Topic Category: Tax and Budget

Despite ‘Exodus’ Rhetoric, New Jersey’s Still Adding Millionaires

Posted on by Jon Whiten

millionaires growing 2016 update-01We hear it all the time: Hordes of wealthy New Jerseyans are packing up their Lexuses and heading to “friendlier” climates to avoid paying the Garden State’s relatively high income tax rates on the state’s most well-off families or its taxes on inherited wealth.

Yet time and time again, the facts clearly show this isn’t the case, and there is no such “exodus” of wealthy New Jerseyans.

The latest data point to confirm New Jersey’s ability to attract and retain well-off families comes from Phoenix Marketing International’s most recent annual Wealth & Affluent Monitor, which finds that the Garden State now has the third highest share of millionaires in the country, behind only Maryland and Connecticut.

New Jersey climbed to the Number Three spot in 2016 from Number Four in 2015, with the share of millionaires increasing to 7.4 percent from 7.2 percent and the number of millionaires rising to 242,957 from 237,064.

Since 2006, the number of millionaires in New Jersey has increased by more than 35,000 (or 17 percent) while the share of millionaires has risen by 14 percent.

2018 Budget Preview: The Legacy of the Christie Years

Posted on by Sheila Reynertson

When Gov. Christie took office in 2010, he had his work cut out for him. New Jersey’s economy was in the depths of the Great Recession, throwing an already fragile state budget into deeper crisis. In his first budget address, he promised to fix the state’s budget crisis, revamp the public pension system and reduce overall state spending without using “gimmicks or band-aids.” But as we look toward the governor’s final budget of his eight-year tenure, it’s clear that New Jersey’s financial crisis persists.

A  weak economic recovery, on top of big tax cuts and breaks that have helped lead to chronic revenue shortfalls, and ongoing battles over pension obligations, have led the state’s credit rating to be downgraded a record 10 times during Gov. Christie’s tenure. Despite a huge increase in corporate tax breaks, New Jersey has yet to recover jobs at a rate anywhere near those of neighboring states or the nation as whole. New Jersey has the eighth slowest post-Recession revenue growth rate of the states and only nine days of operating funds on reserve – the 5th lowest of the states – putting the state in serious jeopardy should another recession or disastrous storm sink the economy.

As he prepares to present his final state budget this month, the list of enormous and unresolved issues facing New Jersey’s finances – and its prosperity – is as varied as it is daunting.

After uneven reform efforts, New Jersey’s pension system for retired public employees is now the most underfunded in the country. Despite a jump in annual payment size, contributions are actually 40 percent of what is recommended by actuaries to keep up with the ballooning obligations. Add to this crisis the state’s losing battle to adequately fund health care benefits for public employees. The pay-as-you-go method coupled with rising health care costs continue to cripple the state budget. New Jersey has underfunded state-mandated school aid for the past seven years. Now Gov. Christie wants to gut the school funding formula to give residents in wealthier districts a  property tax break.

Meanwhile, New Jerseyans continue to pay the nation’s highest property tax bills. This year the average homeowner paid $8,459 – 2.2 percent higher than last year’s rate despite a 2 percent cap implemented by Gov. Christie. The average residential property tax bill was $7,281 in 2009 representing a 16 percent increase. At the same time, the number of New Jerseyans living below the federal poverty line has grown by 13 percent from 2009 to 2015. Today one in four New Jerseyans live in true poverty. Over one in ten New Jersey households did not have enough money to purchase food at some point last year.

Who wins, who loses

During Gov. Christie’s tenure, corporations and wealthy households have prospered the most, while those in the middle and those struggling to get by in the face of rising costs of living were largely left behind. The name of the economic-development game has largely been to offer tax subsidies to encourage businesses to relocate or stay in New Jersey.

Over the past 6 years, New Jersey has approved over $7 billion in ineffective tax subsidies to corporations – on top of $3 billion worth of business tax cuts it’s doled out.. Touted as a job-creating stimulus, these tax breaks have done little to boost the economy. New Jersey would need to add 120,000 jobs each year for the next three years just to get back to pre-recession levels and employ a growing population. But this past year, just 21,4000 jobs were added representing the 7th slowest job growth among the states since the start of the recession.

Over three-fourths of total income gained between 2010 and 2013 went to the top 35 percent of households. New Jersey now has the 7th highest level of income inequality in the country. That trend is sure to worsen as New Jersey phases out the estate tax, one of the best tools for reducing inequality and building broadly shared prosperity.

Revenue growth still unsteady

New Jersey’s tax collections have grown this fiscal year but at a slower pace than anticipated. If the lower growth rate continues, revenue may fall considerably short of what Office of Legislative Services (OLS) says is needed for the remaining months of this fiscal year.

If the current growth rate of 2.3 percent were to remain steady, the state budget could be over $950 million short in revenue.  According to the latest figures from the OLS, the growth rate would need to be more than twice that rate to meet current costs and recover from the enormous tax cuts signed into law last fall. This lower-than-expected trend has plagued New Jersey since the Great Recession.

Overall, New Jersey’s tax collections continue to struggle to bounce back to pre-Recession levels. State tax collections in the second quarter of 2016 were still 10.9 percent lower than its peak in the fourth quarter of 2007. In fact, New Jersey is surrounded on all sides by states whose tax collections have long since recovered and grown. New York’s tax revenue, for example, was 12.7 percent higher in Q2 2016 than at its peak in Q3 2008. Pennsylvania’s tax revenue was 3.2 percent higher in Q2 2016 than at its peak in Q1 2008.

