Building strong, equitable, and safe communities should be among the highest priorities for states and municipalities. Yet, traditional safety models that rely on police do not address the root causes of crime, often harm communities, and come at a high cost, especially when compared to investments in social services. According to new data from NJ.com’s The Pay Check database on law enforcement salaries, police officers in New Jersey make more than double that of the average community or social service employee, despite growing evidence that community-based services better address root causes of crime and promote safety for all residents.
The Pay Check database provides unprecedented access to local and state police salaries in New Jersey — including overtime and off-duty pay — and shows that police officers receive exceptional compensation when compared to other professions crucial to public safety, such as school counselors or social workers.
Police Salaries In New Jersey
New Jersey is one of the most lucrative states to be a police officer, with the second-highest base salary for law enforcement officers in the country, behind California.[i] When added to benefits and pensions, the salaries of New Jersey police officers often top six figures.[ii] As detailed in the chart below, the average salary for other community and social service occupations is much lower.[iii]
The community and social service occupations category includes social workers, mental health and substance abuse counselors, community health workers, and clergy — all occupations that contribute to broader public safety.[iv]
There are also twice as many police and correctional officers as substance abuse, behavioral, and mental health counselors combined.[v] The chart below outlines just how few mental health professionals there are compared to law enforcement.[vi]
To truly promote public safety, New Jersey must reassess how investments in that area are made, recognizing that public safety depends on more than police officers. Creating stronger communities requires investments in community and social services that use health-centered approaches to prevent, reduce, and safely intervene in harmful behavior, while limiting the damage caused by policing and incarceration. Yet, as detailed in the NJPP report, To Protect and Serve: Investing in Public Safety Beyond Policing, budgets, which provide the resources on which communities depend, rarely support these services to the level of law enforcement officers.
Equity and safety require that the compensation disparities detailed above should be closed so all of the people who call this state home feel safe and valued.
Welcome to NJPP’s State of the State 2022: Rapid Reaction, your source for commentary and data analysis on Governor Murphy’s recent address. The transcript below was taken from NJPP’s Zoom room and has been lightly edited.
Lou (Louis Di Paolo, Communications Director): On Tuesday, Governor Phil Murphy delivered his fourth annual State of the State address where he highlighted policies enacted under his first term, reflected on the state’s ongoing response to the COVID-19 pandemic, and laid out some priorities for 2022.
A big theme in his remarks: The past four years proved that state government does not have to sacrifice low- and moderate-income families at the expense of economic growth — because the two go hand in hand.
But, before we get into the speech, does anyone want to share their thoughts on the post-election legislative session that just wrapped up?
Peter (Peter Chen, Senior Policy Analyst): Although this lame duck session cleaned up a number of leftover measures to help families, such as the expanded child care tax credit, there were plenty of missed opportunities for progress.
Lame duck sessions are rarely opportunities for major legislation. But this one was also full of rushed giveaways to corporate special interests (casinos, Hollywood studios) and politically-connected folks, while leaving out priorities crucial to the wellbeing of communities of color and people struggling to make ends meet.
Marleina (Marleina Ubel, Policy Analyst): Yes, and on top of those issues, there was an unprecedented lack of access and transparency to the process. The public couldn’t enter the State House, and the last session, which included a historic vote on abortion access, had technical glitches in the livestream that went unresolved for over an hour.
Lou: All great points, especially on process and transparency. That was a big theme of last year’s address and it’s clear we haven’t made much progress on that front.
What about the Reproductive Freedom Act? That was the biggest issue of lame duck and dominated news coverage of the session. Sheila, for those who may have missed the last-minute negotiations around the bill that ultimately passed (the Freedom of Reproductive Choice Act), what should our readers know?
Sheila (Sheila Reynertson, Senior Policy Analyst): For starters, this was *not* the Reproductive Freedom Act. What made it across the finish line on the last day of voting was the protection of abortion rights and administrative plans to look into how high deductibles and co-pays may block access to this time-sensitive care. While the declaration of rights is quite strong, the legislation ultimately left behind New Jersey’s undocumented immigrant community. It did nothing to expand access or advance equity in health care. So more work is vital to ensure the well-being and economic security of everyone facing an unplanned pregnancy.
