Topic Category: Tax and Budget

Blueprint for Common-Sense Corporate Tax Reform

Posted on by Sheila Reynertson

This op-ed appeared in the May 26, 2016 edition of the Bergen Record.

opedgraphicFor the fourth time in six years, New Jersey is facing a budget gap with just a few months to close it. Last week we learned that the revenues expected over the next 14 months are short by at least $1 billion, mostly due to less than stellar personal income tax collections in April.

But while the personal income tax shortfall got the most attention, corporate income tax collections are also a problem, and were also downgraded by nonpartisan legislative analysts, falling short by $206 million. The Christie administration, though, expects corporate income taxes to remain flat – thanks to a little old-fashioned can-kicking.

To keep corporate collections from going into the red in 2017, the administration recommends again delaying payments of business tax subsidies to corporations that have now been waiting for years. This gimmick, which comes on top of an earlier conversion of these subsidy rebates into tax credits, is expected to save the state $135 million. Pro tip: If you’re trying to attract business to New Jersey with a huge surge in these subsidies, you might want to be prepared to pay for them when the bills come due.

Here’s another pro tip: There is a much better way to boost corporate tax collections while leveling the playing field for small, local businesses. It’s called “combined reporting,” and it’s a common-sense tax policy now employed by 25 states plus the District of Columbia. By updating the corporate tax code and closing a variety of remaining corporate tax loopholes, policymakers could ensure that all New Jersey businesses are paying their fair share – and raise up to $290 million a year in new revenue doing it.

As it stands, local businesses are more likely to have to pay taxes on all their profits, because, unlike multistate firms, they have nowhere to shift them. Without combined reporting, large multistate corporations end up paying income tax at a lower effective tax rate than small businesses. Recent legislation introduced by Senators Lesniak, Sarlo and Greenstein and Assembly members Holley, Eustace and McKnight would change that by expanding combined reporting, which treats the parent company and subsidiaries of multistate corporations as one entity for state corporate income tax purposes. A diverse group of 37 leading New Jersey organizations – from advocacy to labor to environmental to faith – have asked the legislature to implement this policy, and to do it soon.

Some major multistate corporations and business lobbyists oppose combined reporting, claiming it leads to costly tax compliance burdens. These corporate interests also threaten that combined reporting could lead to job losses if major employers leave the state or reject it for future investments. However, these stale concerns ring hollow because most of New Jersey’s largest employers – 92 of 98 – already operate in combined reporting states and, in some cases, have been doing so for decades.

While kicking the can down the road might help the Christie administration plug leaky corporate tax collections in the short term, it is not sustainable. Corporate taxes will continue to be a sticky spot in the budget for years to come, thanks to the record levels of lucrative tax subsidies awarded by the state over the past few years. Ignoring this no-brainer corporate tax reform sends a lopsided message to New Jersey businesses that have consistently played by the rules. It’s time to realign the corporate tax code in the name of genuine tax fairness.

NJPP’s Brandon McKoy Discusses Legalized Marijuana’s Revenue Potential

Posted on by NJPP Staff

When New Jersey United for Marijuana Reform and New Jersey Policy Perspective partnered earlier this week to release a new report on the positive revenue implications of legalizing marijuana in New Jersey, NJTV News was there.

As NJTV notes, the co-authored report estimates slightly more than $300 million a year in revenue from a fully phased-in legal and regulated market. The trick is undercutting the illegal market by keeping tax rates low to start.

“You will get people comfortable in participating in the legal market and they will come to be familiar with and appreciate the benefits of it being a safe place, ensuring the health and the safety of the product,” said NJPP Policy Analyst Brandon McKoy.

