Category: Explainer

New Jersey’s $15 Minimum Wage Proposal

Posted on by Brandon McKoy


Earlier this month Governor Murphy and legislative leaders reached a deal to raise the state’s minimum wage to $15 by 2024, for most workers. Seasonal and small business employees will reach $15 by 2026, while farm workers will reach $15 by 2027, but only if the labor commissioner and secretary of agriculture sign off on it. The proposal is far from perfect — and unnecessarily complex as all work should be valued equally — but nonetheless it will have a tremendous positive impact for the Garden State’s low-paid workers and broader economy. Further, the minimum wage will remain indexed to inflation, and despite a slower phase-in for some, the legislation provides a pathway for all workers to reach the full minimum wage by 2030.   

The Basics

NJPP has long-advocated for a $15 minimum wage for all workers to combat poverty and ensure all New Jerseyans can better support themselves and their families. The current minimum wage of $8.85 fails to reflect the state’s high cost of living and helps explain why four in ten New Jerseyans qualify as working poor, according to the United Way ALICE report. Raising the minimum wage to $15 an hour will boost the take home pay of nearly one million workers and inject billions of dollars into the state economy as families have more disposable income to spend in their local communities.

Assembly bill A15 is the current proposal to raise the minimum wage to $15 and is the culmination of a year-long deliberation between Governor Murphy, Senate President Sweeney, and Assembly Speaker Coughlin. The bill passed the Assembly Labor Committee on Thursday, January 24, and is being fast-tracked through the Legislature — the bill could pass both chambers and be signed by Governor Murphy by the end of the month.

The proposal makes new distinctions in New Jersey’s wage and hour law,  so workers in certain sectors — in particular farmworkers, seasonal workers and employees at small businesses with five employees or less — will have to wait longer to reach a $15 minimum wage. Again, it is important to note that for these workers, the bill provides a pathway to parity, so all workers will have the same minimum wage from 2030 onward. This is critical because it prevents workers on the slower phase-in schedule from earning a sub-minimum wage in perpetuity. Instead, they will just be on a slower phase-in schedule but will eventually catch up to the full minimum wage and its yearly cost of living increases.

Unfortunately, this does not apply to tipped workers, as is detailed below, and further advocacy is necessary on behalf of both tipped and farm workers to ensure that the dignity of their work is fully valued and properly honored.

Phase-In Schedule (For Most Workers)

As specified in the bill, the current minimum wage of $8.85 will rise to $10.00 an hour on July 1, 2019, and to $11.00 an hour on January 1, 2020. From then on, the minimum wage will increase by $1.00 per hour every January 1st until it reaches $15.00 on January 1, 2024. Every year thereafter, the minimum wage will receive an inflationary bump, tied to the Consumer Price Index (CPI).

Secondary Schedule (Seasonal and Small Business Workers)

For seasonal workers, defined as “those who are employed by an employer that is a seasonal employer or non-profit or government entity, and not outside of the period of that year commencing on May 1 and ending September 30,” and employees at businesses of five workers or fewer, the minimum wage will rise at a slower rate and reach $15.00 an hour on January 1, 2026. The next two years will act as a catch up period, so that by January 1, 2028 these workers will earn the same minimum wage as everyone else, including cost of living increases. From 2028 onward, these workers will earn the full minimum wage and will be eligible for the same CPI increases as the general minimum wage.

Farm Workers

With regard to farm workers, the minimum wage for will increase to $12.50 an hour by January 1, 2024. At that juncture, a joint decision will be made by the state labor commissioner and secretary of agriculture on whether to recommend that the minimum wage for farm workers should continue to increase. If the two agree that the minimum wage should continue to increase, it will rise to $15.00 per hour by 2027, and will reach parity with all other workers by 2030 If the two parties cannot come to an agreement, a third member — as proposed by the governor and approved by the legislator — would break the tie and affirm the decision. If the state labor commissioner and secretary of agriculture make a recommendation to prevent further increases, the legislature would have to affirm that decision by passing a concurrent resolution.

While the different schedule for farm workers is less than ideal, it is important to note that absent both a recommendation not to continue on the specified path by the state labor commissioner and secretary of agriculture, and a concurrent resolution adopted by both houses of the legislature implementing the recommendation, the increases to $15 by 2027 remain in effect, as will further increases to catch up to the general minimum wage.

