Category: Blog

Tired ‘Outmigration’ Claims Rear Their Head In Final Days of Christie Administration

Posted on by Sheila Reynertson

In a final salvo just days before leaving office, the Christie administration last week released a misleading report that cherry-picks data to “warn” the incoming Murphy administration against cleaning up New Jersey’s tax code while raising the resources required to build a stronger state economy.

The report is the latest in a long line of flawed “studies” that purport to show two things: First, that the outflow of people and income from New Jersey is at a crisis level, and, second, that this outflow is due to the state’s relatively progressive tax structure (overall, New Jersey’s state and local tax code is actually regressive, in that the poorest in the state pay the greatest share of their income to taxes, but it is less so than in many other states).

Like similar reports that came before it, this new Treasury report misuses a set of data from the Internal Revenue Services’ Statistics of Income (SOI). The author either did not take the time to read the SOI user guide – which cautions against misinterpreting the data – or deliberately ignored it. The IRS clearly states that the SOI migration data is not an accurate way to measure “migration of money.” There are multiple reasons for this, including the fact that the Adjusted Gross Income data reflects income after the taxpayer moved out of state – not before he/she left the state. Thus AGI data cannot be accurately tied to New Jersey or be considered an outflow of money. Anyone using the data this way is either woefully unaware or willingly deceitful. Either way, the report loses all credibility on this point alone.

This report is a not-so-veiled attempt to delegitimize the importance of fair taxation’s role in helping New Jersey grow and prosper by using revenue to invest in things like mass transit, higher education, clean water and public safety. Presented with the proper context, these facts tell a very different story than the one being peddled by the Office of the Chief Economist.

  • The supposed “loss” of $35 billion described in the report is a big, scary number. But in reality, it is barely a rounding error when put into context of over $6 trillion total household income generated in New Jersey from 1993 to 2016.
  • New Jersey raised an average $1 billion in new annual revenue right out of the gate when it introduced a new top income tax rate of 8.97 percent in 2004. Despite the tax flight fearmongering, no state has ever lost revenue by ensuring that the state’s wealthiest families pay their fair share. And what little revenue is lost due to those taxpayers who chose to move elsewhere is neither statistically, nor socioeconomically, significant.
  • New Jersey should not be in the business of crafting tax policy tailored to benefit the wealthiest given the fact that New Jersey’s state and local tax code is already upside down, favoring those who make over $200,000.
  • The state continues to gain millionaires and has a higher share of them than all but three states – this growth has occurred during a time that state income tax rates on wealthy households were raised twice, and has been healthy despite the Great Recession.

Signing of Amazon Tax Subsidy Bill a Fitting End to the Christie Era

Posted on by Jon Whiten

This afternoon Governor Christie signed A-5340, which clears the way for the state to authorize at least $3 billion in corporate tax breaks for a company that comes to New Jersey with at least 30,000 jobs and meets certain other requirements. The bill, designed with Amazon’s HQ2 in mind, is the latest expansion of these special business tax breaks in New Jersey in recent years.

This is a fitting but unfortunate end to the Christie era, with the governor – and an uncritical Democratic legislature – having overseen a massive and short-sighted expansion of corporate tax subsidies since January 2010. In fact, the governor has now presided over the approval of an astonishing number of 9-figure subsidy deals – 13 to be precise – and with this final legislative act, will clear the way for a colossal 10-figure deal.

Instead of coming up with a sensible plan to reverse billions of dollars of disinvestment in New Jersey’s top economic assets, like public transit or higher education or high-quality preschool, the state’s lawmakers have doubled down on trickle-down economics by clearing the way for a gigantic tax subsidy for Amazon. If New Jersey wants to build a stronger, brighter future, it needs to seriously rethink and reform its use and abuse of these special tax breaks – not just continuously expand them at every turn of the corner.