Lou: Thanks, Sheila. That’s really important context. But let’s get to the speech. What were your takeaways?
Brittany (Brittany Holom-Trundy, Senior Policy Analyst): The first theme that dominated the speech was, of course, the COVID-19 pandemic, and rightfully so. After nearly two years, some people might find discussion of the pandemic to be tiring, but with the continuing waves of cases and hospitalizations — and the health, schooling, and other long-term challenges facing New Jersey families — it’s critical we keep our focus on supporting all New Jersey residents and working toward an equitable recovery.
Lou: If only there was a group that had a blueprint of policies to secure an equitable pandemic recovery. Oh, wait …
Sheila: Governor Murphy did a great job demonstrating that a robust response to the pandemic is in line with his policy goals of strengthening New Jersey. The public investments that supported New Jersey families during a global pandemic are also the building blocks of a strong state economy: affordable health care, housing, child care, and higher education; support for small businesses, green jobs, and mass transit.
Brittany: And even when he stepped up and then stepped away from the podium, Governor Murphy made a point to wear his mask — which, as an example of healthy practices, is a nice contrast to some other leaders we see daily on television.
Peter: That goes hand-in-hand with the Governor’s broader vision of a New Jersey that works together and helps each other succeed. When we hear questions like “when will the economy recover?” or “when will schools go back to normal?” they’re really asking “how can we slow and manage the pandemic itself?” We all have to do our part to control and manage the pandemic, and the mask is a strong symbol of that shared responsibility.
The state of our state is resilient and ready to keep moving forward.
Together, will continue to build a stronger and fairer New Jersey that works for every family – while continuing down the path of recovery from the pandemic.#NJSOTSpic.twitter.com/gT3rxod7uN
Lou: Property taxes were another big theme — any thoughts on that?
Jon (Jon Shure, Interim President): It wouldn’t be a New Jersey State of the State speech without a governor pledging to work to reduce property taxes. I was involved in Governor Florio’s final State of the State and it was all about property taxes.
Governor Murphy accurately observed that school funding is property tax relief, for example. The real solution has to involve equitably increasing broad-based state taxes (sales, income) and using some of the money to pay for local services — and schools — for which New Jersey relies much more on local property taxes than do other states.
As NJPP pointed out a while back, the state would have made a lot of progress toward that better balance had Gov. Tom Kean not declared the final bipartisan recommendations of the amusingly named SLERP (State and Local Expenditure & Revenue Policy) Commission to be dead on arrival, four months before they came out.
Lou: Now that’s a throwback. Thanks for providing some important historical context there, Jon.
What was everyone’s favorite part of the speech? Or were there any topics you were especially glad to hear mentioned?
Peter: My favorite part was the no new tax pledge for the upcoming budget year.
Lou: Didn’t realize we had Grover Norquist here in the chat.
Peter: But seriously, I thought the Governor’s speech did a good job of outlining the positive role state government plays in the lives of New Jerseyans, especially in light of the pandemic. Too often, rhetoric around “government” and “taxes” obscures what government really is — schools, hospitals, transportation, infrastructure, child care. The institutions that undergird society and support thriving communities need cheerleading, and the Governor provided it.
But to go back to my snarky answer above, strong public services require public investments, and that requires revenue. Changes in the tax code are a key tool to ensure the wealthiest pay their fair share to support the services we all benefit from.
Lou: So true. And it’s worth mentioning that state lawmakers still haven’t reversed some Christie-era tax cuts that primarily benefitted New Jersey’s wealthiest residents (looking at you, estate tax).
Sheila: Amen, Peter. I appreciated the eloquent way the Governor presented progressive taxation.
“The price for having an unlimited upside cannot be an unlimited downside. New Jersey will never move forward if we cling to the outdated and selfish notion of, ‘I got mine and the rest be damned.'”
That theme was woven throughout the speech — from his position on the pandemic response to the political process. It’s such an important tactic at a time of deep divisions and harsh health and economic disparities.
Marleina: I was happy to hear about the growing cannabis industry! Wait. Never mind. We are still talking about how great the cannabis industry will be. You know, when it happens.
