Category: Testimony

Pandemic Relief Funds Must Be Used to Dismantle Racial, Gender, and Economic Inequities

Posted on by Sheila Reynertson

The following testimony on American Rescue Plan funds was delivered before Governor Murphy’s American Rescue Plan virtual hearing on July 28, 2021. 

Good morning. I’m Sheila Reynertson and am a Senior Policy Analyst at New Jersey Policy Perspective (NJPP), a member of the For the Many NJ coalition. Thank you for the opportunity to testify on how best to administer the remaining $4 billion in Fiscal Recovery Funds (FRF) made available through the federal American Rescue Plan.

NJPP is fully aligned with the U.S. Treasury’s recommendation to use these flexible funds to “foster a strong, inclusive, and equitable recovery, especially with long-term benefits for health and economic outcomes.” The most effective way to achieve such a goal is to target aid to those most in need and begin dismantling racial, gender, and economic inequities exacerbated by the pandemic.

Here are a few essential ways to make the most of this opportunity. For more recommendations, please refer to the letter signed by organizations of the For the Many coalition.

Strengthen the Social Safety Net

New Jersey must be aggressive in reversing the pervasive barriers that keep the safety net out of reach for some families and allow poverty to remain widespread. Benefit programs are difficult, and sometimes impossible, to navigate for residents already under extreme stress. Unnecessary red tape for those struggling to find a job, feed their kids, or manage a health crisis is both punitive and regressive.

NJPP recommends using FRF dollars to spearhead a robust outreach campaign and application assistance for all social safety net and support services, targeting communities that face systemic barriers to learning about and accessing support programs, including immigrants and people of color with low-incomes as well as families in deep poverty who are less likely to owe and file taxes and, as result, may miss out on tax credits for low-paid workers and their families.

Provide Direct Cash Assistance to Residents Who Need It Most

Second, NJPP recommends using relief funds to stabilize residents facing hardship and keep their children safe from the long-term effects of deep poverty. The most straightforward way to boost household income of families who are living paycheck to paycheck is to provide direct cash payments with no strings attached — and regardless of immigration status. In fact, one targeted population that must be included is the nearly a half million undocumented immigrants who have been excluded from almost every form of state and federal relief for the past seventeen months. New Jersey can provide relief to these residents by fully funding the Excluded New Jerseyans Fund.

Support Low-Paid Essential Workers with Bonus Pay

It can’t be said enough: Those who worked outside of their home during the pandemic providing critical services like health care and food production were overwhelmingly women and people of color — and they often went without basic health and safety protections, paid leave, or hazard pay. These workers deserve recognition through fair compensation, yet they have been repeatedly overlooked in federal relief and recovery legislation. New Jersey can rectify this using FRF dollars to provide bonus pay to those with limited income and those who worked in difficult and often dangerous conditions so the rest of us could quarantine safely at home.

Advance Health Equity

Past policies and continuing racism in health care — the effects of which were on full display during the COVID-19 pandemic — have disproportionately burdened Black, Hispanic/Latinx, and indigenous populations. The physical and emotional toll of such disparity will be felt for years to come. NJPP recommends using FRF dollars to break down barriers and expand access to high-quality and affordable mental health care services for adults and children through provider recruitment efforts, insurance expansion, and improved Medicaid reimbursement. To reach chronically underserved low-income areas and Black and Hispanic/Latinx communities, fund mental health outreach efforts through community-based organizations. To reach pandemic-stressed students in high-poverty schools, provide enhanced payments for behavioral screenings and school counselors and mental health professionals.

Incorporate Racial Impact Analysis into Selection Process and Data Collection

Finally, even with the best of intentions, New Jersey’s distribution of these recovery funds is likely to exacerbate racial injustice without intentional strategies to do otherwise. To demonstrate a commitment to an equitable recovery, NJPP recommends that racial equity impact assessments be produced for FRF grants that have a potential racial impact. New Jersey can also foster a culture of advancing racial and gender equity by improving its data collection with data on gender, race, and ethnicity. By modernizing the IT infrastructure across departments, New Jersey can enhance the quality of administrative data to better evaluate existing programs and demonstrate transparency.

These recommendations would make the biggest difference in providing long-term benefits for communities most at risk of being left behind and laying the groundwork for a more prosperous future for all New Jersey families.

Thank you for this opportunity to testify today.

Structure of New Emerge Tax Credit Program Must Prioritize Equity and Transparency

Posted on by Sheila Reynertson

The following comments on the draft Emerge program rules were delivered to the Economic Development Authority on April 16, 2021.

New Jersey Policy Perspective (NJPP) has researched and analyzed the state’s economic development programs for over twenty years. We closely monitor the tax credits awarded by the state Economic Development Authority (EDA), how many jobs created and maintained the state gets in return, and regularly compare New Jersey’s corporate subsidy programs — and the laws that guide them — against those in other states across the nation.

