Earlier today, Governor Murphy, Senate President Sweeney, and Assembly Speaker Coughlin announced a deal on the FY 2021 budget. The deal includes the “millionaires tax” — a new tax bracket on annual earnings over $1 million — and provides a $500 rebate to middle-class families with children. In response to the budget deal, New Jersey Policy Perspective (NJPP) releases the following statement.
Brandon McKoy, President, New Jersey Policy Perspective (NJPP):
“New Jersey’s tax code just got a lot fairer with the budget deal announced by Governor Murphy and legislative leadership. Calling on the state’s wealthiest residents to help fund New Jersey’s pandemic recovery is both smart and just policy, especially now during an economic downturn that has disproportionately harmed low-paid workers and communities of color.
“While many states across the country are balancing their budgets with steep spending cuts, New Jersey’s legislative leaders made the right choice in rejecting austerity measures like those made in response to the Great Recession. This deal recognizes the importance of maintaining state investments that grow our economy and protect New Jersey families harmed during the pandemic.
“There is still much more work to be done. Even with this deal, New Jersey needs more resources to meet its obligations, address future challenges, and advance racial equity and economic justice. We eagerly await details regarding funding for programs and will provide analysis of those decisions when they are made public.”
New Jersey Policy Perspective (NJPP) is a nonpartisan think tank that drives policy change to advance economic, social, and racial justice through evidence-based, independent research, analysis, and advocacy.
New Jersey lawmakers have taken an interest in implementing a state-level financial transactions tax, which would levy a small fee on the billions of stock trades that are processed in the state every day. This could be a promising way to raise additional revenue from high-income earners and tamp down excessive stock market speculation. It could also be the answer to the state’s long standing fiscal woes, including billion-dollar debt service payments that crowd out other spending. But it is unlikely to become a reality in time to shore up New Jersey’s revenue shortfalls during the immediate fiscal crisis.
Based on a compelling proposal published in a June op-ed, a recently introduced bill (A4402) would apply a micro-tax on high-speed stock trading. Specifically, this bill would impose a $0.0025-per-transaction tax on persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in the state. The tax, estimated to generate $13 billion in annual revenue, would apply to transactions involving financial securities such as futures contracts, derivatives, and stock shares. The largely conceptual bill was introduced by Assemblyman McKeon, chair of the Financial Institutions and Insurance Committee, and has grabbed the attention of both the Governor and the Senate President. New York has introduced similar legislation[1] and Vice-President Biden also has his eyes on a financial transaction tax at the federal level, as originally proposed by Senator Elizabeth Warren.
But how do these financial transactions work? Every day, trillions of dollars’ worth of financial securities are traded electronically at hyper speed through fiber-optic cables connected to banks of computer servers. Those servers don’t reside under Wall Street in Manhattan; they sit in metal cages inside nondescript, temperature-controlled facilities just across the river in New Jersey. The largest among them — a 338,000-square foot data center in Secaucus — provides storage space for servers owned or leased by thousands of companies including Nasdaq, the New York Stock Exchange (NYSE), Bloomberg LP, and the Chicago Board Options Exchange, plus telecommunication companies and brokerage firms. Densely packed data centers like this one make it possible to trade stocks on a smartphone, as all the intermediaries needed to complete such a complex transaction are housed in this data center. This particular mega data-center is so vital to the U.S. financial industry that it requires five security checkpoints to reach the servers themselves and contains multiple backup options in the event of a power outage.
While the revenue potential is impressive, further study of the state-level proposal is necessary. For instance: How would this tax be structured? Would it mimic the current fee on stocks and derivatives collected by the Securities and Exchange Commission (SEC) to fund the agency? Which entities would pay the tax: the data centers that provide the infrastructure for the servers, the exchanges or other financial firms that own or lease the servers, or the software companies that facilitate high-speed trading taking place on these servers? Besides potential legal issues that arise in taxing any interstate transaction, technical issues of how to appropriately tax the transactions also need to be thoroughly vetted. And designating taxable transactions of such vast swaths of financial activity could run into regulatory issues.
It may be worth exploring other ways to tax these data centers that do not involve the high-speed transactions themselves. Given the novelty of the proposal — no other state has implemented this tax since New York repealed theirs in 1981 — and the high probability of legal action against it, a tax on financial transactions is unlikely to generate revenue in FY 2021.