New Jersey’s subsidy surge, by the numbers (figures are up-to-date through the EDA’s December 2017 meeting – they do not include any of the deals approved this week):

  • $8.3 billion: Total amount of tax breaks approved since January 2010 (a monthly rate of $87 million)
  • $5.7 billion: Of that, the amount that’s come since December 2013, when the “Economic Opportunity Act of 2013” went into effect (a monthly rate of $117 million)

New Jersey’s 13 nine-figure subsidy deals under Christie administration (through Dec. 2017):

Panasonic (Newark): $102,408,062 February 2011

Prudential Financial (Newark): $210,828,357 June 2012

American Dream Mall (East Rutherford): $390,000,000 November 2013

Legislative overhaul goes into effect December 2013

MMC-DB Group LLC (Paterson): $105,559,214 December 2013

JP Morgan Chase (Jersey City): $224,835,000 May 2014

Sayreville Seaport (Sayreville): $223,277,590 May 2014

Holtec International (Camden): $260,000,000 July 2014

Lockheed Martin (Camden): $107,000,000 November 2014

Subaru (Camden): $117,832,868 December 2014

American Water Works (Camden): $164,187,735 June 2015

JP Morgan Chase (Jersey City): $187,781,000 July 2015

EMR Eastern (Camden): $148,589,900 September 2015

Resintech Inc. (Camden): $138,817,600 October 2016

Note #1: This does not include nine-figure deals that were closed and later abandoned before awarding any tax breaks (ie, the $261 million deal to Revel casino)

Note #2: Only one nine-figure deal preceded Christie: $164,336,000 for Goldman Sachs in Jersey City in 2000

Amazon Subsidy Bill a Big Step in the Wrong Direction

Posted on by Jon Whiten

Below is prepared testimony delivered to the Senate Budget & Appropriations Committee and the Assembly Judiciary Committee.

Let’s imagine there was a program administered by the state of New Jersey that helped about the same number of residents each year but whose cost exploded nearly 8-fold over the course of a decade. No doubt there would be outrage from the legislature, who are elected to be – in part – guardians of the state’s finances. There would be grave concern about the state’s return on its investment. There might even be public hearings, a special committee, or some independent investigation about just how this particular program got so incredibly expensive.

The thing is, we don’t have to imagine this scenario – it’s actually happening, and the legislation being considered today will only serve to make it worse.

In 2006, the state of New Jersey was able to either lure or keep about 15,000 jobs through it’s corporate tax subsidy programs – about the same number (actually, a few hundred more) than it did about a decade later, in 2015. But that’s where the similarities between those 2 years ends, and the differences here are as clear an illustration as any that New Jersey has gone way overboard on these special tax breaks.

In 2006, the state “paid” – through future tax credits – $186 million for these 15,167 jobs. In 2015, the state paid 7 and a half times as much – $1.4 billion – for the 14,385 jobs. Put another way, the cost per subsidized job shot up from about $12,000 to nearly $98,000.

As we have rigorously documented at New Jersey Policy Perspective, the state has doubled down on its nearly-exclusive use of subsidies to try to spur economic development. We just wrapped up our 5th year in a row, in fact, of approving more than $1 billion in these breaks – after 17 years of never crossing that line. The amount New Jersey has approved in those most recent 5 years ($6.7 billion) is more than double the amount ($3.0 billion) it approved the entire 17 years before.

This singular approach has ignored the state’s crucial assets that made New Jersey an economic powerhouse: location in the middle of the world’s largest consumer market, one of the nation’s most highly-educated workforces and thriving communities. Instead we have witnessed the deterioration in NJ Transit, disinvestment in higher education and declining support for our excellent public schools.

Clearly, New Jersey has gone off the rails. But it’s not just NJPP that has noticed. In fact, corporate consultants at McKinsey and Company, and national economic-development experts at the Pew Charitable Trusts and elsewhere, have noticed, and – like NJPP – called for a suite of reforms that would make the state’s use of these so-called “incentives” smarter, more responsible and accountable, and less of a long-term drag on the state’s fiscal health.

Unfortunately, this bill takes New Jersey in the exact opposite direction.

Yes, we all want to bring Amazon’s new headquarters to New Jersey. But like with any other development deal, we must ask: at what cost? Is giving one of the world’s largest corporations, with $136 billion in earnings last year, a dollar-for-dollar tax break for its investment in the state of New Jersey a fair deal to all 9 million residents? Is it a good deal?

Quite simply, it is not a good deal.

Amazon does not need $3 to $7 billion in public dollars to spur its own private investment; that much is clear by looking at the company’s earnings, and at its RFP for this project. But let’s assume for a second that it does. Why are all the other critical public investments that Amazon needs to succeed in New Jersey being ignored? Why is there not a bill in this lame duck legislature to invest $2 billion in public transit investments so Amazon’s workers can get in and out of a New Jersey city efficiently, affordably and not in their cars? Why are there not bills moving right now to invest in affordable homes, higher education, workforce development, childcare and education, or any of the other factors and assets that draw leading corporations to New Jersey? Why must we continue to put all of our economic-development eggs in this one inefficient and ineffective basket?

