Category: Blog

Expanding EITC Could Help Over 1 Million New Jersey Families

Posted on by Brandon McKoy

Earlier this fall, U.S. Senator Sherrod Brown and Representative Ro Khanna, joined by 52 House cosponsors, introduced legislation that would expand the earned income tax credit (EITC) and help raise the incomes of 47 million working families and individuals across the country, including over 1 million right here in New Jersey.

Expanding the EITC – a federal tax credit with a long track record of success in helping lift families out of poverty – is the kind of real tax “reform” that could actually boost working-class Americans, unlike the Trump-GOP proposal that delivers the overwhelming majority of its benefits to the top 1 percent. New Jersey’s own Representatives Bonnie Watson Coleman, Donald Norcross, Frank Pallone Jr., and Albio Sires should be applauded for co-sponsoring this proposal, and we urge their colleagues to join them.

The Brown-Khanna proposal would expand the EITC by lowering the qualifying age for workers without children to 21 from 25 and increasing income eligibility levels for all EITC recipients. For families with children, the average federal credit would be more than $5,600, and the maximum federal credit would nearly double from $3,400 to $6,528; the income ceiling to qualify would increase from about $45,000 to about $65,000. For families without children, the average federal credit would be more than $1,800, and the maximum federal credit would increase nearly six-fold from $510 to $3,000; the income ceiling to qualify would increase from about $15,000 to about $37,000.

Expanding the EITC would also significantly reduce the number of working families and individuals in poverty – effectively doubling the poverty-reducing impact of the federal credit. In 2015, the federal EITC lifted 6.5 million people out of poverty, including about 3.3 million children. The Brown-Khana proposal would lift an additional 8.3 million people out of poverty, including 2.9 million children. Additionally, 16.9 million people would be made less poor, including 5.3 million children. With income inequality at alarming levels across the nation, this would be an important step to reversing course and helping low-income families have a better shot at success.

The working families who receive the EITC in New Jersey would be especially helped by this proposal, since the state has its own version of the credit, which is refundable at 35 percent of the federal credit.

The over 1 million New Jersey workers who would be helped by the proposal are a diverse group, including everyone from retail workers to truck drivers to home health aides and teachers.

New Jersey Second Hardest Hit State Under Senate Tax Proposal

Posted on by Jon Whiten

To read a PDF version of this report, click here.

Once the Senate tax proposal is fully phased in, New Jersey’s wealthiest 5 percent of taxpayers would receive an average $11,800 tax break each year while close to 1 in 4 Garden State taxpayers (22 percent) would pay an average of $2,330 more in a year in federal taxes.[1] (Unless otherwise noted, all data in this Fast Facts is on the impact in the year 2027, once the plan is fully phased in.)

In all, the wealthiest 5 percent of New Jerseyans – those with annual incomes over $440,000 a year – would receive about half (49 percent) of the tax cut coming to the state by 2027, while the bottom 60 percent (everyone earning less than $111,000 a year) would get just 28 percent.

While the Senate plan is slightly less tilted to New Jersey’s top earners than the House plan, at its core it retains all the same flaws as the House plan:

  • It increases federal deficits by more than $1.5 trillion over the coming decade
  • Its tax cuts that are heavily skewed to the wealthiest families and large corporations
  • It will lead to cuts to services and programs that working New Jerseyans count on
  • It will make it harder for states to invest in schools, infrastructure, health care and more
  • It punishes New Jersey more than nearly every other state

Nearly 1 in 4 New Jerseyans would face a tax hike by 2027 in large part because the Senate proposal would completely end Americans’ ability to deduct state and local income, sales and/or property taxes paid. (The House plan offered a partial elimination.) At 22 percent, New Jersey has the second highest share of taxpayers facing a tax hike behind only Maryland (27 percent). This is far higher than the total share of Americans – 13 percent ­– who face a tax hike.

A total of 1.8 million New Jersey households deduct a cumulative $17 billion in state income or sales taxes from their federal taxes, while 1.6 million New Jersey households deduct a cumulative $14.9 billion in local property taxes.[2] These deductions help tens of thousands of families in every single Congressional District.[3] New Jersey’s average residential property taxes are $8,549 a year, and 147 of New Jersey’s 565 municipalities (26 percent) have average residential property tax bills of over $10,000 a year.[4]

What’s more, this analysis of the “winners and losers” under the House proposal doesn’t take into account the impact of likely budget cuts that would be paired with these tax breaks. If the tax cuts were eventually paid for through the spending cuts on entitlements and federal programs promised in recent GOP budget proposals, it’s clear that any modest tax cut for low-income or middle-class New Jerseyans would be more than wiped out. (An analysis of the earlier tax framework that took program cuts into effect found the “vast majority of Americans” would lose – even if they took home small tax cuts.[5])

Endnotes

[1] Institute on Taxation and Economic Policy Microsimulation Tax Model, November 2017. Full dataset available at https://itep.org/senatetaxplan/

[2] New Jersey Policy Perspective, Fast Facts: Millions of New Jerseyans Deduct Billions in State & Local Taxes Each Year, November 2017.

