesses were given $660 million in tax cuts.

Come 2016, a package of tax cuts that benefited the wealthy, and left crumbs for everyone else, was enacted as an unnecessary tradeoff for raising the gas tax. The deal to replenish the Transportation Trust Fund (TTF) eliminated New Jersey’s estate tax, allowing approximately 4,000 of New Jersey’s wealthiest families to collectively enjoy over $500 million in tax cuts. And the sales tax decrease, which disproportionately benefits New Jersey’s highest earners and spenders, translates to over $600 million less in the state’s general fund.

Worse, these cuts became fully phased in at precisely the same time that corporate tax subsidies began to balloon in cost. In essence, New Jersey has sacrificed revenue it is in no position to give away to begin with. When 2013 reforms stripped spending caps on the tax subsidy program, the cost per job (retained and new) drastically increased from $17,000 in the 2000s to $78,000 post-overhaul. If awarded corporations cash in their tax credits, the Treasury may come up short by $1 billion a year for the next three fiscal years, at least.

All told, the entire package of Christie-era tax cuts and subsidies for corporations deprives the state government of $3 billion in essential revenue in this upcoming budget season and well into the future.

And everyday New Jerseyans will pay the cost. It is our commutes to work, our roads, our children’s schools, and our pocketbooks that suffer. Governor Murphy has an opportunity to make the difficult and visionary choices that will lead us to a better financial future. This is the budget season to think big and bold — and protect New Jersey’s future.

Slow Pace of Progress on Minimum Wage Limits Benefits

Posted on by Brandon McKoy

Stagnating wages are no secret—not to New Jersey’s low-paid workforce nor to state legislators who have long considered raising the minimum wage to a more-livable $15 an hour. But with every year of inaction, the value of $15 takes a hit, as do New Jersey’s working families who struggle to make ends meet on minimum wage salaries.

In August 2016, Governor Chris Christie vetoed a bill that would have increased the minimum wage to $15 by 2021. That veto proved to be a significant setback to the Fight for $15 campaign, delaying much needed relief for low-paid workers across New Jersey by several years. Now, increasing the minimum wage to $15 is back in the spotlight, but the current proposal is a shell of the legislation passed two years ago and fails to recognize how much ground has been lost over that time.

Introduced earlier this month by Assembly Speaker Craig Coughlin, A15 would increase the minimum wage to $15 by 2024 for most workers, and not until 2029 for “carved out” sectors of New Jersey’s low-paid workforce. The purchasing power of $15 already takes a hit by pushing back the minimum wage’s implementation to 2024, but extending the phase-in to 2029 fails to meaningfully tackle poverty or address ever-growing income inequality in a serious manner. As legislators negotiate the future of New Jersey’s minimum wage it is important to tease out just how much low-paid workers will be losing due to the slow pace of progress on this issue.

For a full-time worker who doesn’t miss any time whatsoever — meaning they never have to take time off for being sick, to take care of a loved one, or even for a short vacation — a $15 an hour wage translates to a $31,200 annual salary, and that’s before taxes. Assuming three percent inflation per year, a $15 minimum wage erodes in value to $13.69 an hour, or $28,475 per year, in 2024, and just $11.76 an hour, or $24,453 per year, in 2029.

 


There is a real cost associated with the slow pace of progress in raising New Jersey’s minimum wage. For a full-time worker, this will cost them between $2,725 and $6,747 in annual wages. In a state where the current living wage is upwards of $18 an hour for a single worker, a $15 minimum wage in 2024—while a significant improvement—isn’t meeting the need that many lawmakers are hoping to address with this piece of legislation.

If the goal is to truly provide workers with a living wage, legislators must recognize the need to make up for the time lost after Governor Christie’s veto in 2016. In practice, this means either shortening the phase-in period so the minimum wage reaches $15 by 2021, or keeping the same phase-in schedule but ending at a figure higher than $15. Why? Because if the bill from 2016 had been signed into law and the minimum wage reached $15 in 2021, it would have risen with inflationary bumps to $16.39 an hour in 2024 and $19.00 per hour in 2029. Fully acknowledging these facts would mean proposing and passing legislation that increases the wage to $16.39 — not just $15 — by 2024.