In Every County, Very Few New Jerseyans Owe Estate Tax

Posted on by Jon Whiten

FOR IMMEDIATE RELEASE: May 25, 2016
Contact: Jon Whiten, NJPP: 609-393-1145 ext. 15 | whiten@njpp.org

Report: In Every County, Very Few New Jerseyans Owe Estate Tax

Boosting the EITC a Better Option for Tax Fairness

estate-tax-by-county-01In 20 of New Jersey’s 21 counties, fewer than 400 heirs have estates large enough to owe the estate tax in any given year – and in the majority of counties, including every one in the southern part of the state, fewer than 200 heirs owe the tax, according to a new reportreleased today by New Jersey Policy Perspective (NJPP).

The report comes a week after the news broke that New Jersey is facing a $1 billion budget hole in the next 14 months, and in the midst of an ongoing campaign by the governor, some legislators and business lobbying groups to eliminate this tax on inherited wealth. Despite the fact that doing so would cost New Jersey $550 million in annual revenue, last week a leading Senator behind this push said efforts to eliminate the tax would continue, despite the state’s dire and worsening financial condition.

“Seeing how few people actually owe estate tax in each county reinforces the fact that wiping it off the books would benefit only the fortunate few and do actual harm to rest of New Jerseyans,” said Sheila Reynertson, NJPP’s Senior Policy Analyst and author of the report. “At a time when we get warning sign after warning sign about how broke New Jersey is, pulling $550 million a year out of our coffers is a big step in the wrong direction.”

The share of heirs that owe estate tax varies by county, from a low of 2.2 percent in densely populated Hudson County to a high of 9.1 percent in wealthy Morris and Somerset Counties. When fewer than 1 in 10 heirs in New Jersey’s wealthiest counties owe the estate tax, it’s laughable to assert that eliminating the tax will help the “middle class.”

Supporters of eliminating New Jersey’s estate tax think it must be part of a package deal to increase the fuel taxes needed to repair and maintain New Jersey’s deteriorating highway and transit networks in the name of so-called “tax fairness.” But eliminating the estate tax would leave New Jersey with $550 million less each year, seriously threatening support for things like public colleges, safe communities and health care.

If real “tax fairness” is the goal, it would be better served by enacting an increase in the state’s Earned Income Tax Credit, which would help offset the fact that low-income and working-class New Jerseyans would pay a higher share of their yearly earnings in fuel taxes than would more well-off households.

And the number of EITC recipients dwarfs the number of estate tax payers. The estate tax repeal would give a tax break to just 3,000 to 4,000 well-off households per year, the majority of whom live in a handful of New Jersey’s wealthier counties. Raising the state EITC would help nearly 600,000 households across the entire state – and cost about one-tenth as much as eliminating the estate tax.

“Eliminating the estate tax in no way guarantees that elderly residents will stick around to enjoy New Jersey winters. That’s fantasy,” said Gordon MacInnes, NJPP’s President. “But raising the EITC guarantees immediate fairness for low-income and working-class New Jerseyans who would actually notice the hit to their wallets from higher fuel taxes, unlike the state’s wealthiest households.”

In Every County, Very Few New Jerseyans Owe Estate Tax

Posted on by Sheila Reynertson

To download a PDF of this Fast Facts, click here.

estate-tax-by-county-01Eliminating New Jersey’s estate tax would seriously threaten support for the foundations of the state’s prosperity – like public colleges, safe communities and health care – all to save money for a very few of the state’s wealthiest households.

Each year about 70,000 people in New Jersey die. On average, fewer than 4,000 of the estates they leave – just 4 or 5 percent – owe any estate tax. These estates worth more than $675,000 belong to New Jersey’s wealthiest households.[1]

This means that in 20 of 21 New Jersey counties, fewer than 400 estates are large enough to owe the New Jersey estate tax in any given year, according to state Division of Taxation data.[2] This ranges between 2.2 percent (in Hudson County) and 9.1 percent (in Morris and Somerset Counties) of annual deaths in each county.[3]

The taxes that these heirs and heiresses pay on the wealth they inherit are an important – and growing – source of revenue that pays for priorities that benefit all New Jerseyans and help create more opportunities and shared prosperity. Eliminating the estate tax would leave New Jersey with $550 million less each year to help make our colleges affordable, our water and air cleaner, and our safety net stronger, according to independent legislative estimates.[4]

The dearth of residents across the state who owe the estate tax calls into question the claim that its elimination qualifies as “tax fairness” that would help the middle class. Rather, a look at who actually pays estate tax reinforces that wiping it off the books would benefit the fortunate few and do actual harm to rest of New Jerseyans.