Lou: Speaking of drug policy, he also mentioned the importance of harm reduction in the state’s response to the ongoing overdose crisis. As the folks at the New Jersey Harm Reduction Coalition pointed out on Twitter, this is probably the first time harm reduction was ever mentioned in a New Jersey State of the State.
Today @GovMurphy became the first New Jersey governor to mention harm reduction in the #NJSOTS address.
— NJ Harm Reduction Coalition (@NJHarmReduction) January 11, 2022
Brittany: Yes! I love that the Governor has embraced harm reduction. It shows that we are building a state where everyone deserves access to needed care, without stigma, discrimination, or barriers. I’m also pleased that the importance of health and health care affordability remains a priority. We’ve learned so many lessons through the pandemic, and one that I hope will be a permanent change is this recognition that health for all New Jersey residents is key for a thriving state, now and in the future.
Lou: Did anything in the speech surprise you?
Marleina: Can I share one thing that didn’t surprise me? That New Jersey is growing! Both in terms of population and new jobs. New Jersey is a desirable place to be!
Jon: I know. Listening to the Governor extol the state’s advantages, I was thinking that if I didn’t live in New Jersey, I’d move here.
Peter: OK, but I saw some moving trucks leaving my neighborhood, so how can that be true?
Jon: I like that he attacked that bogus survey from a moving company that people still use to “prove” people are fleeing New Jersey. Here’s an interesting fact — the 3 states people move to most from New Jersey every year are New York, Pennsylvania, and Florida — and the top 3 states people move here from are — wait for it — New York, Pennsylvania, and Florida. There’s a lot of churning.
Lou: What was missing from the speech?
Sheila: The racial wealth gap in New Jersey. Reparations. Mental health crisis. Essential workers. The undocumented immigrant community. Educational and behavioral harm of virtual learning.
Peter: For a speech that mentioned criminal legal reforms, school funding, COVID-19, tax fairness, and environmental justice, there was no mention of the word “race” or “racism.”
The Governor mentioned Census data showing New Jersey’s growth since 2010. But that growth has also included increased racial and ethnic diversity. Without considering and combating the racial disparities in each of these issues, we run the risk of another unequal recovery. Even a quick glance at unemployment numbers show continued gaps in the recovery for different racial and ethnic groups.
Given the Governor’s commitment to policies that address racial justice, it was a bit disappointing that he excluded them from his address.
Marleina: I couldn’t agree more. This felt like the most glaring omission for me, along with the Excluded New Jerseyans Fund. Frontline workers are disproportionately women, immigrants (another word that was not in the speech), and people of color. It feels like they were left out, as the folks at Make the Road NJ were quick to point out on Twitter.
Immigrant women from across NJ call on @GovMurphy to fully fund #ExcludedNJ with $1 Billion.
Brittany: Absolutely, Marleina. As I mentioned earlier, I was very happy to hear health and health care affordability prioritized, but a narrow focus on affordability leaves out the fact that many residents are ineligible for coverage, even the affordable options being improved each year through NJ FamilyCare and GetCovered NJ.
So, in addition to cost growth control and affordability, I would have loved to have heard more about implementation of Cover All Kids, plans for opening up options for undocumented adults, as well as a commitment to addressing barriers to care for reproductive health — particularly abortion — that was left out of the recently passed, pared-down reproductive health act as Sheila mentioned earlier.
Jon: All true. But this was just the first in a trifecta of speeches Governor Murphy will deliver over the next couple months, the others being his inaugural address and the speech outlining the budget he’ll purpose for the fiscal year that starts July 1. My fingers are crossed that he held back some good stuff for those occasions.
Lou: Sounds like a lot of unfinished business for the new legislative session and Governor Murphy’s second term. What’s everyone looking forward to accomplishing in term two? And yes, this is an opportunity to once again plug the policies in our Blueprint…
Marleina: I am looking forward to shrinking the number of people incarcerated in this state. The pandemic showed us that decarceration is possible and can happen quickly. I am excited to see that work continue.
Also, I hope to see real reform in criminal justice and policing. There is a lot of work to do and there are bills waiting to be signed that could really move us toward a more transparent and accountable system.