Tipped Workers

With regard to tipped workers, their minimum wage will increase to $5.13 per hour by 2022, where it will remain until 2024. Then, beginning in 2025, the wage will increase in concert with the general minimum wage, remaining $9.87 lower than the general minimum wage in perpetuity. NJPP has advocated for a full phase-out of the tipped wage as it improves the work experience for employees, guarantees a level of income that enables them to reliably budget for their lives, and very clearly makes a tip a tip again rather than being a critical portion of earnings that is necessary to afford the most basic of needs. We will continue to advocate for a full phase-out of the tipped wage, as is the law in seven other states, so that the labor of tipped workers is properly recognized and valued.

FAQs: Universal Driver's Licenses

Posted on by Erika J Nava

New Jersey is poised to become the 13th state in the nation to allow all residents, regardless of immigration status, to apply for a driver’s license. Doing so would increase public safety, bolster the state’s economy, and increase the well-being of all families, particularly the hundreds of thousands of New Jersey residents who would gain the right to legally drive.


How many New Jersey residents would benefit from expanded access to driver’s licenses?

There are approximately 466,000 undocumented immigrants in New Jersey who are of driving age and would be eligible for a license. Based on the experience of other states, NJPP estimates that half these eligible New Jerseyans – 233,000 – would receive a license within the first three years of implementation, a 3.8 percent increase in the total number of licensed drivers in the state. A higher number would likely apply for a license, but not everyone who applies passes the written and road tests.


Would allowing undocumented immigrants access to obtaining a driver’s license and insurance under their name increase premiums?

No. There is no evidence that undocumented immigrants obtaining a driver’s license raises premiums for the average driver. In fact, having more insured drivers who have been tested, trained, and licensed on the road would make everyone safer. Since auto insurance is compulsory in New Jersey, universal driver’s licenses would allow for thousands of drivers to obtain auto insurance coverage, thereby reducing the number of uninsured drivers, a cost that is currently borne by all insured motorists.In Utah, which has allowed undocumented immigrants to drive legally since 1999, the uninsured motorist rate dropped by 20 percent.


Do undocumented immigrants qualify for the Special Automobile Insurance Policy (SAIP), also known as the dollar-a-day auto insurance policy?

 No. Undocumented immigrants do not qualify for the dollar-a-day (SAIP) auto insurance policy because they are not eligible for federal Medicaid benefits. Undocumented immigrants are barred from all social safety net programs (i.e. NJ Family Care, TANF, SNAP).


Do you need a social security number (SSN) to obtain auto insurance?

No. Insurance companies are not required by law to ask for a driver’s social security number (SSN). Insurers may ask for an SSN in their auto insurance application, but disclosing an SSN is not mandatory to obtain auto insurance.


Does auto insurance coverage or cost vary depending on the type of license you have? For example, some states have Real ID license; does it matter if you have a Real ID compliant license?

No. Having a certain kind of license does not bar individuals from certain types of insurance coverages. Also, under the current proposed expanded driver’s license legislation, insurance companies are barred from assigning anyone with the proposed provisional license to a rating plan.


Will drivers who obtain a license be vulnerable to violations of privacy if they get into an automobile accident?

Potentially. Ideally, restrictions to automobile accident reports would protect drivers from unsolicited legal notices that can mislead or scare people into thinking they need a lawyer simply because they were in an auto accident.  People with provisional driver’s licenses should be confident that an auto accident does not jeopardize their privacy or subject them to unnecessary medical treatment and fraudulent activity.

Final GOP Tax Bill Punishes New Jersey’s Working Families

Posted on by Jon Whiten

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

Once it is fully phased in, the federal tax proposal released by conference committee on December 15 would raise taxes for the average middle-class and low-income New Jersey family while cutting taxes for wealthier families and for large corporations. At the same time, it would increase the number of New Jerseyans without health insurance by 340,000 by 2027 thanks to the repeal of the Affordable Care Act’s individual mandate,[1] and would tee up deep and devastating budget cuts that would harm working families across New Jersey.

While all income groups in New Jersey on average would see a tax reduction in 2019 under the final GOP plan, it’s important to look at the impact in the year 2027, since the bill includes both permanent provisions (the tax cuts for corporations and a tax hike on working families through a change to how inflation is measured) and temporary provisions that expire after 2025 (the rest of the bill that directly affect families and individuals). Unless otherwise noted, this fact sheet looks at the impact on New Jersey families in 2027.