The facts also debunk another claim made by proponents of eliminating the estate tax: that the number of New Jersey taxpayers subject to the tax is low because so many older people leave the state to avoid the tax. In fact, the revenue collected from New Jersey’s estate tax, and the related but separate inheritance tax, has grown by 44 percent in the past 13 years.[5] It is unlikely this would happen if people are fleeing New Jersey to avoid these taxes. And the state budget Gov. Christie proposed three months ago for the fiscal year that starts July 1 anticipates even more revenue from these taxes – an all-time high of $848 million.[6] The Office of Legislative Services 2017 estimate is now even higher, at $880 million.[7]

Some supporters of eliminating New Jersey’s estate tax think it must be part of a package deal to increase the fuel taxes needed to repair and maintain New Jersey’s deteriorating highway and transit networks. If real “tax fairness” is the goal, it would be better served by enacting an increase in the state’s Earned Income Tax Credit. Raising the state EITC would help nearly 600,000 households, all of which include people who work but are paid wages too low to make ends meet. This would help offset the fact that low-income and working-class New Jerseyans would pay a higher share of their yearly earnings in fuel taxes than would more well-off households.[8] Increasing the EITC would cost the state about one-tenth as much as eliminating the estate tax, and it would help far more New Jerseyans in every county.

estate-tax-vs-eitc-by-county-01

Endnotes

[1] New Jersey Policy Perspective, Eliminating the Estate Tax: Like Robin Hood in Reverse, January 2016.
[2] Using the Open Public Records Act, NJPP obtained information from the Division of Taxation that breaks down how many taxpayers in every county paid the estate tax in Fiscal Years 2013, 2014 and 2015. We use a three-year average of those figures in this analysis.
[3] NJPP analysis of number of deaths per county 2011-2013, as reported in the New Jersey Department of Health’s New Jersey Death Certificate Database, available at https://www26.state.nj.us/doh-shad/resources/BirthDeathData.html
[4] New Jersey Office of Legislative Services, Legislative Fiscal Estimate of S-1728, March 2016.
[5] NJPP analysis of annual Comprehensive Annual Financial Reports, available at http://www.nj.gov/treasury/omb/publications/archives.shtml
[6] State of New Jersey, The Governor’s FY2017 Budget Summary, February 2016.
[7] New Jersey Office of Legislative Services, Remarks of Frank Haines, Legislative Budget and Finance Officer to the Senate Budget and Appropriations Committee, May 2016.
[8] New Jersey Policy Perspective, Tax Increase to Fund Transportation Should Be Combined with Credit to Help Low-Income Families, January 2015.

Marijuana Legalization Could Bring $300 Million in Tax Revenue to New Jersey

Posted on by Jon Whiten

New Jersey would bring in hundreds of millions of dollars in new revenue by legalizing marijuana, a new report released by New Jersey Policy Perspective and New Jersey United for Marijuana Reform has found. Legalization, taxation, and regulation of marijuana for use by adults aged 21 and older would ultimately add an estimated $300 million in sales tax to state coffers rather than divert consumers to the illegal market, the two policy-focused groups said at a Trenton press conference.

“The lessons from around the country are loud and clear: marijuana legalization makes fiscal sense, and it makes practical sense,” said New Jersey Policy Perspective Policy Analyst Brandon McKoy, a co-author of the report (pictured at right speaking at this morning’s press conference). “Expanding economic opportunities and addressing our persistent budget deficit aren’t the only reasons to legalize and regulate marijuana, but they are extremely persuasive ones.”