Peter: Given the Governor’s focus on affordability for working families, I’m hoping to see an ambitious agenda of tax credits and supports, such as a state-level child tax credit and a more expanded state earned income tax credit for New Jerseyans paid too little to get by, especially in this difficult time. To make life more affordable, as he promises, we’ll need strong public investment on behalf of New Jersey’s low- and moderate-income families.
Brittany: Agreed. Along those lines, I want to see significant TANF reforms so we can finally bring that program into the 21st century and move it away from its racist roots. And in addition to things I mentioned before, I’m looking forward to actions that will help all New Jerseyans get quality health care. So I’ll be following things the Governor’s mentioned in the State of the State like analyzing prescription drug costs, which could include creating the Prescription Drug Affordability Board. Passing and establishing an Easy Enrollment program (which he conditionally vetoed this legislative session) too would help get more New Jerseyans insured.
Availability, affordability, accessibility, quality — there are plenty of issues for the Gov’s team to pursue in term two!
Sheila: I appreciate the idea of tending to the policies of the first term to ensure their longevity. That being said, there is room in his second term for more tax reform, especially when it comes to taxation of inherited wealth. The amount of foregone revenue that is instead flowing into the pocketbooks of a few thousand very wealthy families every year is a policy failure, plain and simple. The Governor has made it clear that taxation based on ability to pay (unlike the local property tax) “open[s] opportunities for more New Jerseyans to gain the tools they need to have their own prosperous future.”
Lou: Amazing. Thanks, team! Any final thoughts?
Peter: Next time we do this we need more memes.
Lou: Noted. We’ll make that a priority next time we do this. Go, team!
Unfortunately, though, not all minimum wage workers will be treated alike. Phase-in schedules vary across job sectors. Farm workers’ wages, for example, will rise only to $10.90 an hour in 2022 and won’t reach $15 until 2027. For workers who rely on tips for much of their income, the minimum wage will rise to a mere $5.13 in 2022. Of course, not every restaurant server makes up the difference in tips; their treatment under the law is an inequitable shortcoming.
Overall, inadequate wage growth makes it difficult for far too many working families — including many families of color — to pay for necessities. For low-paid workers, the past 20 years have been less about building economic security and improving their living standards and more about the struggle to simply stay afloat. With wages no longer keeping pace with increases in productivity, let alone inflation, minimum wage workers only see boosts in their pay when the state commits to raising their living standards.
Minimum wage increases are one of the most effective policy tools to boost the incomes of the lowest-paid workers. These raises help workers better afford basic needs, like food and transportation, and help more families cope with increased financial pressures, such as the COVID-19 pandemic and recession. Many of these low-paid workers lost weeks or months of wages during the pandemic, including many undocumented workers who have been forced to make ends meet with minimal government relief.
More work remains before all workers can live with dignity, meet basic needs, and have an opportunity to thrive. Thankfully, New Jersey’s minimum wage law positions working families for a stronger pandemic recovery — and the state with a stronger economic future.
New Jersey — and other states — can invest in proven, community-based approaches to public safety through the American Rescue Plan (ARP), according to a new report from the Center on Budget and Policy Priorities. By shifting away from law enforcement-based approaches to issues of mental health, substance abuse, school safety, and traffic safety, states can achieve better outcomes for everyone.
Decades of punitive policy making have made the United States one of the most incarcerated countries in the world, while ballooning police and corrections spending, even amid declines in violent and property crime rates.
The ARP is an unprecedented opportunity to invest in programs that will increase public health and safety while decreasing the need for police intervention. Signed into law in March 2021, the $1.9 trillion package offers flexibility for state and local governments to fund a wide range of programs that can be catered to the unique needs of communities.
States can address racial and other inequities in the criminal legal system, reducing unnecessary police stops that too often result in arrests and incarceration, and reducing acts of police violence, which disproportionately harm people of color and communities that have been pushed behind by decades of exclusionary policies.
New Jersey, specifically, has some of the worst Black-white disparities in police use of force and incarceration in the country. The state also prioritizes investments in law enforcement, which outpace investments in health and human services, as outlined in the NJPP report released earlier this year, To Protect and Serve: Investing In Public Safety Beyond Policing.