There is a smarter path to take if we want to return New Jersey to its days of being one of the country’s economic powerhouses. But it takes real investment in public assets. Bills like this one not only ignore that crucial part of the economic-development formula, they make it harder in the future to pony up the dollars required to pay for public services and investments. This is a damaging cycle that needs to end – and there’s no better time to start than now, by voting against this legislation.

New Jersey’s Minimum Wage To Rise by 16 Cents on Monday

Posted on by Brandon McKoy

Inflation adjusted January 1 increase is helpful, but not nearly enough for New Jersey’s low-paid workers or for the state’s economy, as our new report shows.

A full-time worker at the minimum wage in 2018 will take home less than $18,000 for the year, assuming they don’t take any time off. According to analysis by the Economic Policy Institute, a single worker in the Garden State needs to make $37,974 in 2018 just to earn a wage that can provide stability.

Fortunately, Governor-Elect Murphy and legislative leaders have made it clear that they intend to increase the minimum wage to $15 per hour, a move that would help a diverse group of workers – nearly 25 percent of the workforce – and improve their chances of being able to provide for themselves and their families in our high-cost state.

Here are some key facts about New Jersey’s January 1 minimum wage increase:

* The January 1 wage increase will boost the pay of 300,000 low-paid New Jersey workers, or 7.5% of the state’s workforce.

* Of these 300,000 workers, 91,000 are directly affected (meaning they currently make between $8.44 and $8.60 per hour) and the remaining 209,000 are indirectly affected (meaning they currently make between $8.60 and $8.76 per hour, and will see an increase in their pay as employers adjust their pay scales upward to reflect the new minimum wage).

* The new minimum wage still falls very short of what it takes to get by. In fact, it covers just 41-57% of the basic household budget for a single adult full-time worker with no children.

* Four of every five workers who will get a raise (81 percent) are at least 20 years old, while most are working either full-time (45 percent) or between 20 and 35 hours a week (33 percent). Almost half – 44.6 percent – have attended or finished college, and an additional 30 percent have finished high school.

* The majority, 56 percent, are women and one in five – 20 percent – are parents. A total of 111,000 New Jersey kids have at least one parent who will benefit from the January 1 increase. When looking at race and ethnicity, 44 percent of affected workers are white, 30 percent are Hispanic, and 18 percent are black.

Nearly All New Jersey Members of Congress Vote ‘No’ on GOP Tax Bill

Posted on by Jon Whiten

New Jersey delegation must continue to put Garden Staters first as Congress moves on deep spending cuts
Yesterday and early this morning, the House of Representatives and the U.S. Senate passed a GOP tax bill that rewards profitable corporations and wealthy families while putting middle-class and low-income families across the country at risk.

All but one of New Jersey’s 14 members of Congress – including 4 of the state’s 5 Republican House members – voted against the bill. Congressman Tom MacArthur was the lone “yes” vote.

The fact that nearly all of New Jersey’s members of Congress had the clarity to see this GOP tax bill for what it is – an attack on New Jersey working families – is the tiny silver lining in an incredibly dark cloud for America’s future.

This tax bill is an expensive gift to the wealthy and to corporate America, wrapped up in the guise of “tax reform.” And Congressional Republican leaders are already calling for spending cuts next year that will threaten working families – and they’re using high deficits, which their tax bill will make worse, as the rationale.

The tax bill, once fully phased in, will disproportionately harm middle-class and lower-income New Jerseyans while rewarding the state’s wealthiest households, according to a fact sheet we released yesterday.

  • New Jersey households with incomes over $1.4 million (the top 1 percent) would receive an average $8,470 tax cut while the bulk of Garden State families (the bottom 60 percent, or those with incomes under $111,000) would see a tax hike averaging $110.
  • Those families in the top 1 percent would receive 63 percent of the state’s share of the tax cut – $384.1 million in total – while the bottom 60 percent would, together, receive less than 0 percent of the tax cut, since they’d pay a total of $331 million more in taxes.
  • About 1 in 4 New Jersey taxpayers (26 percent) would see a tax hike.

But these direct impacts from the bill aren’t even the worst of it. In fact, the tax bill is step one of Congressional Republicans’ two-step tax and budget agenda that would rip the American social contract to shreds, undo decades of progress for working Americans and send the country hurtling even faster toward a new gilded age.