The report estimates that New Jersey would bring in at least $300 million annually if marijuana legalization were fully implemented, using graduated tax increases over a three-year period, going from 5 percent, to 15 percent, to the final rate of 25 percent. The first-of-its-kind report in New Jersey relies on conservative estimates, predicting the tax revenue only from marijuana sales. The report’s projections are based on the experiences of other states, current information on marijuana users in New Jersey and the surrounding area, current pricing, and the tax structure of other states as they relate to New Jersey’s interests.

Including a small percentage of New Yorkers and Pennsylvanians from counties neighboring New Jersey who are expected to participate in the legal, regulated market, the state could take in approximately $305.4 million once the sales tax is fully scaled to 25 percent, the report said. The report estimates that approximately 343,100 New Jerseyans would participate in a legal marketplace, spending $1.2 billion each year. Currently, New Jerseyans spend more than $850 million on marijuana each year. The calculation of tax revenue was based on a price of $350 per ounce, similar to the current estimated price of $343 per ounce in New Jersey.

Legalization would bring other economic benefits not covered in the report, such as job creation, growth in business, research and development, and boosts in property, agricultural, business, and income taxes. In addition, it would increase public safety, protect young people, save resources, advance racial justice, bolster public health, and reduce the strain on the police, corrections, and the criminal justice system, the report argues. New Jersey arrests more people for marijuana possession each year than for any other crime. A June 2015 Rutgers-Eagleton poll found that 58 percent of New Jerseyans support legalizing, taxing and regulating marijuana for use by adults aged 21 and older.

“Facing yet another budget shortfall, New Jersey is again confronted with the untenable choice of either further draconian cuts or massive tax increases in order to balance the state budget,” said New Jersey United for Marijuana Steering Committee member Bill Caruso, Of Counsel at Archer & Grenier and former Executive Director of the New Jersey Assembly. “But, we have the ability to generate hundreds of millions of dollars in new revenue and create tremendous economic opportunities in our state by capitalizing on New Jersey’s geographic location and our world-class education and health care infrastructure. It’s time for New Jersey to get off the sidelines and into the game to join success stories like Colorado and Washington State. For every day that passes without safe and responsible legalization, taxation, and regulation of marijuana in our state, we are leaving money on the table.”

To set up a legal, regulated market and increase public health, the report recommends:

• Introducing graduated tax increases in the first three years

• Building flexibility into the tax rate to account for the challenges of transitioning from an illegal, unregulated market to a legal, regulated one

• Creating a board or committee focused on calculating the right tax rate for New Jersey, preventing use by individuals under 21, undercutting the prices of the illegal market, and maximizing revenue for the state

• Using tax revenue for critical state needs, such as expansion of drug-treatment, drug-abuse prevention, and justice reinvestment

“New Jersey can’t afford to wait – it’s time to legalize, tax, and regulate marijuana,” said Ari Rosmarin, a co-author and the Public Policy Director of the American Civil Liberties Union of New Jersey, which sits on the steering committee of New Jersey United for Marijuana Reform. “With just one vote, the Legislature can raise hundreds of millions of dollars annually, help end a civil rights injustice, and make sure that no more New Jerseyans see their lives ruined for something every president in the last 24 years has done. It’s time for common sense, and that means ending prohibition again.”

Four states and Washington, D.C., have fully legalized marijuana for adult use, and Nevada voters will consider a ballot measure in November to legalize marijuana. Twenty-four states, plus Washington, D.C., and Guam, have instituted medical marijuana programs, and 17 states have decriminalized marijuana possession but not legalized it. States that have legalized marijuana have seen revenues outpace initial estimates. Colorado is on pace to bring in $140 million in tax revenue from marijuana this year, according to the Tax Foundation. According to the Oregon Employment Department, the state has added 2,165 new jobs since its legal marijuana program launched in October 2015, and the sector is expected to see significant additional growth in the coming months.