 


Since 2016, income inequality has only grown more dire and poverty remains higher than pre-Recession levels. In proposing a much-needed increase in the minimum wage, the Legislature should introduce legislation that recognizes just how much ground has been lost. The level of need for low-paid workers in New Jersey has not waned; if anything, it has grown in size and scope. The minimum wage bill that the legislature votes on must address these economic realities and the serious needs that low-paid workers have today. Passing a comprehensive bill that values work—and New Jersey’s high cost of living— will ensure the full benefit of the policy can be realized across the state and its economy.

Now is the Time for Driver’s License Expansion

Posted on by Erika J Nava

New Jersey is among the most diverse states in the nation and has the third-largest share of immigrants, and its public policy should reflect this reality. Expanding access to driver’s licenses to all residents, regardless of immigration status, is fundamental to New Jersey’s immigrant communities fully participating in the state’s economy.

All New Jerseyans would benefit from drivers license expansion through safer roads and a stronger economy. And chances are we all have family members, friends, classmates, coworkers, and neighbors who are immigrants, and perhaps undocumented.Their success is very much tied to ours, and we all want members of our communities to thrive.

This policy has already been adopted in twelve states and Washington, DC, and is proven to make roads safer and immigrant communities more secure. Other vulnerable populations also benefit from this policy, like survivors of domestic violence who many not have all of the 6-point identification documents on-hand. There is simply no good reason not to advance this common-sense legislation.

In 2006, legislation was introduced to allow all New Jerseyans to be trained, tested, licensed and insured. This proposal ultimately failed as legislative leadership felt it was “not the right time.” Now, more than a decade has passed and immigration advocates are left wondering: when is the right time? Why not now?

Yes, New Jersey has taken important steps over the last year to make the state fairer and more welcoming to immigrant communities, namely through the passage of universal access to financial aid for higher education, but critical work remains undone.

The Senate President has publicly stated he supports expanding access to driver’s licenses. The Assembly Speaker similarly pledged his support to the Let’s Drive campaign. The governor has also signaled that he will sign such a policy if it lands on his desk. So what is holding up the legislation from advancing?

It is not lost on the Let’s Drive campaign that every member of the Assembly is up for reelection in 2019, but politics should not get in the way of sound public policy, especially when that policy would benefit so many New Jerseyans. Now is the time. Let’s drive.

New Jersey’s Minimum Wage Set to Increase by 25 Cents

Posted on by Brandon McKoy

New Jersey’s minimum wage will increase on January 1, 2019 from $8.60 from $8.85, according to an announcement by the NJ Department of Labor and Workforce Development. While this is a welcomed change, representing a possible increase of $520 in annual earnings for full-time workers making minimum wage, the bump isn’t nearly enough to help New Jersey’s low-wage workforce better afford their needs and provide for their families.

When New Jersey increased the minimum wage in 2013 to $8.25, it tied future increases to inflation, indexing the wage floor to the  Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This has resulted in minor raises in most years since: 13 cents in 2015, 0 cents in 2016, 6 cents in 2017, and 16 cents in 2018. The increase of 25 cents in January 2019 will be the largest since 2013.

It’s important to remember that both houses of the state legislature passed a $15 minimum wage bill in 2016 that  included all workers. Unfortunately, the bill was vetoed by then-Governor Christie. Had it been signed into law in 2016, the minimum wage would be increasing to $12.50 on January 1, 2019 – which equates to $26,000 annually for a full-time worker.

A minimum wage of $8.85 – $18,408 a year – is woefully insufficient for someone working full-time who never gets sick and doesn’t take any vacation time. This isn’t enough for workers to make ends meet and contributes to the sluggish nature of New Jersey’s economy. When so few workers are able to participate in the economy, businesses miss out on would-be customers.