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.[2] Taken all together, 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 under the plan.

In all, about 1 in 4 New Jersey taxpayers (26 percent) would see a tax hike under the GOP bill,[3] a slightly lower share than the nation as a whole (27 percent) and the 22nd highest of the 50 states.

The plan is a clear example of Robin Hood in reverse, as it gives the largest average tax hikes to New Jersey’s poorest families while showering the state’s very wealthiest families with the biggest tax cuts. While just 1.6 percent of the state’s wealthiest 5 percent of families would see a tax hike, 31 percent of families in the bottom 60 percent would. That share of tax hikes for middle- and lower-income families is the 15th highest of the 50 states.

The final GOP bill is more similar to the Senate-passed bill than the House-passed bill, as you can see by looking at the impact of all three plans on New Jersey.

Corporate Tax Cuts Drive GOP Tax Plan’s Impact – and its Inequities

Big tax cuts for corporations – specifically a cut in the corporate income tax from 35 percent to 21 percent – are the centerpiece of the GOP tax plan. After all, they comprise most of the parts of the final plan that are permanent, while nearly all of the smaller tax cuts and changes for individuals and families are temporary. As a result, these breaks for corporations end up driving the overall impact of the GOP tax plan once fully phased in, as well as the plan’s inequity.

That’s because slashing the top corporate tax rate by nearly half will primarily benefit owners of corporate stocks, according to Congress’ own Joint Committee on Taxation.[4] In fact, despite President Trump’s insistence that average working families will get a “$4,000 pay raise” from this tax plan, just 25 percent of the long-term benefit of a corporate tax cut will go to workers.[5]

And of that already small share, an even smaller piece will go to middle-class or low-income workers, since fewer than half of all Americans own any stock, and overall shareholder wealth is – like most of the rest of the country’s wealth – extremely concentrated at the top (the top 10 percent of Americans own about 80 percent of the value of the total stock market, according to leading economist Ed Wolff).[6]

The bulk of the benefit from the corporate rate cut – three-quarters of it, in fact, – will go to shareholders, and a good chunk of that will flow to foreign investors, who own about 35 percent of stocks in American corporations.[7]

Tax Bill is Step One of a Damaging Two-Step Tax & Budget Agenda

Unfortunately, the pain for New Jersey’s working families does not end with the direct impact of this tax bill. 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.[8]

Here’s how this two-step agenda works. First, enact costly tax cuts now that are heavily skewed toward wealthy households and profitable corporations. Next, use the cost of those tax cuts and their negative impact on the federal deficit as a rationale to cut public services, programs and investments on which all Americans – particularly low- and moderate-income residents – rely.[9]

We don’t need to wildly guess what will be on the chopping block when GOP lawmakers get to this second step. After all, they have already outlined deep and severe budget cuts in their long-range budget plans.

For New Jersey, these budget plans have included devastating cuts to programs that expand economic opportunity for all residents, including job training, education, and economic development programs in cities and rural communities. But the proposals’ cuts would fall hardest on Garden State residents struggling in today’s economy, with reductions to programs that provide income assistance to help families get back on their feet and help nearly 900,000 New Jerseyans afford groceries through SNAP, and additional cuts to Medicaid, which provides health care to about 1.8 million New Jerseyans – including 852,000 kids.[10]

Endnotes

[1] NJPP analysis based on Congressional Budget Office estimates using weighted average for employer-based, marketplace, and Medicaid expansion coverage.

[2] Institute on Taxation and Economic Policy (ITEP) Microsimulation Tax Model, December 2017. Model includes all major components of the tax bill, including personal income tax changes, changes to deductions, corporate tax changes and estate tax changes. Full dataset and methodology available at https://itep.org/finalgop-trumpbill/

[3] This report’s key findings on the distribution of the tax plan focus on average and total tax hikes or cuts by income group. This explains why, for example, the bottom 60 percent would, on average, and, in total, pay more in taxes, even while there are individual taxpayers inside that income group who would pay less – the tax cuts they receive are just overwhelmed by the tax hikes that others in the same income group would see.

[4] Joint Committee on Taxation (JCT), Modeling the Distribution of Taxes on Business Income, JCX-14-13, October 2013.