Given that revenue shortfalls continue to undermine the state’s ability to meet its obligations, the next budget is likely to resemble those from the last several years with expected underfunding in key areas including pension payments, school aid, tuition assistance for higher education and general assistance to families in need. Add to this strapped budget the loss of $675 million as a package of tax breaks begin to be phased in. That loss will increase to $1.4 billion by 2021. Some $350 million will no longer be diverted from the general fund to pay TTF debts, but in the long run, the state’s ability to adequately fund key obligations will be severely compromised due to these cuts.

Pension payments

Pension payments during Gov. Christie’s tenure may have been larger than those made by his predecessors, but they have been only a fraction of what is needed to keep the pension system from piling up even more debt.

After skipping a $3.1 billion payment in fiscal year 2011, Christie contributed $484 million in 2012, $1 billion in 2013 and $696 million in 2014. He then made a $892 million payment in fiscal year 2015 – nowhere near the $2.25 billion sought by the legislature. And the 2016 state’s contribution of $1.3 billion was also well below the $3.1 billion payment included in the legislature’s budget. For the fiscal year ending this June 30, the state’s contribution of $1.86 billion to the pension fund, which mirrors the Legislature’s contribution, will occur near the end of the fiscal year.

Recently, Gov. Christie announced a $650 million increase in state contributions to the pension fund boosting the total pension contribution for the 2018 fiscal year to approximately $2.51 billion in keeping with the state’s 10-year pension payment formula.

Higher education

New Jersey students and families continue to have a hard time affording the high cost of a college education, thanks in large part to sharply declining state support for public colleges and universities.

New Jersey has cut funding for higher education by 23 percent since 2008 when adjusted for inflation, a decrease of more than $2,250 per student and a deeper cut than the national average, according to a new report from the Center on Budget and Policy Priorities (CBPP). This is the 13th largest percentage decline, and 12th largest dollar decline, of the 50 states.

While many states are starting to reverse course and increase funding for higher education, New Jersey is going in the opposite direction. In fact, it is one of just 11 states where per-student funding fell from 2015 to 2016.

As a result of these cuts, the average tuition at a public, four-year college in New Jersey has increased by 17 percent, or $1,903, during this period. On top of these tuition increases, colleges and universities across the state have increased student fees, cut staff and faculty positions and offered fewer courses to save money. All this means that a degree takes much longer to attain, adding years of cost and debt.

Together, this means that most New Jersey’s families – already struggling with slow income gains if not reductions – are often paying more and incurring  higher levels of debt for a lower-quality education. These post-recession increases come on the heels of large increases in tuition and fees at New Jersey’s public, four-year colleges in the early 2000s.

Looking ahead

It took New Jersey decades to dig itself into this fiscal hole and no one governor is going to fix it, but without a doubt it has gotten steadily worse over the past eight years. But it didn’t have to be this way given the proven tools that could have been employed to dig our way out. Here are a few examples of big, bold tools that the next administration should consider to help move New Jersey toward a more stable and prosperous future.

One of the most responsible ways to create a path to financial sustainability is to ensure that corporations and the wealthy are paying their fair share in New Jersey. Closing tax loopholes is one way to do this. Expanding combined reporting in New Jersey would close corporate loopholes and help prevent multi-state corporations from artificially shifting profits out of state. This tax policy could raise up to $290 million in much-needed revenue each year to shore up underfunded investments like higher education and public transit.

New Jersey is currently experiencing income inequality the likes not seen since the Gilded Age. The top 5 percent of New Jersey’s households have average incomes more than 15 times greater than the bottom 20 percent. As income inequality continues to rise, New Jersey has an opportunity to reinstate tax rates and expand tax brackets on wealthy households that have far and away done better than families struggling to get by. By doing so, New Jersey could raise more than $1 billion more each year.

One of the most progressive and equitable taxes in New Jersey, the estate tax, was actually a growing source of revenue before it was eliminated last fall. Paid for by just 5 percent of New Jersey estates in any given year, this long-standing tax on inherited wealth is now being phased out, giving heirs an average tax break of $140,000 and costing New Jersey about $500 million a year – an amount that was projected to grow significantly each year despite the drumbeat myth that the wealthy were fleeing New Jersey in droves.

Bringing the estate tax back even with higher threshold could significantly steer New Jersey in the right direction again. For instance, reinstating the estate tax on estates worth $2 million or more, could recover three-quarters of the lost tax revenue while restoring responsible and fair taxation of inherited wealth. Moreover, New Jersey’s inheritance tax could be modified to ensure that wealthy heirs pay their fare share while ending the tax on modest inheritances of $500.

‘Relief’ Uneven for Families as Tax Cuts Start Going Into Effect

Posted on by Sheila Reynertson

It’s been three months since New Jersey’s gas tax went up in order to pay for critical investments in roads, bridges and public transit. The increase was long overdue – fuel taxes hadn’t been raised since 1990 – but that didn’t make it easier politically. In an attempt to soften the blow for New Jersey drivers, several new tax cuts have gone into effect. However, the bulk of these breaks will benefit New Jersey’s wealthiest families. And these tax cuts aren’t free – they’ll cost the state about $1.4 billion each year, at a time when New Jersey is already unable to pay its bills.