We can create safer communities, lower police violence, and reduce arrests, incarceration, and related costs by investing ARP funds in:
Mental health: The ARP’s additional Medicaid resources and $3 billion in funding for mental health and substance use disorders can help states prevent related arrests and incarceration. Many communities send police instead of health care professionals to respond to mental health crises or drug-related cases, which disproportionately harm people of color. Nationwide, approximately 10 percent of police contacts involve individuals with mental health needs, and 23 percent of people killed by police have a mental health need.
Education: School districts and state education departments can use the ARP’s $122 billion in mostly flexible education funds to replace school police with alternative interventions for students. Positive behavioral supports, trauma-informed training for staff, and restorative justice can reduce involvement in the criminal legal system, especially for students of color.
Housing: States can use the ARP’s targeted housing funds to prevent evictions, increase affordable housing, and reduce homelessness — all of which contribute to lower crime and stronger communities.
Traffic safety: State and local governments can use ARP funds to create new non-police units that focus on traffic safety instead of traffic enforcement, reducing the most common police interaction with the public, which disproportionately targets people of color.
Other interventions: States and localities can use federal funding to invest in violence interrupters and crisis response teams, which respond to crises with mental health professionals rather than armed police officers. Other interventions also include out-of-school programs, nutrition assistance, job training, and subsidized jobs. All of these investments have been shown to reduce crime.
“We the people” is a phrase synonymous with U.S. democracy. After all, these are the first words in the Constitution. However, as history shows — and despite its etching into our nation’s founding documents — not all “men” are created equal in public institutions, policies, and practices. If that were the case, there would be no need to undo voter disenfranchisement, partisan election ballots, institutional racism, sexism, discrimination, and more that have plagued democracy since its founding.
Nevertheless, New Jersey has done a lot to expand democracy over the past few years: from restoring voting rights to formerly incarcerated residents, to establishing automatic voter registration, to enabling residents to register online, vote early, and remotely through vote-by-mail. Yet, white, senior voters are still most likely to vote and shape policy and state and local decision-making. In New Jersey, Black, Asian, and Hispanic/Latinx residents are the least likely to participate in elections, with voting rates of approximately 50 to 60 percent, compared to 79 percent for white voters.[i] Additionally, partisan primary election ballots that privilege the preferences of county political parties further dilute the chances for authentic representation of the public.[ii]
To have a true democracy in the Garden State, lawmakers must extend voting rights to even more residents, abolish “the line” on primary ballots, and create a fairer, more inclusive redistricting process. This will require a collection of policies that make voting easier, bring more New Jerseyans into democratic processes, and encourage more competitive elections. With Senate Republicans blocking federal voting rights legislation in Congress, the need for state reforms are all the more urgent.
To learn more about these important issues before Election Day, please consider reading:
[i] U.S. Census Bureau, Current Population Survey, November 2020.Table 4b. Reported Voting and Registration, by Sex, Race and Hispanic Origin, for States: November 2020 https://www.census.gov/data/tables/time-series/demo/voting-and-registration/p20-583.html
[ii] Julia Sass Rubin. 2020. Toeing the Line: New Jersey Primary Ballots Enable Party Insiders to Pick Winners. New Jersey Policy Perspective. https://www.njpp.org/publications/report/toeing-the-line-new-jersey-primary-ballots-enable-party-insiders-to-pick-winners/
Medicaid provides a crucial safety net for families experiencing economic hardship and saves thousands of lives during public health crises like the COVID-19 pandemic. With the federal pandemic public health emergency (PHE) extended again on October 15th, but expected to expire in early 2022, the upcoming return to pre-pandemic redetermination processes and rules on continuous enrollment threatens families’ health insurance coverage.
Thousands of New Jerseyans at Risk of Losing Health Coverage
New Medicaid applications have now fallen below pre-pandemic levels, a positive sign and reflection of how pandemic relief policies have protected many of those who may otherwise have exited and then re-entered Medicaid in a short period of time due to unstable employment and income.