[5] ITEP and JCT both assume that in the short run, a corporate tax cut will benefit the owners of corporate stocks alone, but in the long run (usually assumed to be ten years after enactment) a quarter of the benefits will flow to workers.

[6] National Bureau of Economic Research, Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession?, December 2014.

[7] Tax Policy Center, Slashing Corporate Taxes: Foreign Investors Are Surprise Winners, October 2017.

[8] Center on Budget and Policy Priorities, Budget Briefs: The Republican Two-Step Fiscal Agenda, November 2017.

[9] The Washington Post, GOP eyes post-tax-cut changes to welfare, Medicare and Social Security, December 2017.

[10] New Jersey Policy Perspective, House Budget Threatens New Jersey Families, July 2017.

Dream Act Would Help Many Young New Jersey Immigrants & Boost the Economy

Posted on by Erika J Nava

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

When President Trump ended the Deferred Action for Childhood Arrivals program earlier this year, he left almost 800,000 DACA recipients – including 17,400 New Jerseyans – to face an unknown future.[1] Now Congress must act to protect these and other young, striving immigrants by passing the Dream Act of 2017.[2] Doing so could brighten the futures of tens of thousands of young New Jerseyans while boosting the state’s economy. However, a Congressional fix for young immigrants should not be used as a vehicle for increased spending to increase border enforcement, expand immigrant detention, further militarize border communities or build a wall on the southern border.

Tens of Thousands of New Jerseyans Would Have Brighter Futures

An estimated 101,000 New Jerseyans could benefit from the Dream Act of 2017. These are people who entered the U.S. before they turned 18 and have been in the country for four continuous years.

Of these New Jerseyans, 74,000 would immediately qualify for Conditional Permanent Residence (CPR) status under the law.[3] This is the first step in the bill’s process for becoming a legal permanent resident (LPR).

Of the New Jerseyans who could benefit from the Dream Act, 61,000 are in the workforce; this is the seventh highest of all the states.[4]

These New Jerseyans live all over the state, with thousands of eligible young immigrants residing in every Congressional District. 

New Jersey’s Economy Would Benefit

Passing the Dream Act and putting these New Jerseyans on a path to legal status could boost the state’s economy by at least $800 million each year – the sixth largest increase of all the states.[5]

The longer-term payoff for New Jersey’s economy is even greater. For example, if just half of the working New Jerseyans who are eligible for the Dream Act complete the transition from CPR status to LPR status by pursuing additional education, New Jersey’s economy would see an economic boost of up to $2.7 billion each year[6] – this impact is spread throughout all Congressional Districts, with every District but one seeing an economic benefit of $100 million or more.

Eventually, the economic boats lifted by the rising tide of the Dream Act would modestly boost the average incomes of all Americans by $82-$273 a year.[7]

Nearly 3 in 4 New Jerseyans (72 percent) who could benefit from the Dream Act and are in the workforce work in five industries: wholesale and retail, leisure and hospitality, construction, manufacturing, and education and health services. These five industries would see a large chunk of the economic gains from the Dream Act as well.

Without the Dream Act, New Jersey Would Suffer

The consequences to New Jersey of the Dream Act not becoming law are dire:

Without a DACA fix, tens of thousands of young New Jerseyans would lose work permits and protection from deportation over the next two and a half years.

The loss of DACA alone would cause New Jersey’s economy to lose an estimated $1.6 billion each year – the fifth largest dollar loss of all states.[8]

It would also make more immigrants vulnerable to wage theft, workplace exploitation and discrimination based on their legal status; lead to economic distress in many households that invested in buying homes, businesses and other investments; and create a higher risk of family separation and deportation.

Endnotes

[1] New Jersey Policy Perspective, Fast Facts: DACA Directive Dims the Future of Thousands of Young New Jersey Immigrants, September 2017. https://www.njpp.org/reports/fast-facts-daca-directive-dims-the-future-of-thousands-of-young-new-jersey-immigrants

[2] Dream Act of 2017, S. 1615, 115 Congress, https://www.congress.gov/bill/115th-congress/senate-bill/1615/text, 2017.