Of course, given the tremendous revenue potential and the likelihood that this tax would be paid by high-income people who own financial assets, NJPP supports efforts to craft comprehensive legislation to establish a financial transactions tax. We also recommend that state lawmakers allocate most, if not all, of the revenue toward paying off New Jersey’s outsized obligations. By dedicating funds to pension payments and debt service, large amounts of revenue would be freed up for investments in areas that benefit all New Jersey families, such as public education, health care, college, housing, and child care support, to name a few.
End Note
[1] New York A7791, introduced by Rep. Phil Steck (D), would repeal the state’s rebate of the stock transfer tax and use the revenue to maintain roads and bridges and fund various state programs. The tax, which was levied from 1905 to 1981 on the sale of securities, is 100 percent rebated to the industry under current law.
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.
Welcome to NJPP’s Revised Budget Address FY 2021: Rapid Reaction, your source for commentary and data analysis on Governor Murphy’s address. The transcript below was taken from NJPP’s Zoom room and has been lightly edited.
Lou (Louis Di Paolo, Communications Director): Budget season gets a reset! For the second time this year, Governor Murphy delivered his budget address for Fiscal Year (FY) 2021 — this time to a socially distanced crowd at the Rutgers University football stadium. For context, New Jersey took the unprecedented step of delaying the budget deadline by three months to better assess the state’s finances after the COVID-19 outbreak. State lawmakers passed a three-month spending bill in June, which extended FY 2020, and this latest budget proposal would fund the state for the following nine months, starting October 1, for FY 2021.
Due to the economic fallout from COVID-19, New Jersey came into this fiscal year with an unprecedented multi-billion dollar revenue shortfall. In his proposal, Governor Murphy makes up for the drop in revenue with a combination of cuts, borrowing, and new revenue, including the millionaires’ tax and an extension of the corporate business tax surcharge.
Joining me in this budget reflection are policy analysts Sheila Reynertson, Brittany Holom, and Vineeta Kapahi. My first question: does this budget proposal meet the moment in responding to the COVID-19 health and economic crisis?
Sheila (Sheila Reynertson, Senior Policy Analyst): Given the extraordinary circumstances of this crisis in a state with outsized obligations, one would think that the Murphy administration’s hands were tied. But it turns out that their advantage was to embrace every option on the table. Faced with a $5.63 billion revenue shortfall, this budget turned a unique fiscal challenge into an opportunity to maintain and even grow some critical investments. With a targeted mix of new revenue, spending cuts, borrowing from the federal government, and even a healthy surplus, the budget proposal sets a solid foundation for a strong pandemic recovery.
Well, almost all.
It’s important to note, with disappointment, the absence of emergency assistance for our immigrant neighbors who have been left out of relief programs for more than 6 months. This proposal is also a missed opportunity to improve how New Jersey taxes inherited wealth.
Lou: My next question is for Vineeta and Brittany. Given that this is your first budget address with NJPP, what are your overall impressions of the governor’s budget address? What stood out to you?
Brittany (Brittany Holom, Senior Policy Analyst): Going into this, I was interested to see how the COVID-19 pandemic would shape the framing of the governor’s speech and the funding decisions in his budget proposal. I was worried that there would be a lot of short-term “patching” with the crisis, but I am glad to see instead that the lessons of the last recession are being recognized. It’s clear from this speech that the focus remains on the future of New Jersey rather than simple bandages hastily constructed during a tough time.
Vineeta (Vineeta Kapahi, Policy Analyst): Given the context of the current crisis, I was heartened to see that efforts have been made to keep many critical programs intact, like the Earned Income Tax Credit (EITC) and Child and Dependent Care Credit. In light of the unprecedented challenges that are disproportionately falling on low-income, Black, and immigrant communities, like Sheila, I was disappointed that the budget does not provide relief to people who have been left out of federal assistance (more on that later). The budget could also go further towards addressing the structural inequities that have allowed wealthy individuals and corporations to continue to gain disproportionate benefits, even during the pandemic.
Brittany: I was also surprised by the Bon Jovi soundtrack. Not that I minded it, I just doubt that’s the type of music that gets played when these types of speeches are given at the State House.