Let’s start with the good news. Yes, there’s good news.

Included among the tax breaks is a 17 percent increase in New Jersey’s earned income tax credit, providing, on average, an extra $116 at tax time to nearly 600,000 working families striving to get by in high-cost New Jersey. This added tax relief for low-income families is very timely, given the state’s rising poverty rates and a minimum wage that chronically fails the adequacy test. In fact, this EITC increase alone should ensure that the state’s poorest families – those earning under $45,000 a year – don’t pay the largest chunks of their incomes to the new gas taxes.

Unfortunately, lawmakers weren’t content to craft good policy for the state’s poor working families and call it day. In search of a “broad-based tax cut” and  to fix a mythical “outmigration” crisis, they also included gimmicky and unfair tax policies that have wealthy families clinking champagne glasses but leave the rest of us worried about our state’s capacity to create the kind of state we all want to live in.

The tax break to affect most New Jersey residents is the phase-in of a one-third percent drop in the state sales tax rate. This year’s tax cut means a savings of about 13 cents for every $100 spent. Next year it will be about a 40 cent savings. But to offset the expensive gas tax hike, one will need to spend $28,000 on taxable goods every year to match that hit at the gas pump. The more you buy, the more you’ll benefit from an unnoticeable sales tax cut. So families in the top 1 percent – with average annual incomes of $2.2 million – will see an average annual tax cut of $723, while those earning under $45,000 will get, on average, an annual tax cut of $46.50 – less than a buck a week.

And while it won’t really help most New Jersey families in any substantial way, the sales tax cut will sure cost the state a lot in lost revenue: over $600 million a year, to be precise. That is a direct hit to the state’s ability to adequately fund programs and services that benefit families and their communities.

The second-largest piece of the tax cut package is even more skewed to the state’s wealthiest families. Eliminating the estate tax will give around 4,000 inheritors of very large estates – the richest 5 percent of estates left behind, in fact – an average tax cut of about $140,000. These are the families who don’t have to worry about choosing between filling up the tank and buying food.

Proponents of killing the estate tax – which has been on the books for 80 years – claim that doing so will make wealthy families reconsider leaving New Jersey, but the data are clear: estate taxes do not drive wealthy retiree relocation decisions, and the existence of New Jersey’s estate tax has not been shrinking the state’s revenues or economy. In reality, the number of wealthy New Jerseyans has been steadily growing, as have estate tax revenues. Now New Jersey must go without this important revenue source and tool to fight inequality.

The gas tax increase, while not popular, will provide the state essential dollars to shore up the Transportation Trust Fund and get New Jersey’s roads, bridges and public transit back in shape. That’s an essential investment. But the trade-offs passed as part of the deal, in the end, will do more harm than good, providing a lavish tax break for those who need it the least and placing the state’s ability to pay for essential services, promised obligations and other critical investments in serious jeopardy. It’s a trade-off New Jersey simply can’t afford.

Don’t Take My Son’s Life-Saving Health Care Away

Posted on by Jon Whiten

This op-ed appeared in the February 5, 2017 edition of the Star-Ledger. 

As Congress inches toward repealing the Affordable Care Act with no apparent replacement, the health and lives of tens of millions of Americans hangs in the balance. My 4-year-old son is one of them, and I urge New Jersey’s four congressmen who recently voted to advance repeal to hear his story, to think about his future and to explain why they want to take away his affordable and life-saving coverage.

They are U.S. Reps. Frank LoBiondo (R-2nd Dist.), Chris Smith (R-4th Dist.), Leonard Lance (R-7th Dist.) and Rodney Frelinghuysen (R-11th Dist.).

In 2015, when he was just 2, my son Michael wasn’t doing well. He was lethargic, he was eating a ton but not gaining any weight and he was urinating excessively. Imagine our shock when we found out he had Type 1 diabetes, and was not just under the weather but nearly dead — his life saved only by the quick and decisive actions of our family pediatrician.

Before we get much further, let’s clear things up: Type 1 diabetes is not the same as Type 2 diabetes. Michael will have Type 1 diabetes forever, unless a cure is found. No amount of “diet and exercise” will make his chronic condition go away.

And no, Michael’s Type 1 diabetes wasn’t caused by him being overweight. It’s a genetic and autoimmune disease that about 40,000 children and adults are diagnosed with each year. In all, nearly 1.3 million Americans are living with Type 1 diabetes.

In other words, in the parlance of the Affordable Care Act, my 4-year-old son has a “pre-existing condition.” And he will forever.

This condition, I should note, is really expensive. Michael is kept alive by a vial of insulin, since his pancreas doesn’t produce a drop of the stuff. The insulin that flows into his little body through a mechanical pump has nearly tripled in cost in the past decade, according to the Journal of the American Medical Association.

Just last week, a class-action lawsuit was filed accusing three manufacturers of this life-sustaining drug of conspiring to drive up the costs of insulin.

Whether or not that’s true, the fact remains: This drug — and the laundry list of other drugs and supplies we have to keep to ensure our 4-year-old son stays alive — is not affordable without excellent health insurance. Luckily, we have been able to find affordable and comprehensive coverage for Michael on the ACA’s health insurance exchange.