[3] New Jersey Policy Perspective, State and Local Tax Deductions Benefit Tens of Thousands of New Jerseyans of All Incomes in Every Congressional District, November 2017.

[4] NJPP analysis of New Jersey Department of Community Affairs, 2016 Property Tax Tables. Available at http://www.nj.gov/dca/divisions/dlgs/resources/property_tax.html

[5] Center on Budget and Policy Priorities, Vast Majority of Americans Would Likely Lose From Senate GOP’s $1.5 Trillion in Tax Cuts, Once They’re Paid For, October 2017.

Poll: Most New Jerseyans Want Bold Solutions on State Taxes

Posted on by Jon Whiten

Most Garden State voters support bold solutions to fix the state’s broken tax code and boost public investments, according to a new poll commissioned by New Jersey Policy Perspective (NJPP). There is strong, bipartisan support for raising income taxes on the wealthiest 5 percent and for restoring the estate tax for millionaires, and there is majority support for rolling back the recent reduction in the state sales tax, which 60 percent of voters say has not helped them at all.

The three tax reforms included in the NJPP-commissioned poll represent over $2 billion in new revenue that New Jersey desperately needs to meet its obligations, maintain essential services and make targeted investments that can boost opportunity and grow the state’s economy, and they are crucial components of NJPP’s broader proactive tax reform agenda.

This polling confirms what we’ve heard as we’ve traveled the state this year to discuss the crucial issues facing New Jersey. Voters are willing to support tax increases – even on themselves – to create a stronger, fairer economy and fix the Garden State’s financial crisis.

Key findings:

  • Strong majorities believe that the state’s wealthiest 5 percent of households and large corporations are paying “too little” in taxes (69 and 66 percent, respectively).
  • Three-quarters of New Jersey voters (75 percent) support raising income taxes on the top 5 percent of households – including 76 percent of independents and 57 percent of Republicans.
  • Over 60 percent of New Jersey voters (62 percent) support restoring the state estate tax on heirs inheriting $1 million or more – including 57 percent of independents and 52 percent of Republicans.
  • A majority of New Jersey voters (53 percent) support rolling back the 2016 cut in the state sales tax – including 54 percent of Republicans.
  • Three-quarters of New Jersey voters (75 percent) support raising $2.5 billion in new revenue by increasing taxes mostly on the wealthy and large corporations.

As the Governor-elect and the new legislature chart a course for greater economic justice in New Jersey, they must be bold. The old playbook – pursuing a patchwork of modest tax fixes here and there in order to limp through a crisis – will not be enough to put our state back on the right track.

The poll of 750 likely 2017 New Jersey voters, conducted by Anzalone Liszt Grove Research, was conducted September 27-October 3 using professional interviewers. The full poll results can be viewed here: http://www.njpp.org/wp-content/uploads/2017/11/NJPP-ALG-poll-results-fall-2017.pdf

Related NJPP reports:

As DACA Ends, Here’s How New Jersey Can Help DREAMers

Posted on by Erika J Nava

In five months, barring constructive Congressional action, 690,000 undocumented youth who call the United States home will face a threatening future thanks to the cruel actions of the Trump administration.

While there is little state policymakers can do to prevent this huge step backward at the federal level, there are actions they can take that would honor New Jersey’s history as the golden door for immigrants, and make our state a more welcoming, inclusive place. They should start by allowing undocumented students access to state financial aid.

Most of the beneficiaries of Deferred Action for Childhood Arrivals (DACA) came to New Jersey in their parents’ arms. They graduated from our high schools. Many worked to help their undocumented parents make ends meet. Under DACA they were able to get jobs that match their skills and given the opportunity to pursue the American Dream. But unlike just about everyone else who’s lived the American Dream, they are now threatened with revocation of their protections, their opportunities and even their continued residency in the United States.