[3] USC Center for the Study of Immigrant Integration analysis of pooled 2010-2014 American Community Survey microdata from IPUMS-USA. http://dornsife.usc.edu/csii/interactive-map-dream-act-2017/

[4] Ibid 3

[5] Center for American Progress. The State-by-State Economic Benefits of Passing the Dream Act, October 2017. https://www.americanprogress.org/issues/immigration/news/2017/10/26/441298/the-state-by-state-economic-benefits-of-passing-the-dream-act/

[6] Ibid 5

[7] Center for American Progress. The Economic Benefits of Passing the Dream Act, September 2017. https://www.americanprogress.org/issues/immigration/reports/2017/09/18/439134/economic-benefits-passing-dream-act/

[8] Center for American Progress, A New Threat to DACA Could Cost States Billions of Dollars, July 2017. https://www.americanprogress.org/issues/immigration/news/2017/07/21/436419/new-threat-daca-cost-states-billions-dollars/

 

Senate-Passed Tax Bill Still a Raw Deal for New Jersey’s Working Families

Posted on by Jon Whiten

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

The federal tax proposal passed by the U.S. Senate on December 2 would raise taxes for the average middle-class and low-income New Jersey family while cutting taxes for wealthier families and for large corporations. At the same time, it would increase the number of New Jerseyans without health insurance by 340,000 by 2027 thanks to the repeal of the Affordable Care Act’s individual mandate.[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.)

New Jersey households with incomes over $1.4 million (the top 1 percent) would receive an average $8,350 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 $120.[2] Taken all together, those families in the top 1 percent would receive 64 percent of the state’s share of the tax cut – $378.8 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 $333.7 million more in taxes under the plan. In all, about 1 in 4 New Jersey taxpayers (26 percent) would see a tax hike under the Senate-passed bill.[3]

The plan is a clear example of Robin Hood in Reverse, as it gives the largest average tax hikes to New Jersey’s poorest families while showering the state’s very wealthiest families with the biggest tax cuts. While just 1.6 percent of the state’s wealthiest 5 percent of families would see a tax hike, 3 in 5 families in the bottom 60 percent would.

By just about every measure, the Senate-passed bill is worse for New Jersey’s working-class and middle-class families than the House bill, which was quite damaging for these families already.

The pain for New Jersey’s working families does not end with the direct impact of this tax bill, unfortunately. In fact, the tax bill is step one of Congressional Republicans’ two-step tax and budget agenda[4]: enact costly tax cuts now that are heavily skewed toward wealthy households and profitable corporations, then use the cost of those tax cuts and their negative impact on the federal deficit as a rationale to cut public services, programs and investments on which all Americans – particularly low- and moderate-income residents – rely.[5]

State and Local Tax Deductions Remain On the Chopping Block

The Senate-passed bill – like the House-passed bill – eliminates taxpayers’ ability to deduct state/local income or sales taxes paid while capping the amount of property taxes one could deduct at $10,000. A total of 41 percent of Garden State households currently file using these deductions – the third highest share of all states, after Maryland and Connecticut. Slightly more New Jerseyans claim the income or sales tax deduction (1.8 million) than claim the property tax deduction (1.6 million). Garden State households deduct a total of $32.2 billion in state and local taxes each year, the third highest dollar amount after California and New York.[6]

While the property tax provision has been pitched as a “compromise” to win over reluctant lawmakers from New Jersey and other similar states, an estimated 54 percent of Garden State taxpayers who currently claim the property tax deduction would no longer do so under the Senate-passed bill. And those most likely to lose the deduction are middle-class families – in fact, 60 percent of current middle-income claimants of the property tax deduction would lose it, while just 1 percent of current high-income claimants would.[7]

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 because even as the Senate-passed bill increases the standard deduction, it eliminates personal exemptions would be eliminated. Even if the standard deduction were tripled (and it’s not even doubled under the Senate-passed bill), a significant portion of families that now itemize their deductions would still end up with tax increases.[8]

In all, New Jerseyans would likely deduct nearly $27 billion less in state and local taxes under the Senate-passed bill than they do now.[9]

Endnotes

[1] NJPP analysis based on Congressional Budget Office estimates using weighted average for employer-based, marketplace, and Medicaid expansion coverage.

[2] Institute on Taxation and Economic Policy Microsimulation Tax Model, December 2017. Model includes all major components of the tax bill, including personal income tax changes, changes to deductions, corporate tax changes and estate tax changes. Full dataset and methodology available at https://itep.org/housesenatetaxplans-dec17/

[3] This report’s key findings on the distribution of the tax plan focus on average and total tax hikes or cuts by income group. This explains why, for example, the bottom 60 percent would, on average, and, in total, pay more in taxes, even while there are individual taxpayers inside that income group who would pay less – the tax cuts they receive are just overwhelmed by the tax hikes that others in the same income group would see.

