New Jersey Policy Perspective (NJPP) is committed to closing the racial wealth gap through statewide policies that build and share wealth equitably. As a nonpartisan think tank that drives policy change to advance economic, social, and racial justice, NJPP has identified key policies that will begin to repair the harms of centuries of discrimination and exploitation.
1. Fair and Just Taxation
The most effective tool in equalizing wealth disparities is taxation aimed at the very wealthiest individuals and corporations. Fair and just taxation of existing wealth serves two critical goals: It ensures that people who have extracted the most value from the state’s economic system pay what they owe, and it ensures that the government has the resources it needs to support programs that advance wealth-building and human capital.
NJPP recommends three immediate commonsense changes to the tax code that will narrow wealth disparities:
- Extend the Corporate Business Tax (CBT) surcharge on profits over $1 million. Corporate earnings over $1 million in New Jersey have been subject to a surtax since 2018. Because it only applies to very wealthy corporations, the surtax ensures that a portion of record-breaking profits benefits everyone. Scheduled to expire at the end of 2023, the surtax should instead be made permanent, turning huge corporate profits into publicly shared support and services.
- Reform the inheritance tax to make it progressive. Lightly-tax and tax-free transfers of wealth at death widen the racial wealth gap. For example, in 2019, 30 percent of white households received an average inheritance of about $200,000, while only 10 percent of Black households received one which, on average, was half the amount. Worse, New Jersey’s mostly flat tax on inheritances over a certain amount leads to these smaller inheritances being taxed at roughly the same rate as multimillion dollar transfers. To reduce the transfer of concentrated wealth, NJPP proposes expanding the tax to direct heirs and, to make it more progressive, lifting the exemption for smaller inheritances up to $1 million.
- Close corporate loopholes to treat all businesses fairly. New Jersey’s combined-reporting law has a big loophole that allows wealthy multistate corporations to transfer their profits out of New Jersey to other states or countries with low or no corporate taxes. Fixing this and other remaining flaws will stop corporations with deep pockets, like Amazon and Walmart, from taking advantage of tax avoidance schemes that reduce what they owe and rob the state of resources needed to strengthen everyone’s ability to build wealth.
These tax policies are only the start. NJPP has other progressive proposals that end preferential tax breaks and target wealth held by the most affluent members of society, like the restoration of the estate tax and strengthening how New Jersey taxes capital gains income, among others.
At its root, taxation is the single most powerful tool to equalize wealth disparities. No doubt these hearings will include many proposals for outstanding and innovative programs: baby bonds, home buying assistance, guaranteed income. But to fund these programs at the level needed to meaningfully close the state’s substantial wealth disparities, New Jersey will need to simultaneously pursue fair taxation of the state’s wealthiest individuals and corporations.
2. Affordable for All: Putting Money in Families’ Pockets
A perpetual obstacle to wealth-building among low- and middle-income households are the day-in, day-out expenses and surprise costs, such as medical emergencies or a car repair. Accumulating wealth is nearly impossible for families who must dip into savings or take additional debt simply to make ends meet.
NJPP supports any policy that puts cash back in the pockets of low- and middle-income households to help ease the pain of these expenses and begin to build savings:
- Expand the Child Tax Credit. New Jersey has created its first state-level Child Tax Credit, but at $500 per child under age 6 for households earning less than $30,000 annually, this does not come close to meeting the high cost of child-rearing. Raising the credit from $500 to at least $1,000 would defray these costs, as would expanding the credit to families with children age 6 and older.
- Expand the Earned Income Tax Credit (EITC). The EITC is a powerful anti-poverty tool, but many New Jerseyans who pay into the tax system don’t get the benefit of the EITC because they lack a Social Security number. Including ITIN-holders would advance equity among all New Jersey families living paycheck to paycheck.
- Reform WorkFirst NJ. New Jersey’s assistance program for very low-income residents is in immediate need of reform to keep households stable and move them out of poverty. Increasing the benefit amount and ending policies that trap households in a cycle of poverty will change lives, especially the lives of children.
Cash in families’ pockets acts as an income support first and foremost. But absent sufficient financial resources to make ends meet, no household can effectively begin building wealth in the first place.
3. Innovative Wealth-Building Programs
Existing asset-building programs have thus far failed to build the base of wealth necessary to begin closing the wealth gap. Indeed, many programs and tax structures have instead widened the gap, by providing disproportionate benefits to the already-wealthy.
NJPP proposes these creative solutions to explicitly build wealth in households that have been left behind for far too long:
- Pay reparations for tangible harms of slavery and racial discrimination. Direct payments to Black communities harmed by the American slave trade, as well as discriminatory practices such as redlining, segregation and employment discrimination, would directly close the racial wealth gap. NJPP supports legislation to create a task force on reparations to Black residents.
- Fund robust baby bonds programs. Connecticut and Washington, DC have passed baby bonds legislation, which funds savings accounts for all births covered by their Medicaid programs. These accounts receive additional contributions from the state before the bonds and children reach maturity. Such a program would help close the wealth gap for children and young adults by giving families an opportunity to build assets without dipping into savings or going into debt.
NJPP supports a broad array of proposals to reduce wealth inequality in New Jersey, but real change comes down to appropriately taxing the obscene accumulation of wealth by the top one percent of individuals and corporations, while building assets and reducing deprivation for working-class families.
Thank you.