This is why a $15 minimum wage is necessary for all workers in New Jersey, including tipped, youth, farm and seasonal workers. The change would inject $3.9 billion into the state’s economy  and help over 1 million workers better afford their needs. Today, there is no region of the state where a single worker with no children can afford basic necessities while making less than $15 per hour. The costs of transportation, food and rent are simply too high for a minimum wage worker to afford without suffering in poverty.

Higher Ed: A Decade of Cuts and Tuition Hikes

Posted on by Brandon McKoy

Over the past decade, New Jersey’s investment in its institutions of higher education has dropped while tuition has gone up, putting increasing pressure on students and families to pay the high costs necessary to get a college degree.

According to a new report released today by the Center on Budget and Policy Priorities, between 2008 and 2018 New Jersey’s funding for public four-year colleges and universities dropped 24 percent, representing a $2,387 cut per-student. Over that same period, average tuition costs at public four-year colleges and universities increased 18 percent, or $2,075, from $11,973 in 2008 to $13,868 in 2018.

In 2017, average tuition and fees at a public four-year institution accounted for 17 percent of a New Jersey family’s median income. For families of color – who often face additional barriers to employment and increased difficulty accessing jobs that pay better – college costs can be a particularly heavy burden. In 2017, the average tuition and fees at New Jersey’s public four-year institutions accounted for 15 percent of median household income for White families, 27 percent for Black families, 25 percent for Hispanic families, and 11 percent for Asian families.

As the state has pulled back on funding, families have been forced to pay more to secure a college education for their children. The shift in cost has happened over a period when many families have struggled financially due to stagnant or declining income. Nationally, the average cost of tuition increased more than 36 percent between 2008 and 2018. At the same time, real median income grew just over 2.1 percent.

NJPP Statement: Restricting Low-Income Immigrants is Un-American

Posted on by Erika J Nava

Over the weekend, the Trump administration announced its proposal to amend a 100 plus year-old immigration rule that would change how the federal government categorizes immigrants as a “public charge.”

Statement from NJPP Policy Analyst Erika J. Nava:
“Prioritizing well-off immigrants while penalizing those struggling to provide for their families is state sponsored cruelty and runs counter to American values. No family should have to choose between having their basic needs met and being separated from their family. New Jersey has the third largest share of immigrants in the nation, including a large percentage of mixed-status families who will be impacted tremendously by this policy change. Lawmakers must fight back against this proposal to keep New Jersey families together.”

Existing Law:
Currently, immigrants who want to adjust their immigration status to Legal Permanent Residency or enter the country with a U.S. visa would be deemed ineligible and likely to become a “public charge” if they used the following:

  • Cash assistance – such as Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), and comparable state or local programs, or
  • Government-funded long-term institutional care
The Rule Change:
The proposed rule would include other programs such as: SNAP (food assistance), public housing, non-emergency Medicaid, and Medicare Part D. In addition, it would require those petitioning to earn at least 125% of the federal poverty level (FPL) and give preference to a households with incomes at 250% of the FPL. For example, a family of four would need to earn at least $63,000 annually to avoid scrutiny under the new public charge test.

As in the 1900s, the federal government proposes to stipulate an immigrants’ native region and immigration status to restrict access to the United States.

Once the proposed rule becomes official there will be a 60-day comment period. NJPP plans to release a fact sheet detailing how the proposed rule would impact New Jersey’s economy and immigrant communities.

Census 2017: A Tale of Two New Jerseys

Posted on by Brandon McKoy

It is no secret that the Garden State has been among the slowest states to recover from the Great Recession. Now, nearly a decade later, New Jersey remains a tale of two states as household incomes are on the rise while far too many families continue to live in poverty and struggle to make ends meet.

New data from the U.S. Census Bureau signals an improving economy with increases in employment and median household income to pre-recession levels. The poverty rate, meanwhile, remains stubbornly high, with one in ten New Jerseyans unable to afford basic necessities. Communities of color are more than twice as likely as Whites to struggle economically – living on less than $24,600 for a family of four – meaning that not all New Jersey families are sharing in the state’s economic gains.