In the past, insurers could discriminate against people like my son; their pre-existing conditions often led to higher premiums, or denial of coverage altogether. Thanks to the Affordable Care Act, that’s no longer legal.

As he gets older, and potentially faces a variety of serious medical complications from his diabetes, he’ll become a less and less “attractive customer” to health insurers whose primary concern is protecting their bottom lines. If the Affordable Care Act is no longer there to protect him from the vagaries of an industry with a long track record of putting profits before people, he will face enormous bills for health coverage. And that’s if he’s lucky enough to even be approved for coverage.

Make no mistake: Michael is not alone. In fact, over 52 million non-elderly Americans — including 1.2 million New Jerseyans — had declinable pre-existing conditions in 2015, according to the Kaiser Family Foundation.

Also unmistakable is the fact that, overall, Michael is very lucky. His parents (my wife and me) are middle-class professionals able to pay for his nonsubsidized insurance on the exchange. He’s not among the 14 million Americans — including more than half a million New Jerseyans, of whom about 100,000 are children — who have obtained coverage due to the ACA’s Medicaid expansion, people whose coverage will likely disappear after repeal takes effect.

And he’s not among the other 60 million low-income Americans (and 1.3 million New Jerseyans, of whom over 600,000 are children) on “pre-expansion” Medicaid (and NJ FamilyCare) who face grave threats to coverage, in the form of “block grants” that would lead to devastating cuts in service or eligibility as the federal government reduces spending on Medicaid by $1 trillion or so over 10 years.

As members of Congress move to repeal the Affordable Care Act, they need to be clear of the consequences. Repeal without an adequate and robust replacement will take affordable coverage away from my 4-year-old son and millions of others just like him. Putting their lives in jeopardy in order to score political points is not only a terrible way to make public policy, it’s immoral.

Our congressional leaders must stand up against this destruction.

Op-Ed: Immigration Orders Fly in Face of American Values

Posted on by Erika J Nava

This op-ed appeared in the February 1, 2017 edition of the Asbury Park Press.

Instead of creating an environment of inclusion and respect towards immigrants, President Trump has – with a few strokes of his pen – put New Jersey families at risk, put billions of taxpayer dollars needlessly on the line and turned America from a country welcoming “poor, huddled masses” to one dangerously shutting its doors. The president’s actions – if fully implemented – will also seriously damage New Jersey’s economy.

Building a wall at the taxpayers’ expense will not deter undocumented immigration. But it will cost at least $12 billion, according to most estimates, and as much as $40 billion. For an administration and Congress that is eyeing major budget cuts that will harm the well-being of tens of millions of American families in the name of “deficit reduction,” spending such unfathomable amounts on an ineffective wall is reckless at best. The idea floated last week to pay for the wall with a 20 percent tariff on Mexican imports would not only disrupt trade agreements around the world – it would end up brazenly passing the bill to American consumers, who would face higher prices for food (the U.S. imported $21 billion in Mexican agricultural products in 2015), cars and consumer goods made in Mexico.

Punishing decisions made by local police and policymakers to limit their voluntary involvement with federal Immigrations and Customs Enforcement (ICE) deportations puts the safety of residents of these “sanctuary cities” in jeopardy. And the latest research from the Center for American Progress and National Immigration Law Center shows this commonsense approach by local authorities also pays dividends for local economies. Counties with sanctuary policies not only have lower crime rates than non-sanctuary counties – busting the myth that sanctuaries are “safe havens” for criminal activity – they have stronger economies, with higher median household incomes, lower unemployment rates and less poverty.

Apparently facts do not matter to the President – or to our Governor, who recently voiced his support for taking federal funds away from New Jersey’s own sanctuary cities, even though such a move would clearly harm the Garden State.

Despite the executive order’s threat of drying up funding, some experts suggest that eliminating federal funding to sanctuary cities would be unconstitutional and halted by the courts. Simply put, federal ICE agents have to do their own deportation work, not rely on local police and local taxpayers to do it for them.

And banning refugees and legal permanent residents from seven Muslim-majority countries is an affront to core American values – and one that won’t make America any safer. In fact, no terrorist from these countries has perpetrated a lethal attack in the U.S., and the chance of being killed by any refugee is just 1 in 3.64 billion, according to the Cato Institute.

Here in New Jersey, we take pride in being the state with the third largest share of immigrants in the nation and the most diverse, with immigrants from all over the world, including refugees. Little known fact: New Jersey, along tied with California, has the highest share of Syrian immigrants in the nation.

This ban, the proposed wall and punishing sanctuary cities are all immoral, a violation of basic civil rights and an affront to basic American values and a serious blow to the American economy, which prospers from attracting enterprising immigrants from around the world. We all – including Gov. Christie – must stand in unison to reject these proposals.

Audit Finds Lax Oversight with Tax Subsidy Program

Posted on by NJPP Staff

Last night, NJTV News covered a recent state audit that found lax oversight of New Jersey’s business tax subsidy programs, and turned to NJPP President Gordon MacInnes for insight and analysis.

“It strikes us that the likelihood is very strong that most of the jobs that were retained — where the subsidy gets the credit — were going to stay anyway,” he said.

MacInnes heads the left-leaning New Jersey Policy Perspective. He points to Panasonic as an example.