Latest BEIP Proposal is Proof New Jersey’s Surge in Corporate Tax Subsidies is Unaffordable

Posted on by Jon Whiten

Yesterday the Christie administration proposed to “slow the implementation schedule of the conversion of BEIP grants into tax credits” as part of its plan to close a looming 2017 budget gap. This is just more proof that New Jersey’s surge in business tax subsidies is simply unaffordable.

This proposal – combined with projections released last week by the EDA showing a growing budget hole from BEIP and other subsidy programs – clearly shows that policymakers need to rethink this flawed economic development strategy, which favors short-term thinking over long-term prosperity.

When the state couldn’t afford to keep its commitments to these businesses, it converted the annual payments from budget line items to future tax credits, which kicked the can down the road and made the dollars lost to these subsidies harder to see.

Now the state can’t even afford the anticipated first-year loss from the tax credits, and is looking at kicking the can even further down the road.

If policymakers want to offer such lucrative tax breaks to corporations, they should make the hard choices and find the money to pay for them – not merely push the costs off to future policymakers, who will be forced to contend with an ever-shrinking pool of revenues to pay for pressing state needs.

New Jersey Should Give All Families a Shot at Success By Boosting Basic Assistance

Posted on by Raymond Castro

This op-ed appeared in the May 15, 2016 edition of the Star-Ledger.

With a record amount of wealth held by a relative handful of households while millions struggle to make ends meet, New Jersey isn’t a state where all families have a clear shot at success.

It’s time to reverse course, starting with those families whose kids face the toughest times by partially restoring the basic assistance they need to try to keep their heads above water.

Three factors drive New Jersey’s growing income inequality: nearly all the gains since the Great Recession have gone to the very wealthy, middle-income families have seen their incomes decline and the state has cut support for struggling families. Six years into the recovery, poverty is still the highest it has been in New Jersey in 50 years and what’s called “deep child poverty” – kids living in households earning less than $10,000 a year for a family of three – has continued to increase by a whopping 26 percent.

One of the main causes for deep child poverty is the erosion of basic assistance to New Jersey families facing the biggest economic challenges. Temporary Assistance to Needy Families (TANF) has not increased since 1987. If the maximum assistance payment of $424 a month for a family of three had kept up with the cost of living over those 29 years it would be $889 today. In 1989 the grant could at least cover nearly three quarters of the fair market rent for a two-bedroom apartment. Now, it has eroded to where it covers about a third. That means most TANF families can’t pay their rent, forcing many of them into shelters and ramshackle motels at far greater public expense, not to mention the trauma for children who lack stable homes.

For people who face it daily, poverty is more than a statistic. It’s a dangerous condition that significantly harms children’s development, reducing their ability to learn in school or hold a job when they become an adult. The stress from poverty literally rewires a child’s brain, causing permanent damage, research has found. These problems are greatest for the youngest children – and about half of all children in TANF in New Jersey are five or under. And child poverty is not only harmful to those who have to live with it every day – it is also very expensive for all of us — costing New Jersey about $13 billion annually in reduced productivity, poor health and crime. In the words of Frederick Douglass, “it is easier to build strong children than to repair broken men.”

Other states are starting to put all this together and deciding to invest in children now rather than pay much more later. Since 2013 alone, 11 states have increased TANF support. New Jersey’s assistance is the lowest in the Northeast and is now below the national average. And when the cost of housing is considered, 40 states – including very poor states like West Virginia and Kentucky – offer more adequate TANF support to struggling families than New Jersey. New Jersey’s TANF benefit has shrunk to 25 percent of the federal poverty level from 61 percent in 1981. What an embarrassment for the second richest state in the nation.

The erosion of TANF support and more restrictive eligibility means that families who get support find it doesn’t go far at all and more families facing desperate times get nothing at all. Since 1988, enrollment for parents and children is down 81 percent even as poverty has increased. The percentage of poor families with children participating in TANF in New Jersey has dropped much faster than the national average. Tragically, all this means that over 80 percent of all New Jersey children living in poverty are not receiving any help.