These comments on draft rules implementing the new Emerge program under the New Jersey Economic Recovery Act are intended to ensure the job creation program is structured and administered in an equitable and transparent manner. The following feedback focuses on seven sections of the proposed rules including application requirements, review process, community benefit agreement, and evaluation transparency.

19.31-22.3(a)5 Eligibility criteria

“The award of tax credits, the capital investment resultant from the award of tax credits, and the resultant creation and retention of new and retained full-time jobs will yield a net positive economic benefit to the State…”

Given that the EDA’s “net benefit” methodology is hidden from public scrutiny, a debate about who is most qualified to analyze them or about the standards being used to estimate the efficiency of tax incentives is seemingly impossible. The result is that the public doesn’t know if the costs and benefits are calculated in a way that accurately captures the local economy and its unique needs. Does it estimate the employment benefits, particularly the proportion of new jobs likely to go to local, unemployed residents? What effect would the wage rate have on similar local jobs? Does the analysis look at wage gains across the income distribution and per capita income growth? Can the existing infrastructure accommodate the expected job growth, and can the local government absorb the added costs that come with new residents?

Public access to this methodology should be made available. Absent that, NJPP agrees with the recommendation made by Governor Murphy’s Task Force on EDA Tax Incentives (“the Task Force”) that “the EDA implement a recordkeeping requirement that permits [an auditor] to conduct effective examinations [of the analysis used for approval decisions]. This requirement would promote transparency and accountability in the EDA’s decision-making process and promote the effectiveness and efficiency of any future audits of the EDA.”[i]A paper trail of the net benefit analysis is also in the best interest of taxpayer resources.

19.31-22.4 Restrictions

(a)“The Authority shall not enter into an incentive agreement with a business that has previously received incentives administered by the Authority unless the capital investment incurred and new or retained full-time jobs pledged by the business in the new incentive agreement are separate and apart from any capital investment or jobs underlying the previous award of incentives.”

Given the recent history of bad actors forced to rescind their tax credits,[ii] this exception should be contingent upon a record of good standing with the EDA based on the previous tax incentives awards. In fact, any company whose tax credits were subject to early termination by the EDA for non-compliance should not be eligible for future tax credit award in perpetuity.

19.31-22.5 Application Submission Requirements 

(a)1“Each application to the Authority made by a business shall include the following information in an application format prescribed by the Authority…”

Among the listed business information requirements (1.i-xiv), NJPP recommends the inclusion of the New Jersey lobbying number of the authorized agent hired to assist the business with the application process.[iii]

We understand it is common for companies that apply to the EDA for tax incentives to engage the services of professional consultants to guide companies through the complex process of applying for incentives. However, without safeguards in place, these consultants can manipulate the process for financial gain. As described in the Task Force’s final report, “one consultant fabricated and altered documents before submitting them to the EDA on multiple occasions.”[iv]

The Task Force recommended the EDA hold consultants accountable for improper conduct by requiring they adhere to a code of ethical conduct — similar to how company executives are currently required by the EDA to execute certifications prior to the company’s award of tax credits.

However, given the blatant abuse of the past, this does not go far enough. Any site selection consultant or real estate broker should instead be required to register as a New Jersey lobbyist. Since accepting “success fees” is considered overt incentive for bribery under the law, this requirement removes consultants motivated by commissions out of the process entirely.

19.31-22.7 Review of Completed Application

During the review of an application, the proposed rules as currently written do not allow the public an opportunity to comment on the business applicant and/or the proposed location before the application is reviewed by the Board. To promote additional transparency of the Emerge program and shed light on an applicant’s standing among workers and in the community, the EDA should inform interested parties of pending applications and provide the opportunity to comment in advance of the final Board meeting.

NJPP recommends two ways to keep the public informed and engaged during the application process. The EDA should create and maintain a public web-based application tracker, which is updated on a rolling basis as new applications are submitted for review.  Such a tracker should include the applicant business name, the municipality and county in which the business seeks to relocate or expand, and the date the application was submitted. The tracker should also include application status and advance notification. A public tracker for business tax incentives maintained by Louisiana’s economic development authority is an exemplary model.[v] The EDA should also provide 30 days in advance a public notice of Board meetings at which an application will be reviewed, which would trigger a comment period leading up to the final Board meeting. An example of public notices can be found at NYC Industrial Development Agencies.[vi]

19.31-22.9 Approval Letter and Commitment Agreement

(c)19 A provision requiring a community benefits agreement if the total project cost equals or exceeds $10 million.

Communities are rarely at the table of a statewide economic development strategy. A community benefit agreement (CBA) can address this, but too often the corporation receiving the tax break dictates the terms, downplaying community participation and crucial benefits that would meet their needs. Given the level of fraud that was allowed to prosper under the previous economic development legislation, the EDA must play a stronger role to ensure community voices are heard and that compliance with this type of agreement is enforced.