This agenda is a one-two punch for working families, children, seniors, and people with disabilities. Calls for spending cuts to balance the budget are nothing more than thinly-veiled efforts to gut programs like Medicaid, SNAP, and disability insurance that help struggling New Jerseyans meet their basic needs.

We all share a responsibility to ensure that struggling families do not go hungry or become homeless. New Jersey’s entire Congressional delegation – but particularly Congressman MacArthur, who failed struggling working families when he voted for the GOP tax bill – should commit now to standing against budget cuts that would further hurt everyday New Jerseyans by taking away health coverage, food assistance, housing, and more from Garden State families.

Failure to Act on DACA and Dream Act Would Harm New Jersey’s Tax Revenues

Posted on by Erika J Nava

On September 5, the Trump administration announced that it would end DACA (Deferred Action for Childhood Arrivals), the program for immigrants who were brought to the United States as children. DACA grants immigrant youth temporary relief from deportation and gives them authorization to work lawfully in this country. The president then “challenged” Congress to provide a fix to the problem he created—presumably with something like the Dream Act, a pathway to citizenship for immigrants who were brought to the United States as children.

So far, Congress has not moved a solution forward, and the lives of many young immigrants hang in the balance. Failure to act will harm these individuals and their families, of course, as well as the state’s economy, as NJPP’s earlier work has shown. The lack of action also has negative consequences for the state budget.

There are 53,000 young immigrants who were potentially eligible for DACA that call New Jersey home. They have attended our public schools, graduated high school and many have enrolled in our public colleges. And many are our coworkers, our neighbors and loved ones. They currently pay a total of $57 million to state and local taxes each year – an amount that’s sure to shrink if Congress fails to act.

Without the Dream Act, New Jersey can expect to lose at least $19 million in annual tax revenue. That’s the projected loss if DACA recipients stay in the state after losing work authorization, earning lower wages and becoming less likely to file income tax returns.

Of course, New Jersey would lose even more if all DACA-eligible residents were deported. In that case, the state would lose the entire $57 million that’s currently paid each year, and there would be many additional costs to businesses and communities of such a draconian measure.

On the other hand, if Congress passes a Dream Act, these young immigrants would retain or be granted work authorization and a pathway to citizenship – and New Jersey would see a boost of at least $41 million a year in state and local taxes paid. If allowed a pathway to citizenship, immigrant youth would be more likely to advance in a real career, buy a home, or start a business. At stake is $98 million in annual tax revenues, the difference between a $57 million loss and a $41 million gain.

How the GOP Tax Bill Could Undo Decades of Progress

Posted on by Jon Whiten

On Friday, I joined a tele-town hall on the Republican tax plan with Governor-Elect Murphy, Senators Menendez and Booker, and Congressman Pallone. Audio from the call, which was organized and hosted by New Jersey Working Families, can be heard here. Below are my prepared remarks.

There are a lot of ways to think about this Republican tax plan, and a lot of different slices to look at. I like to think of it this way: There are the pocketbook effects of the tax plan – these are the direct impacts on New Jersey families. And then there are the larger, existential threats to the American social contract that this tax bill represents and puts into motion.

On the first, the pocketbook effects, this plan is a raw deal for New Jersey’s middle class, its low-income families and its working class. We’ve been crunching the numbers with every new iteration of this bill, and while minor changes occur from version to version, the big picture remains the same: the wealthiest families and large corporations make out like bandits, and working families get stuck with the bill.

A few quick data points on the bill the Senate passed last weekend:

  • New Jersey’s top 1 percent of households would receive an average $8,350 tax cut each year, while the bottom 60 percent of families see a tax hike averaging $120 a year.
  • Those families in the top 1 percent would receive nearly two-thirds of the state’s total share of the tax cut.
  • In all, we estimate that New Jerseyans would deduct nearly $27 billion less in state and local taxes under the Senate-passed bill than they do now.

As terrible as that all sounds, that is not even the worst part of this bill. In fact, this bill is the first step in a two-step “cut and cut” agenda that would rip the American social contract to shreds, undo decades of progress for working Americans and send the country hurtling even faster toward a new gilded age.

Here’s how this cut and cut agenda works: First come the tax cuts – they are tilted to the top, they are expensive and they blow up the deficit. That last point is key. Because the second step is to cut services, using the deficit pressure these tax cuts cause as the rationale. GOP leaders are already out there promising to slash the already-tattered safety net and rein in so-called “entitlements” – in other words, health care, retirement security and food assistance for millions and millions of Americans.