“The chief financial officer — after the deal was struck — said, ‘Eh! That had nothing to do with our moving and staying in New Jersey,’” MacInnes said.

The audit found lax oversight, noting, for example, “…four of seven businesses reviewed had fewer employees than they needed to receive a full grant but their awards had not been adjusted.” In Camden the EDA offered companies like Lockheed Martin, Holtec and Subaru even bigger, enhanced tax breaks. But the audit examined that rationale and advised, “…such an increase should be questioned and revisited as it may not be in the best interest of the state.”

And MacInnes adds, the EDA can’t verify a company’s motive.

“Yet, that is the threat that is employed by supporters of these tax cuts, to say, ‘If you don’t do this, we’re going to see even greater flight out of New Jersey,’” he said.

A 35 Percent EITC is Good News for New Jersey Working Families

Posted on by Jon Whiten

EITCto35countychart-01

Increasing New Jersey’s Earned Income Tax Credit (EITC) will provide over half a million New Jersey working families with a much-needed bump in their take-home pay while giving the state’s economy a boost, according to a new report we released today.

As part of last year’s gas tax increase deal, the New Jersey EITC was increased to 35 percent of the federal credit, up from 30 percent of the federal credit. The change will help hundreds of thousands of New Jersey families this year during tax time, as the change applies to tax year 2016.

Working families across New Jersey will benefit from the governor and legislature’s decision to increase this important tax credit. Now Congress should take the next step in improving the EITC by expanding it for workers not raising children.

The report includes a county-by-county breakdown of the number of working families affected, and the increase in the EITC to those families, as well as other key information about this vital boost to this important tax credit.

Key findings:

Increasing the EITC to 35 percent will help nearly 600,000 New Jersey families whose members are working but not earning enough to get by in this high-cost state. These workers’ annual take-home pay will increase by an average of $116 (and by as much as $314), bringing the average total of state EITC dollars received to $811 a year

Boosting the EITC will help working people all over New Jersey. All but five of the state’s 21 counties have more than 10,000 households receiving the EITC, and more than half of them (12) have over 20,000 EITC households.

Increasing the EITC will help very poor families the most. Nine out of every ten New Jersey households that receive the EITC earn less than $30,000 a year. About three-quarters earn less than $20,000 and more than half – 61 percent – make less than $15,000.

Increasing the EITC will boost the economy. Increasing the state EITC to 35 percent will generate $69 million in new tax credits each year that will help boost local economies around the state, bringing millions of dollars of spending to almost every county.

Increasing the EITC Will Boost New Jersey’s Workers and Their Families

Posted on by Jon Whiten

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

Increasing New Jersey’s Earned Income Tax Credit (EITC) to 35 percent from 30 percent of the federal EITC will provide over half a million New Jersey working families with a much-needed bump in their take-home pay while giving the state’s economy a boost.

The state’s EITC supplements the federal EITC, an income tax credit for low-income working people that rewards work and boosts the pay of families across the country. Working families with qualifing children and earned incomes up to $53,505 (for married couples filing jointly and with three or more children in tax year 2016) are eligible for this tax credit; adults without children with earned incomes less than $14,880 are also eligible.

Working New Jerseyans are currently eligible to receive 30 percent of the federal credit received through the state EITC, which was created in 2000, rose to 25 percent in 2009, was cut to 20 percent in 2010 and was increased to 30 percent last year.[1] In 2013, the latest year for which state data are available, 576,400 New Jersey households claimed the credit on their tax returns.[2] In 2014, according to federal data compiled by the Brookings Institution, 594,700 New Jersey households claimed the federal EITC.[3]

Increasing the EITC to 35 percent will help nearly 600,000 New Jersey families whose members are working but not earning enough to get by in this high-cost state. These workers’ annual take-home pay will increase by an average of $116 (and by as much as $314), bringing the average total of state EITC dollars received to $811 a year.[4]

This income boost will be crucial for these working families in tandem with the fuel tax increases simultaneously approved by the legislature to invest in critical road, bridge and transit infrastructure. After all, low-income and middle-class families will pay a larger share of their incomes to these new fuel taxes than other New Jerseyans – and a boost to the EITC helps mitigate that impact.[5]

However, the large-scale tax package that included the fuel tax and EITC increases also included more than $1.3 billion in additional annual tax cuts that will disproportionately help higher-income New Jersey families while crippling the state’s ability to maintain services that are essential to low-income working families.[6] So it’s by no means all good news for low-income working families.

That said, with a 35 percent EITC, New Jersey will be a national leader in boosting the incomes of working families – and rightly so, given how expensive basic necessities like housing are here.

The Garden State now trails only the District of Columbia, which has a 40 percent credit; Minnesota and California have different structures that also allow for credits of more than 40 percent (the former’s range goes up to 45 percent; the latter’s, 85 percent).[7]

Families All Over New Jersey Will Benefit

eitc recip by county-01Boosting the EITC will help working people all over New Jersey. All but five of the state’s 21 counties have more than 10,000 households receiving the EITC, and more than half of them (12) have over 20,000 EITC households.

The largest counties in each part of the state have tens of thousands of EITC households, with Essex County having the most recipients in North Jersey, Middlesex County having the most in Central Jersey and Camden County having the most in South Jersey.