Lou: Brittany brings up a great point (well, two if you count her comment on Bon Jovi). It definitely seems like New Jersey learned its lesson from the Great Recession. Instead of cuts, cuts, and more cuts, Governor Murphy is proposing balancing the budget with roughly $1 billion in new revenue. This follows the recommendations laid out in an open letter signed by nearly 100 economists in New Jersey, which highlighted how targeted tax increases on wealthy families and big businesses would be better for the state’s economy than spending cuts.
So this question on revenue is for Sheila: How do you feel about the Governor’s revenue proposals? And as a follow-up, do they go far enough?
Sheila: The governor proposed a pretty solid list of new revenue streams, totaling $1.02 billion to help fund the recovery and create a more equitable tax code. It’s impressive that the state would be able to raise this much revenue without it affecting the vast majority of New Jersey families and small businesses. And most of these sources are sustainable, meaning they will be reliable funding streams for years to come.
That means that the wealthiest among us – millionaires and large corporations – need to pay their fair share in taxes, whether it be on income or in buying a yacht. #NJBudget
Lou: Definitely thrilled to see the millionaires’ tax in the governor’s proposal. Earlier this year, state lawmakers said they didn’t want to raise taxes on the top one percent of earners during a booming economy. Maybe this economic downturn — which has largely spared the wealthiest among us — will convince them that the tax code needs to change. We all know the state desperately needs the revenue. Any other tax changes worth highlighting?
Sheila: It’s also great to see a permanent extension of the corporate business tax surcharge on businesses that make over $1 million in profits a year. That will make a big difference for programs and services that may otherwise have been shut down, including programs that businesses themselves benefit from, like high-quality education and reliable roads and bridges.
The budget proposal also reverses sales tax breaks on limousine services and on yacht purchases, which will raise a combined $20 million. These tax breaks disproportionately benefit the wealthiest among us while robbing the state of critical revenue.
Lou: Wait, you’re telling me the yacht and limousine tax breaks benefit wealthy folks?
And there’s one new source of revenue that caught me by surprise: a five percent surcharge on certain federally qualified business income (QBI) for individuals with income greater than $1 million. But this isn’t a new tax — it’s a partial repeal of a very regressive tax policy that was included in the 2017 federal Tax Cuts and Jobs Act (TCJA). This will raise an estimated $75 million in FY 2021 and could raise much more in the future.
Brittany: Oh, and don’t forget the Health Insurance Assessment (HIA)! I know it was passed last month, but that’s more than $200 million to expand health coverage and keep insurance affordable.
Lou: Thank you for the breakdown, Sheila (and Brittany)! With this new revenue, New Jersey will be able to maintain investments in public services and programs that families across the state rely on. Along those lines, what investments are you all most excited about?
Vineeta: This budget maintains several programs that aim to provide stability for low-paid New Jersey residents. The governor committed to following through on the scheduled increase in the state EITC to 40 percent of the federal credit and to extending eligibility to certain young adults without qualifying children. I would have liked to see a boost in the credit amount for workers without qualifying children (the maximum credit is only $206 for this group!) and a commitment to addressing other barriers to the EITC, like including immigrant households that file taxes using an ITIN. The governor’s budget also maintains the Child and Dependent Care Tax Credit, which can help offset childcare costs. This program would be more impactful for those who need it the most if it were refundable; it would be great to see that happen next year.
Brittany: I’m excited to see the state’s commitment to affordable health care through support for critical Medicaid benefits and with state subsidies for our upcoming State Exchange. Making sure that more people can afford health care is key when many are losing access to employer-based health insurance. I am also happy with the continued commitment to addressing the stark racial inequities in our health care system with the public awareness campaign for Black infant mortality and increases in payments for certain providers and services that address inequities. I hope that, while there are unfortunate decreases in areas like the Charity Care program, these targeted investments will establish a foundation for a healthier future for all New Jerseyans.
Sheila: It is fantastic to see a full pension payment in the budget proposal. The recognition that New Jersey’s recovery is closely tied to child care availability and affordability for workers is another highlight that wouldn’t have even registered just a few years ago.
And finally, the most surprising proposal of the day, and one that puts New Jersey on the map as an incubator for new progressive policy, is baby bonds! Inspired by a federal bill by Senator Cory Booker, the proposal would provide a $1,000 deposit into a savings account for every child born in 2021 to families making up to $131,000 a year. Under Governor Murphy’s proposal, when the child reaches the age of 18 that appreciated bond becomes theirs to invest in higher education, a business, or a home.