[4] Center on Budget and Policy Priorities, Budget Briefs: The Republican Two-Step Fiscal Agenda, November 2017. https://www.cbpp.org/budget-briefs-the-republican-two-step-fiscal-agenda

[5] The Washington Post, GOP eyes post-tax-cut changes to welfare, Medicare and Social Security, December 2017. https://www.washingtonpost.com/news/wonk/wp/2017/12/01/gop-eyes-post-tax-cut-changes-to-welfare-medicare-and-social-security/?utm_term=.7f251e2e56bf

[6] New Jersey Policy Perspective, Fast Facts: Millions of New Jerseyans Deduct Billions in State & Local Taxes Each Year, November 2017. https://www.njpp.org/budget/fast-facts-millions-of-new-jerseyans-deduct-billions-in-state-local-taxes-each-year

[7] Ibid 2

[8] Government Finance Officers Association, Impact of Eliminating the State and Local Tax Deduction (Updated with 2015 IRS Data), 2017. http://www.gfoa.org/sites/default/files/RCC%20Report%20on%20SALT%20Deduction-092017_Final.pdf

[9] NJPP analysis using data and estimates from Ibid 2 and actual dollar amounts currently deducted by New Jersey households from Ibid 6

Latest Senate Tax Proposal Even Worse for New Jersey’s Working Families

Posted on by Jon Whiten

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

The latest Senate tax proposal, with the amendments added last Thursday, November 16, would raise taxes for the average middle-class and low-income New Jersey family while cutting taxes for wealthier families and for large corporations. Worse, it would increase the number of New Jerseyans without health insurance by 340,000 by 2027.[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.)

The proposal is noticeably worse than the original, both in its inequitable distribution – in other words, it brings more direct and immediate harm to the bottom 60 percent of families than the original bill – and in its overall impact on New Jersey: at least 29 percent of Garden State households would see a tax hike under the revised bill,[2] versus 22 percent in the original.[3]

Once this plan is fully phased in, New Jersey households with incomes over $1.4 million (the top 1 percent) would receive an average $8,570 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 $120.

The plan is a clear example of Robin Hood in Reverse, as it gives the largest average tax hikes to New Jersey’s poorest families while showering the state’s very wealthiest families with the biggest tax cuts.[4] While just 1.6 percent of the state’s wealthiest 5 percent of families would see a tax hike, 1 in 3 families in the bottom 60 percent would.

The latest Senate proposal:

  • Permanently repeals the Affordable Care Act’s individual mandate – the requirement that people get health insurance or pay a penalty – which would leave 13 million more Americans (and 340,000 New Jerseyans) uninsured, raise premiums for millions more, and create uncertainty across the health insurance market[5]
  • Pairs permanent tax cuts for corporations and permanent tax hikes for many low- and moderate-income families with temporary tax cuts for most working and middle-class families[6]
  • Increases the federal deficit by $1.5 trillion over a decade
  • The growing deficit will be used as the excuse for major cuts in services and programs that working New Jerseyans count on
  • By eliminating state and local tax deductions used by about 4 in 10 New Jersey families, it will make it harder for states to invest in schools, infrastructure, health care and more[7]

Endnotes

[1] NJPP analysis based on Congressional Budget Office estimates (see Endnote 5) using weighted average for employer-based, marketplace, and Medicaid expansion coverage.

[2] This estimate is the likely low, because it does not include the impact of the repeal of the ACA mandate.

[3] New Jersey Policy Perspective, Fast Facts: New Jersey Second Hardest Hit State Under Senate Tax Proposal, November 2017. https://www.njpp.org/budget/fast-facts-new-jersey-second-hardest-hit-state-under-senate-tax-proposal

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

[5] Congressional Budget Office, Repealing the Individual Health Insurance Mandate: An Updated Estimate, November 2017. https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53300-individualmandate.pdf

[6] Center on Budget and Policy Priorities, Senate Tax Bill Revisions Make Its Fundamental Tradeoffs – Big Tax Cuts for the Top, Little Gain for Low- and Moderate-Income Families – Even Harsher, November 2017. https://www.cbpp.org/federal-tax/commentary-senate-tax-bill-revisions-make-its-fundamental-tradeoffs-big-tax-cuts-for-the