However, around 320,000 New Jerseyans will lose Medicaid coverage in 2022 with the reintroduction of eligibility processes and the end of continuous coverage, resulting in a 19 percent decrease in enrollment compared to the end of 2021. Disenrollment from NJ FamilyCare will jeopardize health insurance for residents with low incomes. It will also disproportionately threaten the coverage of Black, Hispanic/Latinx, and mixed race families, who are disproportionately represented in the program and are more likely to experience housing and employment instability, limiting their ability to complete redetermination processes that require extensive and onerous documentation, workday commitments, or mailed notifications.
To Prioritize Equity, New Jersey Must Plan Proactively
The harms created by the sudden end of the PHE and return to normal eligibility processes necessitate state plans that center health equity. New Jersey decision makers can reduce adverse effects with several measures:
Use a 12-Month Timeline for Disenrollments
Guidance from the Centers for Medicare & Medicaid Services (CMS) allows states to take up to 12 months to return to normal income eligibility after the month in which the PHE ends, but states may choose to implement this more quickly. A slower rate for disenrollment would allow more time for beneficiaries to complete the redetermination process, fully understand their other options if they are no longer eligible, and plan for next steps in maintaining health insurance coverage.
Create and implement a communication strategy that meets people where they’re at
Complicated forms, extensive documentation requirements, and language access issues make it difficult for Medicaid beneficiaries to meet the necessary requirements of redetermination, even if they are still eligible. Actively addressing these barriers through strategies like pre-populated forms, state officials can better serve the diverse population that relies on Medicaid.
Partner with Navigator organizations and other community groups to amplify messaging and build trust
Many New Jerseyans turn to community organizations and local leaders that they trust for health insurance information. By following a structured, data-driven plan that includes clear guidance and resources for outreach to Navigators, the state can use communication channels that already exist and reach many residents who may otherwise miss the department’s messaging.
Explore Continuous Coverage, Autorenewal, and Other Coverage Opportunities
Addressing instability in Medicaid coverage requires advancing technology and policies that provide greater flexibility under changing circumstances. The state can explore a Section 1115 demonstration waiver to extend Medicaid’s 12-month continuous eligibility to adults, similar to the coverage currently provided to children. It can also improve data-sharing across state departments to simplify and efficiently process automatic renewals. Finally, clear communication or easy transfers to other insurance options for those determined to be ineligible for Medicaid — as many will be eligible for the Children’s Health Insurance Program (CHIP) or subsidized marketplace coverage through GetCoveredNJ — can help keep families covered.
Air quality improvements may pay dividends beyond reducing COVID-19 exposure. Research has shown that reductions in indoor air quality coincide with decreases in test performance in school. This is particularly concerning for the many New Jersey school children who live in areas with low outdoor air quality due to proximity to highways, busy intersections, and industrial facilities. One study found that 13.8% of New Jersey schools are within 250 meters of a major roadway, with high-poverty schools eligible for Title I funding 67% more likely to be near a major roadway than their higher-income counterparts. Although less obvious than curriculum or teaching staff, improving indoor air quality may be an important, if overlooked, component of student and teacher performance.
New Jersey School Implementation Of Air Quality Standards Can Vary
Like all public buildings, New Jersey public schools are governed by the state’s indoor air quality standards, N.J.A.C. 12:100-13.1 (2007). The State has issued guidance summarizing these requirements and providing recommendations for improving ventilation. This standard requires checking whether carbon dioxide levels exceed 1,000 parts per million, which may require regular carbon dioxide monitoring. However, implementing these standards is largely dependent on proactive approaches by individual school districts and boards of education, and some of these changes can be expensive, especially changes to a school building’s ventilation system.
Resources Are Available For School Districts To Improve Their Ventilation And Air Quality
Federal funding through the American Rescue Plan can be used on physical ventilation improvements and improved airflow in school buildings, including HVAC system upgrades, filters or filtration devices, and carbon dioxide and other air quality measurement devices. Guidance is available here.
If local lawmakers and school board officials take advantage of these new resources, the current focus on ventilation and airflow in schools could result in substantial improvements for student and school staff well-being, as well as academic performance.