While DACA was not perfect, it highlighted the concrete benefits of giving undocumented residents a chance to step out of the shadows by allowing them to participate more fully in our community and economy. In New Jersey, it allowed about 22,000 undocumented youth to have access to driver’s licenses and work permits and protection against deportation. Many DACA beneficiaries were able to obtain decent jobs, buy a car, go to college, or even open their own business. Nearly all of these Garden State DREAMers are working – and paying $66 million a year in state and local taxes.

Now the future of these young immigrants’ lives is in limbo and they face diminished opportunities. There is no better time for New Jersey to expand the educational opportunities it offers young undocumented immigrants by allowing those who meet certain requirements to gain access to state financial aid so they have a realistic shot at affording New Jersey’s public colleges and universities.

Yes, the law granting DREAMERS in-state tuition rates was a welcome but insufficient step forward given the low incomes of almost all undocumented households and their exclusion from any federal grants or loans. Even so, hundreds of striving students have benefitted from the law – but now without DACA many may no longer be able to work in jobs that helped pay for their education and would be forced to subsist on low-wage jobs.

If New Jersey fails to act, the situation would only get worse and many of these young students would be forced to drop out of school as they would no longer be able to keep their work-permitted jobs. But, even without work permits, these students should be given the opportunity to pursue higher education. We all benefit from having a more educated population and we should not be the state that blocks their passion for higher education. After all, we have told them since they were young children that there is no better way to succeed in America than to graduate from college.

All New Jersey students who show promise to succeed and meet the financial requirements should be able to access the same programs as their classmates, regardless of their status. Let’s be clear: the best way to get a return on the investment made educating these young folks from preschool through 12th grade is to create a clear pathway to an attainable college education – and the increased earnings and economic impact it brings.

New Jersey’s undocumented students are part of our community. Their families pay taxes just like yours do – in fact they pay a higher effective tax rate than the state’s wealthiest 1 percent. To continue to deny them access to state student financial aid clearly dilutes the positive impact of DACA and Tuition Equity.

Trump’s Sabotage Threatens Health Care for New Jerseyans

Posted on by Raymond Castro

With Congress thus far failing in its multiple attempts to roll back progress on health care by repealing the Affordable Care Act (ACA), President Trump is increasingly taking matters into his own hands. This week his sabotage efforts intensified even as we approach the crucial open enrollment period for 2018 coverage in the federal Marketplace.

The President’s move to end cost-sharing subsidies for insurers will wreak havoc in New Jersey, with premiums likely increasing by 20 to 30 percent in the state.

The change will most harm the 150,000 New Jerseyans who pay the full cost of their insurance, both on and off the federal exchange. It could cause their average annual premium – currently an estimated $5,748 – to increase between $1,100 and $2,200, making insurance unaffordable for thousands. Most New Jerseyans who receive individual subsidies in the exchange (about 200,000 individuals last year) will not be directly affected by this change – at least in the short run.

This is on top of the executive order the President issued Thursday that could destabilize the health insurance markets where millions of individuals and small businesses get their coverage and undermine protections for people with pre-existing health conditions. That policy changes outlined in that order would harm New Jersey more than most other states. (The executive order itself doesn’t change policy, but instead directs agencies to consider making changes by issuing regulations and revising guidance.)

Contrary to President’s claims, these changes would reduce coverage and access while increasing costs. Not only would they eliminate all the federal essential benefits that are currently guaranteed for nearly everyone (like hospitalization, mental health and maternal care) for organizations that form health plan associations, they would allow these businesses to bypass the many additional benefits required under New Jersey law, such as treatment for autism.

Since New Jersey requires more benefits than other states, organizations forming these associations would have more of an incentive to buy cheap policies across state lines. That would have a twofold effect: New Jerseyans who purchase these bare-bones plans will not be adequately covered if they have a real medical emergency, and the state’s entire commercial market would be at risk because the healthiest New Jerseyans could leave the New Jersey marketplace, leaving only the sickest consumers and driving up premiums to unaffordable levels.

At the same time as the President is attempting to dismantle key parts of the ACA via executive order, his administration has slashed federal funding for Navigators. This will gut the entire outreach effort in New Jersey and likely result in thousands of New Jerseyans not receiving the coverage they desperately need. The state’s 62 percent reduction was the largest in the Northeast and the ninth largest nationally. Two of the state’s five navigator contracts were cut by a stunning 85 percent.  Most of these agencies will probably have to lay off staff, reduce marketing, help fewer New Jerseyans eligible for Medicaid, or spend less time with consumers who have language barriers or other complex needs.