[7] New Jersey Policy Perspective, Fast Facts: Millions of New Jerseyans Deduct Billions in State & Local Taxes Each Year, November 2017. https://www.njpp.org/budget/fast-facts-millions-of-new-jerseyans-deduct-billions-in-state-local-taxes-each-year

New Jersey Third Hardest Hit State Under House Tax Proposal

Posted on by Jon Whiten

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

Once the tax cut proposal unveiled last week by Republicans in the House of Representatives[1] is fully phased in, New Jersey’s wealthiest 1 percent of taxpayers would receive an average $25,100 tax break each year while more than 1 in 4 Garden State taxpayers (27 percent) would pay an average of $2,200 more in a year in federal taxes.[2] (Unless otherwise noted, all data in this Fast Facts is on the impact in the year 2027, once the plan is fully phased in.)

The wealthiest New Jerseyans’ share of the state’s tax cuts would grow over time due to phase-ins of breaks that mostly benefit the rich and the eventual elimination or erosion in value of provisions that benefit low- and middle-income taxpayers. For example, after five years, the bill eliminates a $300 dependent credit that benefits low- and middle-income families while fully repealing the estate tax in year six for the few very large estates subject to the tax.

In all, the wealthiest 5 percent of New Jerseyans – those with annual incomes over $440,000 a year – would receive two-thirds (67 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.

More than 1 in 4 New Jerseyans would face a tax hike by 2027 in large part because the House proposal would end Americans’ ability to deduct state/local income or sales taxes paid while capping the amount of property taxes one could deduct at $10,000. While the latter provision is being pitched as a “compromise” to win over reluctant lawmakers from New Jersey and other similar states, nationally just 1 in 13 households would see any benefit from this change.[3]

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.[4] 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.[5]

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. After all, the tax proposal remains incredibly expensive – Congress’ Joint Committee on Taxation estimates it would cost $1.5 trillion over a decade.[6] If the $1.5 trillion in 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.[7])

 

 

Endnotes

[1] H.R.1, The “Tax Cuts And Jobs Act,” https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf

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

[3] Institute on Taxation and Economic Policy, House Plan Slashes SALT Deductions by 88%, Even with $10,000 Property Tax Deduction, November 2017. https://itep.org/house-plan-slashes-salt-deductions-by-88-even-with-10000-property-tax-deduction/

[4] New Jersey Policy Perspective, Fast Facts: Millions of New Jerseyans Deduct Billions in State & Local Taxes Each Year, November 2017. https://www.njpp.org/budget/fast-facts-millions-of-new-jerseyans-deduct-billions-in-state-local-taxes-each-year

[5] 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

[6] The Joint Committee on Taxation, Distribution Effects Of The Chairman’s Amendment In The Nature Of A Substitute To H.R.1, The “Tax Cuts And Jobs Act,” November 2017. Available at https://www.jct.gov/publications.html

[7] 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. https://www.cbpp.org/research/federal-tax/vast-majority-of-americans-would-likely-lose-from-senate-gops-15-trillion-in

Millions of New Jerseyans Deduct Billions in State and Local Taxes Each Year

Posted on by Jon Whiten

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

As Republican lawmakers in Congress move forward with their tax proposal, much attention has been paid to the fate of state and local tax deductions, which allow taxpayers who itemize deductions on their federal income taxes to deduct state and local property taxes, and either state and local income taxes or general sales taxes.

Eliminating these deductions would make it harder for states like New Jersey to raise enough revenue to provide essential services and make public investments that benefit all residents. That’s because, with these deductions, higher-income filers are more willing to support state and local taxes – particularly ones, like New Jersey’s personal income tax, that are levied in a progressive manner.