The tax proposals in the Build Back Better legislation recently approved by the House Ways and Means Committee would make the U.S. tax code more progressive, but only if the $10,000 cap on state and local tax (SALT) deductions is kept in place, according to two new reports by the Institute on Taxation and Economic Policy (ITEP). As currently written, the $3.5 trillion package would raise taxes on the nation’s richest households and biggest corporations while providing a tax cut for the average taxpayer in all income groups except the top 5 percent.
These tax reforms would pay for nearly all of the groundbreaking investments in the bill, like child care infrastructure, targeted rental assistance, new Medicare benefits, carbon emission limits, and permanently enhanced tax credits for workers and their families (more on that below).
Here’s what the tax changes of the Build Back Better bill would mean for New Jersey. First, income taxes would go up, but only for 2.7 percent of New Jersey tax filers. According to the ITEP analysis, 86 percent of the tax increases would be paid for by the richest 1 percent of earners, who have a projected average annual income of $2.73 million in 2022. The bill would also raise taxes on corporations. Again, this reform would primarily fall on the wealthiest people as they are the most likely to own stocks and other business assets. Third, the bill would raise federal taxes on tobacco and nicotine, which would affect individuals in all income groups. Together, these tax increases account for 94 percent of the revenue that would be raised in the bill’s first 10 years.
The biggest tax cuts in the legislation are through expansions to the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), which would mostly benefit the bottom 60 percent of earners. These changes would result in a lower effective federal tax rate for households in all but the wealthiest income brackets.
The bottom 20 percent of earners in New Jersey would receive a tax cut equal to 7.3 percent of their income if they qualify for the CTC or EITC expansion. On the other end of the income spectrum, the richest 1 percent in New Jersey would receive a tax increase equal to 3.3 percent of their income. That’s a progressive shift away from the tax policies currently in place, especially after the enactment of the 2017 Trump-GOP tax law, which disproportionately benefits the richest tax filers.
The graph below shows how each of the major tax policies of the proposed legislation would affect each income group as a share of income. Unlike the regressive tax changes made during the Trump administration, these policies target those who have flourished while improving the tax code for those who were disproportionately harmed by the public health crisis and its economic fallout.
But, should amendments include a full repeal of the $10,000 cap on deductions for state and local taxes (SALT), the bill’s progressive income tax reform would be completely wiped out, putting key investments at risk, according to a follow-up analysis by ITEP released last week.
New Jersey’s congressional representatives have repeatedly claimed that their “middle-class” constituents are hurt by the SALT cap. In reality, a full repeal would disproportionately benefit the richest households; almost none of the benefits would go to the state’s bottom 80 percent of earners. Those who make between $89,500 and $159,700 a year, like an East Rutherford police officer (average salary $152,461) or Edison teacher (average salary $96,455), would receive just 5 percent of the benefit with an annual average tax break that amounts to a dollar a day. In contrast, the richest 1 percent would enjoy over 50 percent of the benefit with an average tax break equal to $231 dollars a day, or $84,000 a year.
Further, claims that the bill raises revenue directly from the rich would no longer be accurate if the SALT cap is repealed. In fact, 81 percent of the proposed tax increases for the richest 1 percent would be wiped out. Unless other significant changes are made to the legislation (looking at you, stepped-up basis), an amended version that includes a full SALT cap repeal lets the rich off the hook and puts a huge dent in new tax revenue for the bill’s unprecedented investments in programs like universal pre-K and free community college. As written now, the income tax changes would raise $84.4 billion. But a repeal of the SALT cap would reduce new revenue by $114 billion, resulting in lost revenue overall.
Despite New Jersey’s reputation as a high-wealth state, poverty remains pervasive, with roughly 1 in 10 New Jersey residents living in poverty. New Census data show that 871,000 New Jersey residents were living in poverty between 2018 and 2020 based on the Supplemental Poverty Measure, a more comprehensive Census measure of poverty.
Nationally, New Jersey ranks 25th in the percentage of its population living in poverty. Considering New Jersey residents’ median income is routinely among the top in the nation, its poverty rate shows how inequality remains a large problem in the state.
Bold Public Investments Help Reduce Poverty
Although the poverty figures are three-year estimates, the new data show how the COVID-19 pandemic led to a striking decline in household incomes nationally. With historic job losses and unemployment, many people struggled to make ends meet. However, effective government stimulus programs helped mitigate this economic cost and keep families out of poverty. These programs included: expanded unemployment insurance, direct aid checks, refundable tax credits, suspensions of evictions, and forbearance of mortgage and student loan payments.