(d)1 “The business shall enter into a community benefits agreement with the Authority and the chief executive of the municipality or, if requested by the chief executive of the municipality, the chief executive of the county, in which the qualified business facility is located.”

New Jersey Economic Recovery Act states that “[p]rior to entering a community benefits agreement, the governing body of the county or municipality in which the qualified business facility is located shall hold at least one public hearing.” However, in the proposed rule above, the EDA interprets the term “governing body” to mean the chief executive of the municipality or county. NJPP takes issue with this interpretation as it carves out multiple perspectives found on a multi-person governing body and leaves decisions that affect the entire community to a singular mayor or county executive. NJPP recommends the rule be amended to define the governing body to mean a municipality council or board of commissioners to ensure adequate community input.

“At least one” public hearing before the establishment of a CBA has all the characteristics of a token gesture. The process of creating and monitoring a CBA needs to encourage meaningful community engagement and input. In fact, recipients of tax credits should first be put on mandatory probation for year one, and if compliance of a CBA is not established, the EDA should have the authority to rescind and recapture the tax credits.

In distressed municipalities, job training should be a non-optional main component of the CBA given its proven long-term economic impact, even if the subsidized jobs no longer exist. The EDA should also require that the advisory committee accurately reflect the demographics of the community.

Finally, the various components of the CBA should be made publicly available to community residents on the municipality website and the EDA website. These include the final terms of the CBA, the annual reports produced by the community advisory committee, notice of non-compliance and resulting forfeit of tax credits, and certifications that the CBA has been satisfied.

(d)8 “An eligible business shall not be required to enter into a community benefits agreement pursuant to this subsection if the eligible business submits to the Authority a copy of the eligible business’s redevelopment agreement and approval letter that is certified by the chief executive of the municipality in which the project is located.”

A good community benefits agreement ensures that new development serves the needs of local residents and their communities, not just developers. And the role of local elected officials can ensure community voices are heard and that economic development delivers meaningful benefits. However, this exemption allows one local elected official to sign away the CBA agreement without adequate input from community members. NJPP recommends that this exemption be certified by the municipality’s council or the county’s board of commissioners, not the mayor or county executive, in which the project is located.

19.31-22.14 Reduction and Forfeiture of Tax Credits

(f) “The Authority may recapture all or part of a tax credit awarded if an eligible business does not remain in compliance with the requirements of a project agreement for the duration of the commitment period.”

NJPP again strongly recommends that companies subject to the recapture of all or part of a tax credit due to non-compliance be banned from all EDA tax incentive programs in perpetuity.

19.31-22.19 Reports on Implementation of Program

NJPP supports a regular, independent evaluation process to effectively analyze the design, administration, and effectiveness of the Emerge program. The biennial, independently produced report with a detailed analysis of the program’s effect on a business’ relocation decision, the return on investment for the award, the impact on the state’s economy, and other metrics based on national best practices is an important tool of accountability.

NJPP recommends that the implementation reports and EDA responses to those reports be posted publicly on the EDA website to allow public scrutiny of the overall effectiveness of individual programs.

Finally, NJPP recommends the creation and maintenance of a publicly available and exportable database of projects in the Emerge program as they are approved. The most relevant information should include the name of the company, sector, city, county, award amount, eligibility period, commitment period, number of retained jobs, number of new jobs, number of construction jobs, and status of the CBA agreement, if applicable. For an example of such a database, please refer to the Travis County Financial Transparency Portal.[vii]

End Notes

[i] Governor Murphy’s Task Force on EDA Tax Incentives Third and Final Published Report, July 2020. https://www.njleg.state.nj.us/OPI/Reports_to_the_Legislature/eda_task_force_07092020.pdf

[ii] Ibid at 1

[iii] The Wall Street Journal, Meet the Fixers Pitting States Against Each Other to Win Tax Breaks for New Factories, May 2019.

[iv] Ibid at 1

[v] Louisiana Economic Development, Business Incentives, last visited April 16, 2021. https://fastlaneng.louisianaeconomicdevelopment.com/public/search/bi

[vi] NYC Industrial Development Agencies, last accessed April 16, 2021. https://edc.nyc/nycida-board-meetings-public-hearings

[vii] Travis County Economic Development, Travis County Financial Transparency Portal, last accessed April 16, 2021. https://financialtransparency.traviscountytx.gov/StarsEcoDev

The State Budget Must Support Those Harmed Most by the Pandemic

Posted on by Sheila Reynertson

The following testimony on the FY 2022 state budget was delivered to the Assembly Budget Committee on March 10, 2021.

Good morning, Chairwoman Pintor Marin and members of the Budget Committee. My name is Sheila Reynertson and I am here today representing New Jersey Policy Perspective (NJPP) and the For The Many budget coalition.