What’s more, the GOP tax plan isn’t targeting these deductions in a vacuum. Instead, lawmakers are attempting to end this deduction to free up revenue for significant tax cuts for the wealthiest Americans. They are, in essence, targeting a tax feature that mostly benefits upper-income families in order to push through tax cuts that overwhelmingly benefit the extremely wealthy – swapping out a slightly regressive feature for an extremely regressive change to the tax code.[1]

These deductions are widely used in high-cost, high-tax states like New Jersey. In all, 41 percent of Garden States households file using these deductions – the third highest share of all states, after Maryland and Connecticut. These households deduct a total of $32.2 billion in state and local taxes each year, the third highest dollar amount after California and New York.[2]

The latest proposal reportedly on the table would scrap the income and sales tax deductions while preserving the property tax deduction. This would still leave many New Jerseyans high and dry, and the larger tax and budget scheme it’s part of would still have damaging long-term effects on New Jerseyans of all stripes – except the incredibly wealthy.[3]

40 percent of New Jersey households deduct income or sales taxes

A total of 1.8 million New Jersey households deduct a cumulative $17 billion in state income or sales taxes from their federal taxes. At 40 percent of all taxpaying households, New Jersey ranks third highest in the nation, behind Maryland (45 percent) and Connecticut (41 percent). Of these 1,775,740 households, the overwhelming majority (1,525,000) take the income tax deduction; the remaining 250,740 take the sales tax deduction (taxpayers can’t take both).

About half of New Jersey households taking income or sales tax deduction have five-figure incomes

While a greater share of higher-income New Jerseyans deduct state income and sales taxes, the deduction is not exclusively taken by the state’s wealthiest families. In fact, 48 percent of New Jersey households that deduct these taxes have annual incomes under $100,000 (19 percent under $50,000 and 29 percent between $50,000 and $100,000). An additional 34 percent have an annual income between $100,000 and $200,000, while 16 percent have annual incomes between $200,000 and $1 million. Just 1 percent of these households have annual incomes over $1 million.

Tens of thousands of households in every county deduct income or sales taxes

The families who deduct state income or sales taxes from their federal taxes live all over New Jersey. Bergen County has the highest number of such households, at 212,000, while sparsely populated Salem County has the lowest, at 11,000. But the deduction is used by the highest share of households in Hunterdon County (55 percent of all tax filers), while it is used by the lowest share in Cumberland County (27 percent). In terms of dollar amount, Bergen County is home to the highest figure ($2.9 billion) while Salem County is lowest, at $49 million.

36 percent of New Jersey households deduct property taxes

A total of 1.6 million New Jersey households deduct a cumulative $14.9 billion in local property taxes from their federal taxes. At 36 percent of all taxpaying households, New Jersey ranks third highest in the nation, behind Connecticut (37 percent) and Maryland (which at 36.4 percent just barely edges out the Garden State’s 35.7 percent). (Households can take the property tax deduction in addition to the income or sales tax deduction, so many of these 1.6 million taxpayers are from the same pool of the 1.8 million families taxing those deductions.)

Nearly half of New Jersey households taking property tax deduction have five-figure incomes

While a greater share of higher-income New Jerseyans deduct local property taxes, the deduction is not exclusively taken by the state’s wealthiest families. In fact, 46 percent of New Jersey households that deduct these taxes have annual incomes under $100,000 (18 percent under $50,000 and 28 percent between $50,000 and $100,000). An additional 35 percent have an annual income between $100,000 and $200,000, while 17 percent have annual incomes between $200,000 and $1 million. Just 1 percent of these households have annual incomes over $1 million.

Tens of thousands of households in every county deduct property taxes

The families who deduct local property taxes from their federal taxes live all over New Jersey. Bergen County has the highest number of such households, at 184,000, while sparsely populated Salem County has the lowest, at 11,000. But the deduction is used by the highest share of households in Hunterdon County (53 percent of all tax filers), while it is used by the lowest share in Hudson County (17 percent). In terms of dollar amount, Bergen County is home to the highest figure ($2.2 billion) while Salem County is lowest, at $64 million.

Endnotes

[1] For more, see Center on Budget and Policy Priorities, Eliminating State and Local Tax Deduction to Pay for Tax Cuts for Wealthy a Bad Deal for Most Americans, October 2017.

[2] All data on the use of these deductions in this Fast Facts are from a NJPP analysis of U.S. Internal Revenue Service Statistics of Income data from tax year 2015.

[3] See Institute on Taxation and Economic Policy, Benefits of GOP-Trump Framework Tilted Toward the Richest Taxpayers in Each State, October 2017 (https://itep.org/trumpgopplan/) and Center on Budget and Policy Priorities, House GOP Tax Plan Likely to Contain Same Basic Flaws as Earlier Versions of the Plan, October 2017 (https://www.cbpp.org/research/federal-tax/house-gop-tax-plan-likely-to-contain-same-basic-flaws-as-earlier-versions-of)

 

 

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