Despite all the confusion and the political theater surrounding the ACA, New Jerseyans should absolutely still enroll for coverage in 2018. The enrollment period that begins November 1 is crucial, and thanks to the Trump administration, it’s actually shorter this year than in past years – it will end this December 15.

Tax Credit Delays Continue to Hurt New Jersey Families

Posted on by Brandon McKoy

The Earned Income Tax Credit (EITC) is a proven policy that helps workers who are not being paid enough to better afford their daily needs. In New Jersey, the over half million families that benefit from the federal credit are also able to get a state credit, receiving an important boost during tax time to the tune of $811 a year on average. Even that modest amount is crucial to help struggling working families in our  high-cost state; and New Jersey should be commended for being a national leader for its state EITC contribution.

The Christie administration’s recent efforts to clamp down on “fraud” in the program, however, are leaving more and more people in limbo, preventing them from receiving their tax refund in a timely manner – refunds that many families rely heavily upon to take care of bills, repairs, and basic needs. And these delays couldn’t come at a worse time, as the Garden State continues to battle with stubbornly high poverty rates that endanger the health and prosperity of everyone,.

Since the state began its “enhanced screening” process in 2011, the tax refunds of hundreds of thousands of low-income working families have been significantly delayed or denied. In fact, this policy has caused the average number of taxpayers with pending or denied EITC claims to nearly double, rising to an average of 85,690 a year (2011-2016) from 44,232 (2009-2010) – and it’s caused the total average annual amount of EITC dollars pending or denied to increase by 147 percent, to about $65 million a year (2011-2016) from about $26 million a year (2009-2010).

In the meantime, real New Jerseyans are suffering as they go without vital refunds that they rely upon to afford important needs. The rate of true poverty – 200 percent of the federal poverty level, or about $48,700 for a family of four in 2016 – in New Jersey has remained stubbornly high for the past several years, measuring higher than 23 percent since 2010 and hitting 23.7 percent in 2016. As the state’s economy has slowly recovered from the Great Recession, too many working-class New Jerseyans are being left behind. Launching a punitive – and misguided – policy that prevents these families from receiving important tax refunds in the middle of a poverty crisis is severely harmful.

State officials have justified this change by citing the error rate of the EITC – the IRS estimates between 22 and 26 percent of EITC filings contain errors – but there are better, less draconian ways to deal with this issue.

The IRS itself refers to this problem as an “improper payment rate” rather than “fraud,” because most filing errors are unintentional, not malicious. Enacting error-reduction proposals approved by the federal Treasury Department – such as simplifying the rules around who can apply and working with commercial providers to reduce errors in the returns they submit – would do more to reduce the numbers of false claims than targeting taxpayers. In short, the state should take every step possible to mitigate the error rate without putting low-income residents in limbo.

Over the course of the past several years, the Garden State has experienced worsening economic inequality, stubbornly high poverty, stagnant household income and frustratingly slow job growth when compared to our neighbors and the nation. To withhold over $90 million in total from the state’s most vulnerable families at such a time is seriously damaging. New Jerseyans deserve a government that can efficiently process tax returns so they can receive their refunds in a timely manner and address pressing economic issues in their lives. The state needs to determine and implement a plan that will end this situation before more vulnerable New Jerseyans are harmed even further.

House Budget Threatens Billions in Cuts for New Jerseyans to Set Up Damaging Tax Plan

Posted on by Jon Whiten

The 2018 budget resolution that the U.S. House of Representatives passed today would slash billions of dollars from programs that help Garden State families afford necessities and get ahead, according to a report by the Washington, DC-based Center on Budget and Policy Priorities. These damaging cuts pave the way for massive tax cuts for corporations and the very wealthy on the backs of working Americans. A budget resolution that would have similar, harmful effects on New Jerseyans is currently working its way through the Senate.

Both the House and Senate budgets set up a fast-track, partisan process for passing massive tax cuts for the wealthy and corporations. The GOP tax plan, released last week by congressional Republicans and the White House, would overwhelmingly benefit the top 1 percent in New Jersey, who would receive 82 percent of the tax cuts, a new analysis released by the Institute on Taxation and Economic Policy (ITEP) shows. New Jersey’s wealthiest 1 percent would receive an average $74,000 tax break each year while about 1 in 4 Garden State taxpayers would pay an average of $2,400 more in a year in federal taxes.

Not only would these tax cuts overwhelmingly benefit the very wealthy, they could also pile trillions onto deficits and likely force further cuts to health coverage and critical programs like education, and job training – and put more pressure on Social Security.