In order to grow a stronger and more inclusive economy for us all, it’s imperative that lawmakers remove barriers to economic stability, such as raising the minimum wage for all workers and boosting public investments in affordable homes and transportation infrastructure. For New Jersey’s economy to truly rebound, all New Jerseyans must have access to the resources and investments that will enable them to participate in the state’s growth and prosperity.

Household Income

New Jersey’s median household income rose significantly in 2017, increasing by 3.0 percent to $80,088. This is a return to the state’s pre-recession median income level, which peaked at $80,125 in 2008. This rebound is a milestone for New Jersey, where median income bottomed out at $73,510 in 2011, but also serves as a stark reminder of how long it has taken New Jersey’s economy to recover.

While the increase in median household income is good news, the bad news is that these gains are not being equally shared among all residents. In 2017, median household income was $91,454 for White households, $50,395 for Black households, $54,482 for Hispanic or Latino households, $118,917 for asian households, and $51,027 for American Indian and Alaska Native households.

Poverty

New Jersey’s official poverty rate dropped from 10.4 percent in 2016 to 10.0 percent in 2017, but remains much higher than it did in 2007 when it was 8.6 percent. However, for a high-cost state like New Jersey, it is more appropriate to measure poverty here by looking at the 200% federal poverty level (FPL).

The official poverty rate – 100% FPL – registers at an annual income of $20,420 for a family of three and $24,600 for a family of four. In a high-cost state like New Jersey, that’s incredibly low and it makes no sense to limit real poverty to such a low level of income. Using the 200% FPL rate – which would be an annual income of nearly $50,000 for a family of four – is more appropriate. At that level, 22.9 percent of New Jerseyans were living in poverty in 2017. This is down from 23.8 percent last year but it also remains higher than the pre-recession rate of 20.9 percent in 2007.

Out of the nine million residents who call New Jersey home, 882,673 were living in poverty in 2017. Measuring poverty at  200% FPL, just over 2 million people were in poverty in 2017.

Communities of Color are Struggling the Most

In 2017, the poverty rate remains higher for every race and ethnic group in New Jersey than it was prior to the recession, and the rate is particularly high for New Jerseyans of color. While there has been a drop in the poverty rate for most between 2016 and 2017, two communities saw an increase. For Black New Jerseyans, the poverty rate increased from 17.4 percent to 18.1 percent, and for American Indians and Alaska Natives the poverty rate increased from 19.1 percent to 20.3 percent.

Child poverty dropped slightly, from 14.6 percent to 13.9 percent, but remains higher than in 2007 when it was 11.6 percent.

Poverty among women continues to remain higher than poverty among men. Poverty for women dropped to 10.9 percent in 2017 from 11.4 percent and poverty for men dropped to 9.0 percent in 2017 from 9.4 percent. Both rates are higher than they were prior to the Great Recession, where in 2007 women’s poverty was 9.7 percent and men’s poverty was 7.3 percent.

Employment

The unemployment rate continues to improve after hitting a peak of 10.9 percent in 2011. New Jersey’s unemployment rate is down to 5.3 percent in 2017. This is welcomed news as more New Jerseyans are participating in the labor force and finding work is incredibly important for the state’s economy. However, for the unemployment rate to drop while the poverty rate remains higher than pre-recession levels is indicative of a wage problem, especially for workers in low-wage jobs.

The 2017 Census shows that while the state has made important strides in a number of critical areas, economic security is out of reach for far too many New Jerseyans. Poverty remains higher than pre-recession levels, with rates for women and communities of color being particularly high. And despite an increase in household income across the board, households of color continue to earn less than their White neighbors.

To rectify these problems, lawmakers must prioritize policies that benefit low-income workers, communities of color, and impoverished New Jerseyans who struggle every day. Proven solutions include raising the minimum wage for $15 for all workers, expanding the Earned Income Tax Credit (EITC), implementing strong wage theft protections, and boosting investments in transportation, education, and affordable homes. Until we can ensure all New Jerseyans are able to safely and reliably make ends meet, our economy will continue to have trouble growing our economy in a healthy manner.

Policies that are proven to grow wages, improve benefits, and help more residents to afford their needs will provide the boost that our economy desperately needs and spread prosperity to every corner of the state.

 

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