The most important priority for the FY2022 budget must be supporting those who were disproportionately harmed by both the public health crisis itself and the economic fallout that continues to this day. Black women, Hispanic/Latinx women, essential workers, immigrant workers, low-income households — these are the residents who were immediately at higher risk of contracting the deadly virus, the most likely to lose their jobs, and typically the last to recover from an economic downturn.

It may have been convenient to avoid these glaring disparities before, but the ferocious nature of the pandemic exposed all of it. We cannot turn away from the challenge and opportunities to advance racial and gender equity through the tax code and through sustainable programs that are proven building blocks of a strong state economy.

The FY2022 budget as proposed by Governor Murphy goes a long way to address the uneven impact of this past year in several commendable ways that will make an immediate difference in the lives of children, students, struggling families and seniors. Again, we strongly agree with this approach. Invest in the people and the economy will recover. Invest in the most vulnerable people and the economy will grow stronger than ever.

We support the health care investments focused on low-income families like subsidies for health insurance, a full year of Medicaid coverage after childbirth, funding for reproductive health care services for those without a path toward health insurance, and securing health insurance for every last child in the state.

We support the EITC expansion proposal to include 70,000 low-income, senior workers without kids and making the Child and Dependent Child Care Tax Credit fully refundable so those who need it the most can access it. We also support the state’s role in keeping families together with the increase in funding for legal representation for immigrants facing detention or deportation.

However, it is unfathomable that financial assistance for immigrants has been excluded from pandemic relief. A solution must be found to protect these vulnerable households from becoming impoverished. New Jersey can’t simply turn a blind eye to one its greatest assets: our immigrant communities. The EITC should also be increased and expanded to include immigrants as ITIN filers, low-income workers without children, and to those between the ages of 18 and 21.

Of course, we support the full pension payment a year ahead of schedule, a bigger allocation into the school funding formula and the expansion of pre-K education to another 1,800 children in 25 districts. The $100 million in new funding for higher education is exactly the type of building blocks of a state economy that we have long advocated for.

But to ensure adequate funding for years to come we remind the Assembly budget members to keep an eye on the not-too-distant future. Once the borrowed dollars have been spent and the federal aid is gone, New Jersey can’t expect economic growth alone to make up the difference. And certainly not with corporations looking to cash in their tax subsidies.

The topic may be getting a pass this year, but new sustainable revenue must be on the table before so we can both fund these increased investments well into the future and pay off the billions of dollars that the state just borrowed. New Jersey has a decision to make and we can’t afford making the wrong one: We can either turn a blind eye to the looming shortfalls in future budgets that will put millions of residents at risk of falling further behind or we can recommit to creating a modernized and equitable tax code to ensure a strong state recovery for everyone, especially those hit hardest by the events of the past year. Thank you.

Reforming WorkFirst NJ Will Help Reduce Child Poverty

Posted on by Brittany Holom-Trundy

The following testimony, on S2956, was delivered to the Senate Health, Human Services, and Senior Citizens Committee on January 14, 2021.

Good afternoon Chairman Vitale and members of the Committee. Thank you for this opportunity to provide my testimony on the proposed Work First New Jersey (WFNJ) reforms. My name is Dr. Brittany Holom-Trundy, and I am a senior policy analyst at New Jersey Policy Perspective (NJPP). NJPP is a non-partisan, non-profit research institution that focuses on policies that can improve the lives of low- and middle-income people, strengthen our state’s economy, and enhance the quality of life in New Jersey.

Though these reforms are not the full set of improvements that we would like to see, NJPP strongly supports the changes proposed in S2956 as a response to the Governor’s conditional veto on last year’s legislation. These reforms include needed changes to work requirements for parents, increases in child support pass-throughs to better help families, elimination of graduation requirements for 18-year-olds, and positive language changes. We believe this is a good first step toward a WFNJ that more effectively tackles childhood poverty, helps support low-income families, and builds a stronger future for the state.

As my predecessor Ray Castro’s work has shown, WFNJ provides a key channel of support for parents and children living in poverty. This is particularly true for Black and Latinx families, who are overrepresented amongst low-income families. Year-over-year changes reported throughout the pandemic have continued to emphasize how essential this lifeline is, especially for single-parent families. As people have lost employment, income stability, and family members in record numbers, these safety nets couldn’t be more important.

We hope that the committee will advance these reforms. We also encourage all legislators to consider further improvements, including increases in cash assistance and expanded eligibility for immigrant families in desperate need of support. Now more than ever New Jersey’s parents and children need solid commitments from our state leaders to their well-being and a brighter future.

Thank you for your time.

Legislators Should Vote No on $11.5 Billion Corporate Tax Subsidy Program

Posted on by Sheila Reynertson

The following testimony, on A4, was delivered to the Assembly Appropriations Committee on December 18, 2020.