The bright side is that 10 of New Jersey’s 12 Congressional representatives, including a majority of its Republicans, voted no on the resolution (Reps. Frelinghuysen and MacArthur were the lone ‘yes’ votes from the Garden State).

Despite claims to the contrary, Congressional Republicans’ budget and tax plans would make life harder for working people across New Jersey. Instead of setting the stage for tax cuts that help those who need it the least and tax hikes that would harm so many in New Jersey, Congressmen Frelinghuysen and MacArthur should work to advance policies that invest in working families and boost the economy, while ensuring that tax cuts are paid for by closing tax loopholes or other responsible tax changes – not by running up the deficit and raising taxes on one in four New Jerseyans.

Despite congressional Republicans’ claims, their tax plan would do little to spur economic growth and at the same time would worsen the nation’s long-term fiscal outlook.

Kansans learned this lesson after Gov. Sam Brownback enacted a similarly drastic tax and budget plan in 2012. Following the cuts, Kansas lagged behind its neighbors in economic growth and job creation. The tax breaks created a budget shortfall of $900 million that sent the state’s finances into a tailspin and encouraged dangerous cuts to schools, road repair, and other key services that help working people and foster economic growth.

16-Cent Wage Hike is Not Enough for New Jersey’s Low-Paid Workers

Posted on by Brandon McKoy

Today, the New Jersey Department of Labor and Workforce Development announced that the state’s minimum wage would increase by 16 cents from $8.44 to $8.60 on January 1, 2018, providing a very modest boost to many of New Jersey’s low-paid workers.

While an increase in the minimum wage is a welcomed development, $8.60 an hour remains far below what it takes for a worker to afford the most basic of needs on a daily basis in high-cost New Jersey. Legislators were smart to tie minimum wage raises to increases in inflation so that minimum wage workers don’t fall even further behind, but the new hourly wage accounts to an inadequate income of less than $18,000 a year for a full-time worker.

It’s clearer than ever: gradually increasing the minimum wage to $15 an hour is urgently needed to reduce income inequality and help hundreds of thousands of hard working New Jerseyans afford basic needs for themselves and their families. The sooner elected officials can recognize this need and work together to help our friends and neighbors who are struggling to get by on the current insufficient minimum wage level, the better of all of us – workers, families, and businesses – will be.

To Attract Amazon, New Jersey Needs Public Investments

Posted on by Gordon MacInnes

 

New Jersey would be an excellent choice for Amazon’s new headquarters. After all, we have bustling cities like Jersey City, Newark, New Brunswick and now Camden – plus strong road, rail, port, technology and airport infrastructure; a highly educated labor force; excellent public schools and a great quality of life. These are the key factors that can attract Amazon to the Garden State – not further expanding New Jersey’s overly generous corporate subsidies, as Gov. Christie suggests.

So-called ‘incentives’ are a stated factor in Amazon’s decision-making, but they are just one of many. If state economic-development officials focus narrowly on tax breaks, they will merely be repeating – and making worse – the mistakes New Jersey’s political leaders have been making over and over since the Recession hit. For New Jersey’s economy to truly be competitive and strong, the state needs to get back to basics: investing in the assets that give us an edge.

Whether that’s ensuring NJ Transit is reliable and affordable, strengthening the state’s public colleges and universities, or fostering smart, dense growth in walkable downtowns with more affordable places to live, these are the policy solutions New Jersey must highlight in an attempt to woo Amazon. Merely blowing the lid off already out-of-control corporate tax break policies won’t work – and is dangerous to New Jersey’s future to boot.

New Jersey’s Progress on Health Coverage Must Not Be Undone

Posted on by Raymond Castro

More New Jerseyans are getting vital health coverage, thanks mostly to the Affordable Care Act, including the Medicaid expansion. In fact, the share of Garden State residents with insurance has increased by 39 percent in just three years, with 455,000 people gaining coverage since 2013, according to the latest Census data released today.

The share of New Jerseyans without coverage was 8 percent in 2016, down from 13.2 percent in 2013 before the ACA reforms went into place. That’s fewer than nationally, where 8.8 percent are insured.

It’s clear that the expansion of Medicaid under the ACA has been a key driver of low-income Americans receiving health insurance. According to the Census release, the uninsured rate was nearly twice as high (11.7 percent) in states that didn’t expand Medicaid as in states that did (6.5 percent).

This remarkable progress we’ve made must not be undone by continued efforts to repeal and replace the Affordable Care Act. Our Congressional representatives must continue to work to improve the ACA, not dismantle it.

«« Previous Posts∞Older Posts »»