Lou: Yes! The baby bond proposal was definitely a welcomed surprise. Was there anything else that surprised you in today’s address? Other than the tent interruption.
For the first time in New Jersey history, a flyaway tent has interrupted a governor’s budget speech.
Sheila: I know I have mentioned it already, but can I just state again how impressive it is to see this $2.2 billion surplus in this proposal. That’s 5.6 percent of the 9-month budget, compared to last year’s surplus at 4 percent of the 12-month budget. What that tells us (and credit rating agencies) is that the administration understands the limitations of borrowing from the federal government, as well as the importance of being able to handle revenue shortfalls should the state be hit by a second wave of the pandemic. This is smart budgeting and I am here for it. Brittany: I know I mentioned this earlier too, but I was surprised by the Bon Jovi exit music. While I appreciate the “It’s now or never” mentality, the framing of the address itself rang more “I’ll Be There for You.”
Lou: And what was missing?
Vineeta: At this critical time when thousands of New Jersey households are struggling to pay for basic needs like food and housing, the governor’s budget proposal fails to include relief for immigrants who have been excluded from federal pandemic assistance. Since the onset of COVID-19, immigrants have been calling on state lawmakers to provide support where the federal government has fallen short. Immigrants not only face the same challenges as other New Jerseyans, but they also have disproportionately high representation among essential workers responding to the current crisis and among industries that have experienced the most job loss due to COVID-19. I would have also liked to see an increase in funding for the Detention and Deportation Defense Initiative, which can only provide representation for a small fraction of low-income individuals facing detention and deportation at its current level.
Brittany: I second Vineeta’s point. With so many of our uninsured counting themselves amongst our immigrant, and particularly our undocumented, residents, the lack of a clear solution for getting our immigrant population access to care during this time left the picture of New Jersey’s future uncertain.
Sheila: It does bother me that in the middle of an uncontained pandemic that disproportionately hurts communities of color we still allow large concentrations of wealth and profits to grow unchecked. Wealthy heirs and multinational corporations receive massive tax breaks due to New Jersey’s weak taxation on inherited wealth and remaining loopholes exploited by multinational corporations to avoid state taxation.
** Brandon McKoy enters the chat **
Brandon (Brandon McKoy, President): Couldn’t agree more, Sheila. There’s a lot that the governor said today, appropriately, about the need to tackle racial inequality. He stated, “Ensuring fairness and justice in taxation is just as important as ensuring fairness and justice in society — in fact, it is an essential step in eliminating the structural racism in our society.” To realize that value fully, New Jersey needs to restore some of the wealth taxes that were eliminated under the Christie administration, especially the estate tax. The Center on Budget and Policy Priorities has produced incredible research that shows how fair wealth taxation is critical to closing the racial wealth gap. Until our state secures fair wealth taxation, we’ll continue to struggle in the fight to reduce racial disparities and structural discrimination against New Jerseyans of color.
Nonetheless, it’s nice to see a budget that generally promotes a positive vision of the future and pushes for maintaining — and even expanding — critical investments in programs, services, and assets that are central to growing our economy. It’s a welcomed change to how New Jersey responded to the Great Recession and I sincerely hope the legislature adds to this proposal to make it even stronger.
Earlier today, Governor Murphy delivered his revised Budget Address for Fiscal Year 2021. The $32.4 billion budget proposal covers nine months, beginning October 1, and closes New Jersey’s revenue shortfall with a combination of tax increases and borrowing from the federal government. In response to the budget address, New Jersey Policy Perspective (NJPP) releases the following statement.
Brandon McKoy, President, New Jersey Policy Perspective (NJPP):
“In the face of an unprecedented health and economic crisis, Governor Murphy’s budget proposal thoughtfully protects key state programs and services that workers and their families rely on. These investments — in public education, tuition assistance, tax credits for working families, and much more — are the building blocks of strong communities, a strong economy, and a strong recovery from the COVID-19 pandemic.
“Unlike state budgets passed during the last economic downturn, this proposal recognizes that New Jersey must balance revenue shortfalls by ensuring wealthy individuals and big corporations pay closer to their fair share in taxes. Every dollar raised through new revenue is a dollar we don't have to cut or borrow. These revenue streams will set a strong foundation for a stable recovery, as they provide the state with resources to keep the economy afloat and deliver critical relief to families and small businesses in need.