Good morning, Chairman Burzichelli and members of the Assembly Appropriations Committee. My name is Sheila Reynertson and I am a senior policy analyst at New Jersey Policy Perspective. Thank you for the opportunity to testify on A4.

First, we applaud the important improvements in this legislation regarding oversight and accountability: a robust Community Benefit Agreement requirement, scaled down tax credit cap on each newly created job, tighter reporting requirements, and newly appointed compliance officer and an Inspector General to protect public dollars.

But the scale of this proposal is simply too large. Up until 2010, New Jersey averaged less than $100 million per year on programs authorized by the Economic Development Authority. Only during the Christie administration did the size of the programs balloon to over $1 billion year after year. This proposal takes what should be viewed as unnecessarily exorbitant and attempts to give it a sense of credibility it doesn’t deserve.

Comparable states like Maryland and Massachusetts spend an average of $100.4 million and $193.5 million a year, respectively, on economic development subsidies annually. The idea that New Jersey must have a program of this scale — over $1.5 billion per year — is irresponsible and threatens the state’s short- and long-term fiscal health.

Let’s step back a moment. The original proposal from 2019 topped off at $3 billion. As of last week, negotiations for this bill more than doubled to $7 billion total. And now, here we are looking down the barrel of a $11.5 billion proposal.

What happened? The two biggest programs — the same ones that were out of control under the Christie administration — have ballooned from a combined $300 million limit per year to $1.1 billion a year. At the same time, the minimum job and affordable housing requirements have both been watered down. How does that serve New Jersey taxpayers?

And the spending caps on these fabled “mega-projects” that may or may not transpire have ballooned as well. Originally, up to three redevelopment deals in the transformative program could each receive up to $100 million in tax credits. Now, 10 such large projects could be approved, and each could receive up to $250 million in tax credits each. The annual cap for the other mega-project concept — the institution-anchored redevelopment program — doubled from $100 million to $200 million.

Meanwhile, as we witness the biggest crisis to hit small businesses in our lifetime, this legislation throws them a bone with a loan program that may or may not allocate $50 million per year.

Two years. This legislature had two years of expert testimony from the state Comptroller and national experts at organizations like Pew Charitable Trusts and the Conference of State Legislatures who described the downsides of massive subsidies and limited upside. Best practices and sound research were tossed aside to “get this done before the year ends.” And nobody had the courage to say, “We’ve gone too far.”

Just yesterday, Forbes published an article on the utility of corporate tax subsidies. The jury decision is final, according to economists of all political stripes.

“Conservative scholars at George Mason University’s Mercatus Center find ‘sub­sidies have little to no effect on where companies choose to invest.’  And progressive economists Alan Peters and Peter Fisher conclude that subsidies work at best 10 percent of the time, ‘and are simply a waste of money the other 90 percent.’”

Ultimately, this bill represents a doubling down on the failed strategy of the 2013 Economic Opportunity Act and will weaken our ability as a state to afford our existing obligations and emerging needs — especially as we recover from the COVID pandemic and recession. The proposal is not sufficiently targeted to the areas of New Jersey’s economy that will need the greatest support and will weaken our ability to bolster proven economic drivers and pay down our oversized obligations.

A vote in favor of this legislation says you have confidence that the state will have enough resources in 10 years to simultaneously pay down the recently borrowed $4.5 billion and dole out tax subsidies by the billions. It’s the height of irresponsible stewardship of the public’s money.

We are not implying that the state completely forgoes tax subsidies — we are stating unequivocally that a program of this size is irresponsible and needs to be scaled back, specifically in the job growth and redevelopment programs.

We respectfully request legislators to vote NO on A4 and allow for time to rightsize this tool of economic development so it can fit back into the toolbox.

I am happy to answer any questions you may have. Thank you.

No Need to Rush Horizon Restructuring

Posted on by Brittany Holom-Trundy

The following testimony, on S3218, was delivered to the Senate Budget and Appropriations Committee on December 15, 2020.

Good morning, Chairman Sarlo and members of the Budget and Appropriations Committee. Thank you for this opportunity to provide my testimony on the proposed restructuring of Horizon. My name is Dr. Brittany Holom-Trundy, and I am a senior policy analyst at New Jersey Policy Perspective (NJPP). NJPP is a non-partisan, non-profit research institution that focuses on policies that can improve the lives of low- and middle-income people, strengthen our state’s economy, and enhance the quality of life in New Jersey.

This is one of the most complex pieces of legislation that state lawmakers have considered all year. As you know, the bill would change Horizon’s corporate structure to separate its health insurance operations from other business ventures; it would also give Horizon a tax cut. Because this proposal is crucial to the future of the state, it must be carefully considered in an open and transparent manner. There is no reason to rush the process and doing so would simply invite shortsighted decision-making and regrettable mistakes.