While there are greater concentrations of EITC families in New Jersey’s urban centers, the use of this tax credit has spread to more suburban counties as families all over the state struggle with long-term unemployment and stagnant wages or fewer hours for those who have jobs. Even affluent counties like Morris and Somerset, for example, now have over 10,000 EITC families.

Increasing the EITC Will Help Poor Families the Most

EITC incomes 2016-01Nine out of every ten New Jersey households that receive the EITC earn less than $30,000 a year. About three-quarters earn less than $20,000 and more than half – 61 percent – make less than $15,000.[8]

These are families that are clearly struggling to get by in high-cost New Jersey. The EITC is critical to their struggles.

For example, the budet needed to meet basic needs in the least expensive metro area of the state (the Ocean City area) is $29,662 a year just for a single, childless adult. Add one child to the mix, and that nearly doubles, to $55,672 a year. And this is the most affordable part of the state. In the most expensive metro area (the Middlesex/Somerset/Hunterdon area), the budget needed for basic necessities is $67,026 a year for that same single parent.[9]

In other words, it’s clear that even this modest boost to the take-home pay of these families will allow them to better meet basic necessities like food and rent and rely less on the social safety net to survive.

Boosting the EITC Will Make Tax System More Equitable

Despite having a relatively progressive income tax based on one’s ability to pay, New Jersey’s tax system is still backwards, with the lowest-income households paying the highest share of their earnings to state and local taxes each year. This is due to the regressive nature of sales and property taxes. One of the best ways to help make this upside-down system more equitable is to increase the EITC.

Increasing New Jersey’s EITC to 35 percent will reduce the share of state and local taxes paid by the poorest families. While these New Jerseyans in the bottom 20 percent, whose average annual income is a scant $15,000, will still pay the largest share of their income to these taxes, the gap between this group and other New Jersey households would have been reduced if the EITC increase happened in a vacuum.[10]

But it didn’t. Instead, the EITC increase was paired with a broad-based fuel tax increase that will affect nearly every New Jerseyan, as well as a slew of tax cuts that will benefit wealthier families the most. In the end, each income group in New Jersey will pay a greater share of their incomes to state and local taxes after all of the changes from the Transportation Trust Fund deal.[11]

Expanding This Tax Credit Will Boost New Jersey’s Economy

eitc dollars by county-01The EITC is also a big-time economic stimulus for local economies. The New Jersey EITC distributes nearly $400 million in tax credits each year throughout the state,[12] while the federal EITC puts nearly $1.4 billion a year into the pockets of working New Jerseyans.[13]

But the economic impact of the EITC goes beyond the specific amount credited to each family. Low-wage workers tend to spend these tax credits immediately and locally on short- to medium-term needs like clothes for their family, repairs to the family car, household items or catching up on past-due rent or utility bills.[14]

Increasing the state EITC to 35 percent will further boost the tax credit’s economic impact, generating $69 million in new tax credits each year that will help boost local economies around the state, bringing millions of dollars of spending to almost every county.[15]

The EITC Promotes Work, Raises Living Standards and Helps Lift Families Out of Poverty

The EITC, traditionally a strongly bipartisan measure, is perhaps the most powerful anti-poverty tool available, with significantly positive effects on families who receive it.

The tax credit promotes work, particularly in strong labor markets. During the 1990s, for example, EITC expansions did more to raise employment among single mothers with children than either the changes to welfare during that time or the strong economy.[16]

Lifting a low-income family’s income when a child is young, as the EITC does, improves that child’s immediate well-being, as the family is able to better meet basic needs. But these income boosts have also been tied to better health and more schooling for these children, as well as more hours worked and higher earnings once they become adults.[17]

The extra dollars that these low-wage workers and their families receive each year keeps more than 150,000 New Jerseyans above the federal poverty level each year, including 79,000 New Jersey children.[18] Investing in a program that does so much to help low-income families across New Jersey is common sense.

Next Up: Expanding the EITC for Adults Without Children

The EITC is a crucial tool that improves the lives of working families with children. But it falls short in boosting working adults without children, thanks to a low income cutoff (only those earning less than $14,880 qualify) and a high age threshold (eligibility begins at 25). As a result, working adults without children are the lone group of Americans that the federal tax code taxes into – or deeper into – poverty.

Expanding the EITC for low-income workers without dependent children would raise their incomes and help offset the impact of other taxes they pay.[19] And in a high-cost state like New Jersey, which leads the nation in the share of 18 to 34 year olds living at home,[20] this EITC expansion would help promote greater economic mobility for young workers, which in turn would help boost the economy.

Thankfully, national leaders from both political parties agree this is a problem. The proposals to fix the problem put forward by House Speaker Paul Ryan, Senator Cory Booker, Senator Sherrod Brown and others would help between 343,000 and 504,000 low-income working New Jerseyans across different ethnic groups and vocations.[21] 

Appendix: Impact of Increasing the EITC to 35 Percent by County

EITCto35countychart-01

Endnotes

[1] New Jersey Division of Taxation, Earned Income Tax Credit Information

[2] New Jersey Office of Revenue and Economic Analysis, Statistics of Income, 2013 Tax Returns, Summer 2015.

[3] NJPP analysis of Brookings Institution, Earned Income Tax Credit Interactive and Resources, Tax Year 2014. Source data available at https://www.brookings.edu/interactives/earned-income-tax-credit-eitc-interactive-and-resources/

[4] Ibid 3

[5] New Jersey Policy Perspective, Tax Increase to Fund Transportation Should Be Combined with Credit to Help Low-Income Families, January 2015.