“This budget falls short in one key area: it neglects immigrants who have been excluded from state and federal pandemic relief. Immigrants play a huge role in New Jersey’s diverse communities and local economies and deserve their share of state aid. We urge state lawmakers to do more to ensure that no one is left behind in the state’s recovery, regardless of where they were born. Only then can we be sure that our recovery will be strong and long-lasting for all.”
August 19, 2020 – Earlier today, members of For The Many NJ sent an open letter to Governor Murphy, Senate President Sweeney, Assembly Speaker Coughlin, and members of the Senate and Assembly Budget Committees calling for a transparent and inclusive budget process.
"As of today, 36 business days before the FY 2021 budget must be passed, there is no publicly available basic information on the budget process, like the schedule of key budget events and whether the New Jersey Legislature has plans to call upon state commissioners or fiscal experts to testify before finalizing the Appropriations Act," the letter states.
More than 20 organizations signed onto the letter, including the non-partisan think tank New Jersey Policy Perspective, the Anti-Poverty Network of New Jersey, SEIU 32BJ, and the New Jersey Education Association.
The letter calls next year's state budget "one of the most consequential budgets in New Jersey’s history" given the impact of the COVID-19 pandemic on state revenue and the subsequent possibility of dramatic cuts to public services and programs.
For The Many is a statewide coalition of more than 30 organizations working to expand funding for essential services and improve budget practices to meet current and future needs, especially for communities that have been historically marginalized.
August 18, 2020 – Today, 96 economists and policy experts in New Jersey released a joint letter to Governor Phil Murphy and state legislative leadership urging them to balance the state budget with tax increases on the state’s wealthiest residents and biggest corporations instead of counterproductive budget cuts.
The letter warns that state budget cuts are much worse for the economy than modest tax increases targeted to high-income households and corporations, stating “Large cuts would erode the health and social infrastructure needed to continue combatting COVID-19, increase inequality, and exacerbate the economic downturn. Instead of budget cuts, the state should look to raise revenues to balance its budget.”
The letter includes economists and public policy professors from public and private universities across New Jersey. The letter was made possible by the Scholars Strategy Network, an organization of university-based scholars who are committed to using research to improve policy and strengthen democracy. Signatories include Alan S. Blinder and Cecilia Rouse of Princeton University, Yana van der Meulen Rodgers and Henry Coleman of Rutgers University, and Deborah M. Figart of Stockton University.
The economists cite a June 2020 report by New Jersey Policy Perspective (NJPP), a nonpartisan think tank that researches tax, budget, and economic policy, that proposes increasing income tax rates on annual earnings above $250,000. NJPP’s plan would raise approximately $1.5 billion a year in revenue.
“As we learned after the Great Recession, we cannot cut our way out of an economic downturn,” said Brandon McKoy, President of New Jersey Policy Perspective. “New Jersey is facing an unprecedented economic crisis that is uniquely harming low-paid workers and their families. The economists’ letter makes it abundantly clear that budget cuts would make it impossible for the state to provide relief to the families and small businesses who need it most, while also taking money out of local economies across the state. Balancing the state budget without cuts is the best way to build a strong and speedy recovery in New Jersey.”
Earlier today, the New Jersey Supreme Court ruled in favor of Governor Murphy’s plan to borrow funds from the federal government to balance the state budget. In response to this decision, New Jersey Policy Perspective (NJPP) releases the following statement.
Sheila Reynertson, Senior Policy Analyst, New Jersey Policy Perspective (NJPP):
“Today’s ruling is great news for New Jersey, as it will set the stage for a stronger and faster pandemic recovery. While borrowing should always be viewed with skepticism, the COVID-19 pandemic necessitates this plan. New Jersey is facing unprecedented revenue shortfalls over the next three fiscal years. Without federal borrowing to support state and local governments, lawmakers would be forced to slash critical programs and services at the precise time they are needed the most. We’ve seen the damage caused by a cuts-only approach before. It not only devastated local economies and caused unnecessary hardship, it deepened the Great Recession and hampered New Jersey’s economic recovery. Catastrophic budget cuts during a global pandemic are a nonstarter.”
The following testimony, on A4389, was delivered to the Assembly Appropriations Committee on July 27, 2020.
Good morning Chairman Burzichelli and members of the Appropriations Committee. Thank you for this opportunity to provide my testimony on the Health Insurance Assessment. My name is Dr. Brittany Holom, 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.