That’s why this tax battle is so critical. This is about so much more than preserving tax deductions that so many New Jerseyans use. It’s about so much more than beating back huge tax cuts for powerful interests who are the only ones thriving in today’s rigged economy. It’s about how we shape our society and our future. How we raise money, and what we choose to spend it on, are the truest reflections of our values as a country. We must do better than this. And we can do better than this – but only if we keep up the fight. Thanks to everyone here on this call for your commitment to doing just that.

U.S. Senate Moves Damaging Tax Plan Closer to Reality

Posted on by Jon Whiten

With the U.S. Senate narrowly passing the GOP tax proposal today, Congress has moved one step closer to final approval of a damaging and costly plan that would harm millions of working Americans while rewarding profitable corporations, foreign investors and the country’s wealthiest families and teeing up deep cuts to public services, programs and investments that all New Jerseyans count on.

At its core, this tax proposal is rooted in magical thinking and faulty, reckless mathematics: it’s premise is that borrowing money to pay for huge tax cuts at the top will trickle down to create economic growth for the nation. But this is disputed by nearly every leading economist, and has failed to work in the past.

The plan is especially terrible for New Jersey – even with the so-called ‘compromise’ on deducting up to $10,000 in local property taxes – particularly the state’s low-income, working-class and middle-class families.

In fact, even if New Jerseyans are able to deduct up to $10,000 in property taxes, 60 percent of the Garden State taxpayers who currently take the property tax deduction likely no longer would. 

That’s because even though they’d still technically be able to take the property tax deduction, many would choose not to because the combination of itemized deductions (which would no longer include state income and sales taxes) would be smaller than the standard deduction. This would be a bad deal for many taxpayers even though the proposal makes the standard deduction more generous.

The ball is now back in the court of New Jersey’s House delegation – particularly our Republicans. Reps. Frelinghuysen, Lance, LoBiondo and Smith must stand firm and continue to vote against this plan, while Rep. MacArthur – the lone New Jersey member of Congress to vote “yes” the first time around – needs to change course and put the working people of New Jersey first.

Related resources:

NJPP is Fighting for Progress in Gubernatorial Transition

Posted on by NJPP Staff

New Jersey Policy Perspective is well-represented as the gubernatorial transition process unfolds in Trenton, with four staff members and five board members officially taking part.

Staff appointments:

  • Gordon MacInnes, NJPP President, Serving on Stronger and Fairer Economy Transition Committee
  • Jon Whiten, NJPP Vice President, Serving on Budget Transition Committee
  • Jackie Cornell, NJPP Director of Development & External Affairs, Serving on Healthcare Transition Committee
  • Brandon McKoy, NJPP Policy Analyst, Serving as Deputy Director of Urban and Regional Growth Committee

Board appointments:

  • Henry Coleman, Serving as Budget Committee Co-Chair
  • Dan Fatton, Serving onEnvironment and Energy Committee
  • Heather Howard, Serving as Healthcare Committee Co-Chair
  • Amy Mansue, Serving as Budget Committee Co-Chair
  • Marcia Marley, Serving on Stronger and Fairer Economy Transition Committee

Of course, NJPP’s work to drive a policy agenda for New Jersey’s working families in 2018 and beyond didn’t begin with the official transition. We’ve been working for months to advance a proactive vision for  stronger, fairer, healthier state: Check out our Blueprint here.

Congressional Tax Proposals Target Immigrant Children

Posted on by Erika J Nava

Both the Senate and House tax plans deny crucial working-family tax credits to some immigrant children, putting these working class families at greater risk of poverty.

These proposals include provisions taking away the Child Tax Credit (CTC) and its refundable component, the Additional Child Tax Credit (ACTC), from children without Social Security numbers. Restricting the CTC to filers using Social Security numbers could impact as many as 5 million children of taxpaying parents in immigrant families, the majority of whom are U.S. citizens, and 1 million of whom are young DREAMers. The House bill also threatens to deny access to the American Opportunity Tax Credit, a critical support that helps college students get the education they need to access economic opportunities, to immigrants without Social Security numbers.

Currently, taxpayers can claim the Child Tax Credit as long as that child lives in the U.S. – even if their dependent child does not have a Social Security number.

In New Jersey, there are about 49,000 undocumented children who lack a Social Security number, many of whom live in mixed status households with siblings or other family members who are U.S. citizens.

Targeting children in immigrant families would directly harm these kids and their families, harm local economies that benefit from the economic multiplier effects of working-family tax credits and discourage immigrants from filing their taxes.

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