[6] New Jersey Office of Legislative Services, Legislative Fiscal Estimate of A-12, October 2016. Note: NJPP used the low range of the estimated revenue loss for Fiscal Year 2022.

[7] Tax Credits for Workers and Their Families, State Tax Credits, 2016.

[8] Ibid 2

[9] Economic Policy Institute, Family Budget Calculator, 2016.

[10] Institute on Taxation and Economic Policy microsimulation model. For more on the methodology, see the Institute’s Who Pays? report: http://www.itep.org/whopays/

[11] Ibid 10

[12] New Jersey Division of Taxation, New Jersey Tax Expenditure Report, February 2016.

[13] Ibid 3

[14] The Brookings Institution, Using the Earned Income Tax Credit to Stimulate Local Economies, November 2006.

[15] Ibid 3

[16] Center on Budget and Policy Priorities, EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds, April 2015.

[17] Ibid 16

[18] Brookings Institution, Fighting Poverty at Tax Time through the EITC, December 2014.

[19] Center on Budget and Policy Priorities, Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, April 2016.

[20] New Jersey Policy Perspective, New Jersey’s Sluggish Recovery Hurting Working Families, September 2016.

[21] New Jersey Policy Perspective, EITC Expansion Would Provide a Crucial Boost to Hundreds of Thousands of New Jerseyans, October 2016.

New Jersey Should Welcome Immigrants

Posted on by Erika J Nava

This op-ed appeared in the January 18, 2017 edition of NJ Spotlight.

As the Presidential inauguration approaches, immigrants and advocates across the country – including in New Jersey, the state with the third largest share of immigrants – are preparing for a very real threat: mass deportations. New Jersey families are looking to local governments to lead a charge of resistance that is rooted in common sense and public safety, not fear-mongering. Here’s how.

Throughout the President-elect’s campaign, he falsely linked undocumented immigrants with crime while pledging to crack down on “sanctuary cities.” While there is no single definition of what “sanctuary” means, it typically refers to cities, towns, counties, and even states that limit their voluntary involvement with federal Immigrations and Customs Enforcement (ICE) deportations. This can take many forms. It can be outlined in a police department’s policy, passed via ordinance or be an executive policy directive – with local law enforcement approval – that clearly prohibits police officers from asking about anyone’s immigration status.

In addition, as part of a sanctuary policy, police departments or jails might honor the Constitution by declining to honor requests from immigration agents to hold undocumented persons behind bars to turn them over to ICE. Declining these legally dubious “ICE holds” means that people are released once the criminal justice process is complete and not endlessly warehoused in jails. This practice avoids costly lawsuits for violating basic constitutional rights. Anti-detainer policies are not limited to big cities but have been adopted in rural Kansas and in suburban Princeton, New Jersey.

In his anti-immigrant speeches, Trump regularly failed to mention that “sanctuary cities” are actually supported by many police departments. In other words, the police chiefs Trump praises at his rallies are the same ones he is going after when he labels sanctuary cities bad for public safety. In fact, an association of chiefs and sheriffs of the 68 largest law enforcement agencies in the U.S. has declared that requiring them to participate in immigration enforcement “would undermine the trust and cooperation between police and officers and immigrant communities, which are essential elements of community-oriented policing.” It’s no surprise that so many local law enforcement officials feel this way, since having local police departments become agents for ICE also diverts attention, time and resources from their primary role of protecting their community from real criminals.

And despite the President-elect’s assertions, a “sanctuary city” is not a safe haven for criminals. In fact, there is zero evidence of any link between crime and immigration status. Without evidence, anti-immigrant leaders are left to cherry-pick random and extreme anecdotes in order to paint a scary picture of immigrants. The one certain result of these unsupported charges is to push immigrant communities further underground and dissuade them from reporting crimes and serving as witnesses. This is hardly a public safety strategy.

For local communities, becoming a sanctuary promotes inclusion of all residents, regardless of immigration status, and respects everyone’s privacy. This includes not asking residents about their immigration status, or unnecessarily retaining such information in city databases. This helps explain why the eight cities in New Jersey that allow its residents to apply for municipal IDs, for example, do not keep supporting documents.

Despite the threats of the President-elect, some experts suggest that eliminating federal funding to sanctuary cities would be unconstitutional and halted by the courts. The U.S. Supreme Court has repeatedly ruled that immigration enforcement is a federal responsibility and struck down attempts to force states or localities do federal jobs as a violation of the anti-commandeering clause of the10th Amendment, which protects local government from being forced to do the federal government’s work. Simply put, in a sanctuary town, ICE agents have to do their own deportation work, not rely on local police to do it for them.

New Jersey’s local leaders should be focused on building stronger and safer communities, which includes welcoming immigrants regardless of their status. The New Jersey Alliance for Immigrant Justice is focused on helping towns and cities understand the actions they can take to send a clear message that all their residents will be treated with dignity and respect.

When it comes to public safety, one important step cities and counties can take is to send a clear message to all residents: our job is keeping the community safe, not volunteering to become ICE agents. Counties and municipalities should enhance their privacy and non-discrimination policies by not asking for the citizenship or immigration status of anyone unless it is required by law.