Due to the uncertainty of the bill’s fiscal effects, I have a couple of major concerns.

First, this bill doesn’t provide any information on the fiscal impact of this restructuring on the state. Yes, the $600 million upfront payment may seem enticing, but this is not simply about the lump sum payment. Changes to Horizon’s tax status can lead to significant losses that must be taken into account. For example, we do not yet have a fiscal note on the application of the tax cap law and how this difference, as well as other changes in tax obligations, will impact the funds that the state collects annually. The state is already receiving only a small fraction of the value of the public assets in this deal, and the calculation of the amount owed seems arbitrary at best. Further fiscal analysis of the restructuring by an independent entity is needed.

Additionally, the second part of these funds — the $650 million to be paid over a number of years — are not fully guaranteed, since they can expire under certain conditions. The state is essentially acting, then, as an unsecured general creditor. It is allowing Horizon to change its annual tax obligations for the long term without a backup plan should these funds go unpaid. If we consider this money to be a payment in lieu of taxes (PILOT), then the state should guarantee that the full value of the promised funds will be collected.

Past governors have fallen for the lure of upfront payments to fill budget holes during tough economic times; short-term fixes negatively affect the state’s finances and the state’s credit rating in the long term. We need a fiscal note and independent evaluation of Horizon’s assets and changes to its tax status to understand the full implications of this restructuring.

Lawmakers must consider slowing down this bill to ensure that the state and all New Jerseyans get the best deal possible from any restructuring.

Thank you for your time.

Police Presence at the Polls Could Suppress Turnout

Posted on by Brandon McKoy

The following testimony, on A4655, was delivered to the Assembly Appropriations Committee on October 26, 2020.

Thank you, Chairman Burzichelli and members of the committee for this opportunity to speak with you today.

My name is Brandon McKoy, I am President of New Jersey Policy Perspective, and I am testifying in support of A4655 to help ensure there is limited police presence at voting locations. The simple fact of that matter is that this year’s elections are incredibly pitched and, as such, have invited significant and drama. Unfortunately, comments and actions by the President and many others at the federal level have telegraphed a serious interest on their part in suppressing the right and ability of citizens to vote. Furthermore, due to excessive police behavior and repeated instances of gross brutality – especially over the course of the past several months and years – the relationship between law enforcement and marginalized communities has eroded significantly. As such, unnecessary police presence at voting locations would at best result in additional stress and anxiety on the part of the voting public as they exercise their rights, and serious suppression and disenfranchisement at worst.

To protect the faith and trust of all people in the voting process, this bill, along with its recent amendments, should receive your support and be passed out of committee.

As New Jerseyans, we don’t need to look very far for instances where police presence at polling locations suppressed the vote. The 1981 gubernatorial election is infamous for the manner in which off-duty officers were sent to predominantly Black and Hispanic areas to intimidate voters. Such a terrible occurrence will forever be a stain on our history, and it represents yet another compelling reason why we must do all we can to prevent a similar scenario from ever happening again. This bill will help ensure such success.

While the President has made awful threats that will likely mobilize some of his supporters to work against basic democratic principles, all of you – as elected officials entrusted to protect the rights and welfare of your constituents and all residents of our great state – have the ability to prevent such terrible outcomes and avoid flirtations with the dangerous and corrupt. Please support A4655 today so that all New Jerseyans can vote with a peaceful mind, not having to worry that they will be targeted simply for exercising their civic duty.

Thank you for continuing to enable remote testimony during these challenging times and for treating the pandemic with the seriousness it deserves while protecting the principles of an open and transparent government. I greatly appreciate your time and consideration, and wish you all a wonderful day.

Cleanup Bill is a Missed Opportunity to Close Corporate Tax Loopholes

Posted on by Sheila Reynertson

The following testimony, on A4809, was delivered to the Assembly Commerce and Economic Development Committee on October 21, 2020.

Thank you, Chairman Johnson and members of the committee for this opportunity to speak with you today.

I am testifying in support of A4809 as a technical improvement to the corporate business tax code. This bill should ease the accounting processes for both the state Division of Taxation and tax filers. However, New Jersey Policy Perspective (NJPP) views this legislation as a missed opportunity to close the remaining loopholes in the corporate business tax code. New Jersey successfully enacted combined reporting legislation in 2018, but large corporations continue to utilize tax avoidance schemes, which further erode New Jersey’s corporate business tax revenue and funding for investments that are critically important for the state, especially right now as we chart our recovery from COVID-19.

Given the extraordinary circumstances of a pandemic-induced recession, New Jersey must get a handle on multinational corporations that brazenly exploit tax loopholes. Given New Jersey’s budget restraints, the state is in no position to provide special favors to businesses that need it the least.