As part of Assembly Speaker Prieto’s efforts to fight poverty, he and State Senator Vitale have introduced much-needed legislation that begins to address these problems. It would boost TANF assistance by 30 percent over three years. And by requiring annual cost-of-living adjustments, it would also assure that state inaction would no longer deepen child poverty.

To create a state that works for all of us, New Jersey must redirect its policy priorities, away from lucrative tax breaks to corporations and the rich and towards struggling families who only want a fair shot. Creating equal opportunity for all is the key to prosperity. It can only be achieved if New Jersey begins by at least helping those most in need. This important piece of legislation from Speaker Prieto and Senator Vitale would help New Jersey achieve that essential goal.

Corporate Subsidies Keep Flowing as New Estimates Confirm They’re Creating a Growing Long-Term Budget Hole

Posted on by Jon Whiten

Today New Jersey will consider – and likely approve – $111 million in new tax breaks for corporations as the state’s surge in these subsidies continues.

If all of these tax breaks are approved, New Jersey will have OK’ed over $6.8 billion in subsidies since January 2010 – $4.2 billion of which has been approved since December 2013 alone under the misleadingly-named “Economic Opportunity Act.”

This flamboyant over-reliance on tax breaks to try to boost the state’s economy has done little to move the economic needle or grow good jobs. New Jersey, with among the most lucrative corporate subsidy offerings in the country, is one of just 10 states that hasn’t yet recovered all the jobs it has lost since the Great Recession’s official start in December 2007. This surge in subsidies is creating a long-term and growing economic drag that policymakers will have to grapple with for at least the next 15 years as the backlog of tax credits is paid out.

The regular monthly meeting of the state Economic Development Authority (EDA) comes after EDA officials appeared earlier this week in front of the legislative budget committees and released new estimates showing the damaging revenue consequences of already-approved subsidies.

These tax breaks will cost New Jersey an estimated $2.8 billion in fiscal years 2016 through 2020 alone, or an average of $550 million a year.

subsidy loss estimates may 2016-01

That’s a substantial amount of revenue that could be put to much better use by investing in the assets that, unlike tax breaks, are proven to grow New Jersey’s economy, like higher education or transportation, or providing a stronger safety net for the growing numbers of working New Jersey families and children who are living in poverty.

And the negative impact on New Jersey’s finances is only going to grow after 2020, as more of the corporations who’ve been approved for tax breaks in recent years cash in. Of the $4.1 billion in tax credits approved between December 2013 and April 2016, for example, only $12.9 million – or 0.3% – has been redeemed to date, according to the EDA.  

The approval of more than $100 million in new tax subsidies in a month has become so commonplace in New Jersey, it’s easy to dismiss it as routine business. But what we’re in the midst of is far from routine, and comes with crippling consequences for the Garden State.

New Jersey is already in an enormous financial hole, unable to meet its obligations, provide essential services for all who need them and maintain adequate investment in its key economic assets. And every month that our leaders continue down this path of unbridled corporate largesse, the deeper and wider the hole gets. It’s time for lawmakers to observe the cardinal rule of holes: when you’re in one, stop digging.

UP TO DATE DATA ON NEW JERSEY & CORPORATE TAX SUBSIDIES

(as of May 12 – today’s approvals or modifications will change these totals)

The 2010s Have Seen a Subsidy Surge

• $6.7 billion: The dollar amount of total business tax breaks approved by New Jersey since January 2010. This is up from $1.2 billion the entire previous decade.

• $88 million: The monthly rate of business tax breaks awarded since January 2010. This is up from $10.1 million in the 2000s.

• $59,700: The cost per job of these subsidies since January 2010. This is up from $16,400 in the 2000s.

2013 Legislative Overhaul Opened the Floodgates Even Wider

• $4.1 billion: The dollar amount of total business tax breaks approved by New Jersey since December 2013, when the 2013 legislative changes went into effect.