Counties and municipalities can also support their immigrant residents by establishing a fund to provide legal representation to poor residents in deportation proceedings, as well as establishing citizenship services and English classes.

Make no mistake: the threats to New Jersey’s families, its economy and its communities are huge. Deporting all half million or so undocumented New Jerseyans would, for example, lead the state’s economy to shrink by nearly 5 percent – the largest such drop of any state. And many families with both documented and undocumented members would be torn apart under such a plan, further destabilizing communities across the state.

In the face of these threats from D.C., the Garden State’s cities and counties have an opportunity to redefine what makes a sanctuary city. These polices are an investment in the reality that immigrants – both documented and undocumented – are huge assets to New Jersey and should be protected and nourished.

GOP Governors are Standing Up for Obamacare

Posted on by Raymond Castro

This op-ed appeared in the Sunday, January 15, 2017 edition of the Star-Ledger.

With this week’s late-night Senate vote, lawmakers in D.C. have begun their attempt to repeal the Affordable Care Act and Medicaid expansion. As the prospects of repeal have become more realistic, some courageous Republican governors are pressing Congress to protect the health coverage of millions of their constituents.

Time’s running out, and Gov. Chris Christie should join them now to make the urgent case to Congress and President-elect Trump to protect the most certain piece of his legacy: expanding Medicaid for over half a million low-income New Jerseyans.

In the State of the State address, Christie emphasized the critical role that the Medicaid expansion played in the state’s efforts to treat New Jerseyans addicted to opioid drugs. Over three-quarters of the funding for the governor’s major behavioral-health and substance-use disorder initiative this year was from federal Medicaid dollars. It is that very guarantee of federal matching funds for an unforeseen health crisis that Republicans in Congress want to eliminate. Yet while the governor spent the bulk of his State of the State on what he sees as the urgent need to fight addiction, he has thus far remained silent about protecting his best vehicle to fund that fight. That needs to change.

As a Republican with close ties to the Republican Party and the President-elect, Christie is in an excellent position to advocate for 530,000 struggling New Jerseyans who are at risk of losing the only health insurance if the Medicaid expansion is repealed. At the very least, the governor should tell New Jersey’s Republican Congressmen that it would be the height of irresponsibility to repeal Obamacare without replacing it at the same time.

In addition to preserving health care for hundreds of thousands of New Jerseyans, Christie has a lot riding on this issue because his decision to opt for the Medicaid expansion could arguably be considered his most important legacy as governor. The benefits to New Jersey have been stunning and unprecedented. Over a half million low-income, mostly working, residents have obtained health coverage, the primary explanation for the historic one-third decrease in the state’s uninsurance rate.  His decision has generated over $3 billion annually in federal funds for health care, which has helped create thousands of good jobs; and it has saved the state about $700 million each year, helping to balance the state budget.

The governor – one of 16 Republican governors who expanded Medicaid – is aware of the benefits to New Jersey, and in the past has enthusiastically defended his decision. Now, with the threat to health care access rising to new heights, it is time for him to do so again. By doing so, he’d be joining some of his fellow Republican governors from around the country, like Doug Ducey from Arizona, Ohio’s John Kasich and Rick Snyder from Michigan, who have already pressed Congress to spare their programs from repeal.

Christie’s case would be especially compelling because losing the Medicaid expansion would cause much greater harm to New Jersey than most other states. New Jersey saw the ninth largest increase in Medicaid enrollment in the nation due to the expansion. Taking away health coverage from hundreds of thousands of New Jerseyans could create a health care crisis of historic proportions, while a loss of up to $3 billion loss in federal funds would also wreak havoc in the state’s health care industry and its fragile budget and economy.

These are arguments that New Jersey’s Republican Representatives should listen to – especially if they are made by a fellow home-state Republican. In addition, they know the tremendous harm that such a loss in health care would mean in their districts. In fact, 145,000 New Jerseyans who are now covered under the Medicaid expansion live in their districts.

Christie also should urge New Jersey’s Congressional delegation to not repeal the ACA without first replacing it with something better. This goes far beyond the Medicaid expansion and includes the fate of the health insurance market, consumer protections and even Medicare improvements. A recent poll found that three in four Americans either do not want the ACA repealed or repealed without a replacement at the same time.

But that is not what the Republicans in Congress are planning; they want to repeal now, and then figure out how best to replace later. Since Congressional Republicans haven’t been able to agree on a replacement for the last six years, even though they have voted to repeal the ACA over 60 times, a healthy dose of skepticism regarding their interest in, or capacity to, enact a replacement is warranted.

And the proposals they have discussed – like more tax breaks for the wealthy, high deductibles for bare- bone plans, and reducing essential insurance benefits – would all be bad news for struggling New Jerseyans only making matters worse. The most damaging idea is a Medicaid block grant, which would permanently cap funding at a sharply reduced level. Medicaid is the major health safety net for 1.8 million New Jerseyans. This plan would not only threaten the working poor in the Medicaid expansion, it could result in devastating cuts to health care for seniors, people with disabilities and children for generations to come.

In his final year in office, Christie has a chance to do what’s right and clearly beneficial for New Jersey. Will he seek to protect essential health care for struggling residents of his home state, or will he sit on the sidelines while his party destroys a lifeline for millions of Americans?

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