New Jersey stands at a critical juncture for our health care system. The full impact of the COVID-19 pandemic is still to be seen, but we know one thing for sure: the virus has taken a historic toll on the families, economy, and future of New Jersey. The measures needed to protect our residents and contain the virus’ outbreak have resulted not only in lost income, but also a lack of insurance coverage, rising distrust in and fear of the health care system, and uncertainty about a vast array of activities for the foreseeable future. This is a moment when New Jerseyans need to see that their leaders are not just reacting to the crisis in the short term, but are committed to protecting them in the long term.
In order to maintain the state’s vital services and build a system better able to handle these crises going forward, we need to be creative. The proposed Health Insurance Assessment (HIA) provides a golden opportunity to do just that. With the federal government giving up this source of income, New Jersey has the chance to absorb those funds without having to introduce changes to current fees.
This is why NJPP strongly supports the proposed legislation to collect an assessment on certain health insurance providers and direct those resources toward making health coverage more affordable and accessible. We understand the need for revenue to not only support current programs, but also to support new initiatives to ensure that New Jersey’s health care landscape is more equitable.
The legislation’s dedication of funds to health care gives New Jersey long-term resources to keep health care affordable. Estimates of a state HIA’s revenue come in just above $300 million. This revenue can be put toward initiatives that provide subsidies to our low- and moderately-paid working families, create more affordable coverage opportunities for our most vulnerable populations, support the reinsurance program, help small businesses with the costs of care, and much more. This is more than a simple cut of costs — this is an investment in a sustainable and affordable health care system for New Jersey’s residents for the future.
This is New Jersey’s moment to make that investment. The federal fee expires after December 31st of this year. This means that, by establishing a state fee now, we are maintaining a system that already exists and are not introducing a new fee for health insurance providers. Only by establishing the fee this year do we have the opportunity to capture this revenue without seeing an increase in rates from the previous year.
Some groups may argue that this would raise rates. This is simply not true. New Jersey would be replacing an existing fee — not introducing a new one — and, because that money is being invested back in the health care system, the state would be committing to sustainable decreases in rates. Further, by supporting increases in enrollment and improving the health insurance risk pool, the state would be directly aiding in cost decreases for New Jersey residents. In other words, this is not a one-and-done situation; rates would not just decrease for one year before increasing again. Instead, measures would support lower rates in the long term.
Again, the opportunity to establish this source of revenue and commit funds to affordability is only available this year. If we let this fee expire without replacing it, the actions needed to build this revenue in later years will face significant obstacles, and residents will be faced with greater instability in their health insurance options. Leaders need to show that they are willing to invest in their residents’ future, because if the COVID-19 pandemic has not been a strong enough lesson on the necessity for that investment, then it is clear that nothing ever will be.
Earlier today, the Task Force on EDA Tax Incentives released its final report on New Jersey’s scandal-plagued corporate tax subsidy programs. The report found that New Jersey awarded over $500 million in tax breaks to companies that did not deserve them. In response to the report, New Jersey Policy Perspective (NJPP) releases the following statement.
Sheila Reynertson, Senior Policy Analyst, NJPP:
“This report provides further evidence that New Jersey’s experiment with corporate tax breaks was a costly failure that provided little return on investment for taxpayers. Fortunately, the state’s bloated, scandal-ridden corporate tax subsidy programs expired over a year ago without a replacement, and the state is better off as a result.
“There is no good reason for New Jersey to offer limitless tax incentives to large and already successful corporations. It’s a glass half empty view of New Jersey’s economic potential that ironically robs the state of resources needed to promote a robust and healthy business climate. To remain a viable option for companies to relocate to and expand in, New Jersey should instead focus on the building blocks of a strong economy, like strong public schools that maintain an educated workforce and reliable transit infrastructure so workers can get to their jobs on time.
“With a state budget ravaged by the fallout of a global pandemic, lawmakers must stop awarding billions of dollars in corporate tax subsidies; it is not a wise use of public resources. Mounting research finds that tax subsidies for corporations are a subpar investment when compared to other state policies and investments that are proven to help grow an economy.
“Putting people first by investing in the development of lifelong skills through things like subsidized child care and community college grants has a better return on investment and more positive impact on the state economy than do shovel-ready photo ops that allow politicians to falsely claim they helped create jobs by luring businesses to the state.