Federal stimulus checks alone kept nearly 12 million Americans out of poverty, with millions more helped by expanded unemployment and refundable tax credits (see figure below).
Unfortunately, many of these poverty-reducing programs are ending soon or have already ended, despite continued economic turmoil for New Jersey’s low-income residents. As NJPP’s recent employment report details, the economic hardship caused by the pandemic still weighs heavily on low-wage workers and the unemployed, who are disproportionately Black and Hispanic/Latinx.
And it was precisely these populations for whom the anti-poverty effects of COVID-19 were strongest, reducing the percentage of people in poverty nationally by:
7.4 percentage points for those without a high school diploma
4.7 percentage points for those who worked part-time or did not have work at least part of the year
1.7 percentage points for white, non-Hispanic residents
4.3 percentage points for Black residents
4.9 percentage points for Hispanic/Latinx residents
The “official” poverty measure compares a family’s cash income to the cost of a minimum food diet from more than 50 years ago, failing to account for other household costs like housing or utilities and failing to adjust for geographic differences.
The Supplemental Poverty Measure includes a wider range of cash and non-cash benefits and costs, including taxes and tax credits, food assistance, work or medical expenses, and child support, while also accounting for more costs like clothing, shelter, and utilities.
Even the Supplemental Poverty Measure fails to account fully for the high cost of living in New Jersey, as noted in a recent report from Legal Services of New Jersey on the true cost of poverty. Based on the “official” poverty measure, New Jersey’s poverty rate between 2018 and 2020 was 7.6 percent, compared to the Supplemental Poverty Measure of 10.0 percent.
For more information on the supplemental poverty measure, see here>.
In the recently signed state budget, lawmakers expanded eligibility for the New Jersey Earned Income Tax Credit (EITC) to young workers and seniors without qualifying dependents. This expansion of the EITC, a powerful tool for increasing the after-tax earnings of low- and moderate-income workers, will help thousands of residents cover the costs of basic needs. Increasing household spending power across New Jersey will also provide a boost to state and local economies as EITC benefits are often spent immediately and locally.
Workers between the ages of 18 and 20 and over 65 who do not claim dependent children will now qualify for the state EITC for the first time. This eligibility change builds upon an increase in the credit amount and expansion of eligibility in 2020, when lawmakers raised the New Jersey EITC to 40 percent of the federal credit and decreased the minimum age requirement for workers without qualifying children from 25 to 21, decoupling New Jersey’s state EITC from federal eligibility requirements for the first time.
These improvements will be supplemented by a new, temporary expansion to the federal tax credit. The American Rescue Plan Act (ARP) temporarily reduces the minimum eligibility age from 25 to 19 and eliminates the upper age limit (currently set at 65) for tax year 2021 only. The ARP also temporarily raises the maximum credit amount for workers without children from approximately $540 to approximately $1,500 and increases the income cap from approximately $16,000 to $21,000. In the absence of a permanent federal EITC expansion, New Jersey’s EITC eligibility expansion is an important step toward addressing inequities in the state version of the credit. State lawmakers can further strengthen the EITC for workers without qualifying children by increasing the income cap and credit amount for the state version of the credit.
Unfortunately, workers without qualifying children are not the only group of workers who are penalized by an inequitable EITC. Workers who use an Independent Taxpayer Identification Number (ITIN) to file taxes are ineligible for any EITC. By including ITIN filers in the state version of the credit, New Jersey can remove another discriminatory barrier and expand access to the credit. Several other states, including California, Maryland, Colorado, and New Mexico have already enacted similar expansions.
Strengthening the state EITC is an important step toward promoting equity in the tax code, but more must be done as the credit provides a small benefit, especially for workers who are not raising children at home, and does not reach everyone facing financial hardship. Achieving economic equity in New Jersey will require more robust investments in a broad range of programs — including baby bonds, reparations, and guaranteed income — that can meaningfully address racial and economic inequities both during and beyond the current crisis.