Respectfully, I ask members of the committee to consider some major shortcomings of current law that this bill seeks to codify, each a missed opportunity to close tax loopholes, some big enough to drive a truck through.

The “Nexus Isolation” Method

A4809 clarifies that the income from the separate activities of a multi-state corporation will only be taxed if one of a corporation’s members independently has a physical presence in, or nexus with, New Jersey. The “nexus isolation” strategy itself is not consistent with the fundamental conceptual goal of combined reporting, which is to ensure that the tax liability of a corporation to a state is the same regardless of whether it consists of a single member or multiple members. What this bill actually clarifies is how to give those out-of-state corporations an enormous tax loophole worth millions of dollars in foregone revenue. And the bill’s assertion that this method is in line with the United States Supreme Court jurisprudence on the unitary business principle and combined groups implies that another more effective method is unconstitutional. No court has ever found that to be the case.

Deferred Tax Deduction Provision

A4809 also repeals the use of certain credits to reduce deferred tax liability on a corporation’s balance sheet, but does so without a glance at the deferred tax deduction, an accounting adjustment that offsets a “paper” expense like a one-time income tax increase. This little trick protects publicly traded companies from any appearance of depreciation that could impact their stock value, though there is no compelling evidence to support such a claim. It is an unwarranted and unsubstantiated tax giveaway that will eventually cause New Jersey to forgo real revenue needed to fund critical assets and services. In other words, another lost opportunity.

Tax Haven Subsidiaries in Unitary Groups

The combined reporting legislation as proposed in 2018 included the definition of “tax haven” to ensure that a multinational corporation reports subsidiaries that may be used as tax shelters. The final legislation dropped the definition of “tax haven” entirely, which opened up a loophole so large that between $95 million and $233 million flows right through it every year. This bill fails to address that, which is a shame given New Jersey’s precarious fiscal situation.

Small business owners in New Jersey do not have the ability to move taxable income out of the state or country like these large corporations and their well-compensated tax lawyers do. A strong combined reporting statute would level the playing field for all businesses. That can’t happen with a technical clean-up bill. It’s time to make closing loopholes in the existing corporate business tax code a priority.

Thank you.

Support Young Workers by Expanding the EITC

Posted on by Vineeta Kapahi

The following testimony, on A838, was delivered to the Assembly Budget Committee on September 22, 2020.

Good afternoon Chairwoman Pintor Marin and members of the committee. My name is Vineeta Kapahi and I am a policy analyst at New Jersey Policy Perspective (NJPP), a non-partisan, non-profit research institution that focuses on policies affecting low-to-moderate income people in New Jersey. Thank you for the opportunity to submit testimony on this important issue.

NJPP supports A838, which lowers the minimum age limit for the New Jersey Earned Income Tax Credit (NJ EITC) for workers without qualifying children.

The Earned Income Tax Credit (EITC), a refundable tax credit for low- and moderate- income working individuals and families, has long been a successful tool for reducing poverty, promoting economic security, and improving quality of life for working families. By boosting the wages of low paid workers, the EITC helps New Jerseyans better afford their basic needs, improves health and educational outcomes, and strengthens state and local economies.

Due to the EITC’s narrow eligibility requirements, however, far too many New Jersey residents miss out on this important resource. Eligibility for the credit depends on several factors, including income, family type and size, immigration status, and residence. For workers without children at home, eligibility is also tied to age – workers who do not claim children as dependents only qualify for the credit if they are between the ages of 25 and 64.

While EITC eligibility criteria are based on the assumption that workers under 25 are dependent on their parents, the reality is that many young New Jersey workers are financially independent or even support their families. By lowering the minimum EITC eligibility age for workers without qualifying children, the proposed legislation would provide a much-needed boost and stronger foundation for young adults as they begin their careers.

Several other states have recently taken steps to address barriers to the EITC by making targeted changes to eligibility rules. In 2017, for example, Minnesota decreased the minimum age for workers without qualifying children from 25 to 21. In 2018, California expanded its state EITC to childless workers between the ages of 18 and 24, and Maryland eliminated the minimum age requirement for its state EITC altogether.

By passing A838, New Jersey could join states that have expanded the impact of their EITC programs. New Jersey could further strengthen its EITC beyond the present bill through additional measures, including eliminating the upper and lower age caps for workers without qualifying children, increasing the credit amount for childless workers, and extending the credit to ITIN filers. Removing barriers to the EITC would not help households who need support, but would also strengthen the broader New Jersey economy. As recipients of the EITC use the credit to meet short- and medium- term needs, such as transportation, household supplies, and utility bills, expanding eligibility would increase economic activity and support businesses.

In light of the current health and economic crises, it is more important than ever for New Jersey to invest in tools that directly support workers and strengthen the state’s recovery. I urge you to take a step toward eliminating barriers to economic justice by swiftly passing A838.