• $140.9 million: The monthly rate of business tax breaks awarded since December 2013.

• $83,000: The cost per job of these subsidies since December 2013.

New National Report Underscores Why New Jersey Needs to Preserve its Estate Tax

Posted on by Sheila Reynertson

Estate-Tax-Twitter Graphic 1Some New Jersey lawmakers are trying to take away one of the state’s most effective tools for both reducing inequality and building a thriving state economy at a time when the Garden State cannot afford to lose it.

The legislature is considering eliminating the estate tax as a bargaining chip to make a much-needed but unpopular gas tax increase more palatable. That would have disastrous consequences for essential public investments while putting more money into the hands of the state’s most well-off heirs, according to a new report by the Center on Budget and Policy Priorities.

As we have noted, a supermajority of New Jerseyans will never owe estate taxes. The tax, which is levied on all estates valued at more than $675,000, is paid by just 4 percent of estates per year.  At a time when the imbalance between the richest and the rest is so extreme, a huge tax break for those at the top would only make this economic inequality worse.

The report also highlights how the estate tax helps – not harms – a state’s economy. Money that is collected through New Jersey’s estate tax helps communities thrive by providing hundreds of millions of dollars for higher education, transportation, health care and safe communities. Eliminating this revenue puts New Jersey’s economic future at risk due to the harm that subsequent service cuts can have on businesses and communities that depend on those services.

The report makes clear that claims that the estate tax harms the state’s economy by causing retirees and others to leave the state are exaggerated and are backed up with no credible evidence to support them. A review of recent studies finds that taxes have little to no effect on whether and where people move, and that the estate tax specifically has a small effect on the residence decisions of the very wealthy elderly. That confirms what we see here in New Jersey, where collections from the estate and inheritance taxes have risen by over 40 percent over the last 13 years. The negative impact of the estate tax, therefore, has only a small effect on a state’s economy and revenue collections – certainly much smaller than the impact of eliminating it.

Policymakers who are concerned about record levels of inequality and making sound investments that benefit all New Jerseyans should take this report to heart, and preserve the estate tax. New Jersey is in no condition to lose it.

Increasing the EITC to 40 Percent Would Boost Working Families & Create True ‘Tax Fairness’

Posted on by Gordon MacInnes

The Earned Income Tax Credit is the best tool available to give New Jersey’s working families a shot at success. I want to commend the Senate President for being a champion for these families by pushing to increase New Jersey’s EITC to 40 percent of the federal credit.

The EITC boosts the incomes well over a half-million working families in New Jersey who aren’t paid enough to get by. It’s a proven policy initiated and sustained with strong bipartisan support with decades of success under its belt, and it’s a poverty solution well worth investing in. By boosting these families’ incomes, the EITC lifts – or keeps – many of them out of poverty and, crucially, gives their kids a better short at success later in life. Children from EITC families do better in school, and then have stronger employment prospects and greater earnings potential as they become adults.

And if you want tax fairness, the EITC is the most efficient and effective way to help fix a tax structure that is out of balance.

As it stands now, New Jersey taxpayers who are paid less than $22,000 a year pay the highest share of their income to state and local taxes: 10 percent of their incomes go to pay the tax bills. Meanwhile, the top 1 percent – folks with incomes over $758,000 – pay the least, with just 7.1 percent of their incomes going to taxes.

That’s because, even with a state income tax that is highly progressive and based on the ability to pay, other state and local taxes – namely property, gas and sales taxes – help make New Jersey’s overall state and local tax structure regressive.

If the EITC is increased from 30 to 40 percent, those poorest households would still pay the largest share of their incomes towards taxes, but not by nearly as much.

New Jersey is one of the most expensive states in the country, with housing costs in particular hamstringing the abilities of low-income and working-class families to move into the middle class and provide better opportunities for their children. Thanks to the leadership of the Senate President and the Assembly Speaker, policymakers have the opportunity to give these families a better shot at success – we hope they will seize it.

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