Thank you for your time and attention.

New Jersey’s Budget Must Reject Austerity to Fund the COVID-19 Recovery

Posted on by Sheila Reynertson

The following testimony, on the FY 2021 Revised Budget, was delivered to the Senate Budget and Appropriations Committee on September 11, 2020.

Chairman Sarlo and members of the committee. My name is Sheila Reynertson and I am a Senior Policy Analyst at New Jersey Policy Perspective. I am also testifying as a member of the For The Many coalition, which seeks to enhance equity through the tax code and raise adequate revenue to meet the challenges facing the Garden State.

With the initial pandemic outbreak behind us and the likelihood of another outbreak this winter, all signs are pointing to a long, drawn-out economic recovery. Unlike New Jersey’s last recession, low-income workers and small businesses have been hit the hardest by this crisis with cut hours, layoffs, or businesses shutting down entirely. Job losses thought to be temporary are now becoming permanent, which may reduce low-income and middle-class families’ earnings for years to come. This reality must be at the center of the state budget negotiations.

In fact, we implore the legislature to adopt a long-term approach to the state budget this year, to consider not just the immediate 9-month plan but the next fiscal year as well. How New Jersey policymakers respond to the needs of New Jersey families over the next 21 months will have enormous economic consequences for decades to come.

The legislature has a choice: prioritize racial and economic equity by helping New Jerseyans through a tough economic downturn or continue giving away massive tax breaks to wealthy households and millionaires. New Jersey may not be able to control the timing or severity of a second wave of the coronavirus, but policymakers do have tools to prepare and respond more effectively. Here are our top recommendations.

First, protect the state programs needed to meet the demands induced by the pandemic and the economic crisis that is still unfolding. After years of disinvestment and deep cuts, services and programs that support workers, students, children, and families continue to be under- or flat funded. The damage done was far from being fully repaired and then a global public health crisis struck. Legislators must plan for the full impact that has yet to hit the state. If that means borrowing to shore up the surplus, so be it.

Next, raise revenue quickly while making our income tax more progressive. It’s time to think big and bold — and aim high. There is no good reason why earnings between $500,000 and $5 million are taxed at the same rate. By raising the income tax on the wealthiest 5 percent of households, our state budget will no longer be balanced on the backs of working and middle class families.

We recommend adding four brackets to the state’s income tax and increasing rates on the state’s wealthiest households. This would raise more than $1 billion in new revenue each year for education, aid to cities and towns, and property tax relief for struggling households. ​The tax increase would be paid almost exclusively by New Jersey’s ultra-wealthy, with the top 1 percent – households with average annual incomes of $2.4 million – paying 85 percent.

This tax reform would also make New Jersey’s tax system more equitable, finally undoing the tax code’s upside-down nature, in which low-income and middle-class New Jerseyans have historically paid greater shares of their incomes to state and local taxes than wealthy residents.

To those concerned about losing high earners to another state, consider this: Based on the growth trend of high-income households over the past two decades, there is no reason to treat millionaires like an endangered species. In fact, New Jersey has proven itself to be a healthy and sustainable habitat for them as the state continues to gain millionaire-earning tax filers every year.

Successful corporations have a stake in bringing back New Jersey’s economy. The 2017 Trump tax cuts were a huge giveaway to big corporations and pass-throughs. Given the extraordinary circumstances we are facing, it is vital to make the corporate business tax surcharge permanent as a reliable and sustainable source of needed revenue to ensure a full recovery. We also support the Governor’s proposal of a five percent surcharge on Qualified Business Income for individuals earning over $1 million in income generated by pass-throughs. This would recapture a substantial percentage of a very generous deduction gifted at the federal level. Even with the surcharge, these individuals would still come out ahead.

Finally, we encourage the legislature to take this opportunity to restore fiscal responsibility. Just as our pension obligation is non negotiable, so is our need for sustainable budgeting without resorting to raids of dedicated funds and gimmicky one-time revenue raisers. To get back on track, we must adopt good budgeting practices recognized by credit rating agencies, like prioritizing a healthy surplus and rebuilding the Rainy Day Fund to avoid deep, harmful cuts in the future. States should set aside about 16 percent of total general fund spending for emergencies, according to the Government Finance Officers Association. New Jersey currently has 0 percent in its Rainy Day Fund.

Finally, NJPP thanks the Legislature for enacting a state-level Health Insurance Assessment tax which largely recaptures the recently repealed annual fee on health insurance providers and will support subsidies for New Jerseyans purchasing health insurances. A small percentage of this windfall could also support efforts to make the remaining 80,000 uninsured children in New Jersey eligible for health insurance with the added bonus of $60 million in federal matching funds. We know these kids are at risk for poorer health outcomes and school performance. It’s time to cover all of New Jersey’s kids.

Thank you.

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