Topic Category: Tax and Budget

Workers and Advocates Urge Lawmakers to Stop the Corporate Millionaires Tax Cut

Posted on by NJPP Staff

A day before Governor Murphy delivers his annual budget address, workers, policy experts, and advocates from For The Many NJ gathered outside the State House to urge lawmakers to stop the corporate millionaires’ tax cut and maintain the Corporate Business Tax surcharge in next year’s budget.

Eliminating the 2.5 percent surcharge, paid on every dollar of corporate profit over $1 million, would cost the state at least $650 million in revenue every year. The coalition warned that the tax cut would blow a big hole in the state’s budget and threaten investments in essential public services, programs, and infrastructure that residents and businesses alike rely on.

“Low and moderate-income families are struggling to make ends meet. Sunsetting the corporate business tax and undermining our current and future progress as a state would be a mistake,” said Antoinette Miles, Political Director of New Jersey Working Families and emcee of the press conference. “The only promise our state must fulfill in its budget is the promise of uplifting working families — not the largest multi-million dollar corporations.”

According to a report released last week by New Jersey Policy Perspective, only the top 2 percent of businesses operating in New Jersey pay the surcharge, including multi-national corporations not headquartered in the state like Amazon, Walmart, and Bank of America.

“This is a tax cut for some of the wealthiest corporations on the planet, not ‘Mom and Pop’ businesses,” said Sheila Reynertson, Senior Policy Analyst at New Jersey Policy Perspective. “When big corporations don’t pay what they owe, we all have to make up the difference, either in higher taxes or in cuts to vital public services like schools and transportation. We should know by now that corporate tax cuts never trickle down. This is a bad deal for New Jersey.”

Speakers from the coalition urged lawmakers to pass a budget that would benefit all residents, not just corporate shareholders.

“While working families struggle to pay for rent and food every month, multi-billion dollar corporations like Amazon are reporting record profits,” said Rodney Salas, leader and member of Make the Road NJ. “New Jersey cannot give bad actors like Amazon a tax break. Letting the (CBT) expire would mean that working people would have to subsidize billionaire corporations like Amazon that are making record profits. Working people do not want to subsidize corporations. It is time to invest in housing, schools & working families, not to give tax cuts to billionaire corporations like Amazon in the FY2024 budget.”

“We urge Governor Murphy and the NJ Legislature not to walk away from a successful policy that reversed the state’s fiscal damage and ensured the viability of important investments in low- and moderate-income New Jerseyans,” said Dena Mottola Jaborska, NJ Citizen Action Executive Director. “If our leaders reverse the CBT surcharge while we are simultaneously seeing a deep drop in federal funding, the state’s fiscal health will take a huge hit largely at the expense of our most vulnerable communities. All for a windfall for the state’s wealthiest corporations while jeopardizing funding for a host of programs that millions of residents need to achieve economic security. Progress for these communities requires sustained investment and commitment.”

“Cutting the corporate business tax surcharge is giving money to our wealthiest corporations, those in the top 2% of earnings,” said Francine Pfeffer, Associate Director of Government Relations at NJEA. “That’s $600 million the state doesn’t have to help schools pay for new ventilation systems, student transportation, or other needs.”

“Investments to protect New Jersey’s environment and public health have long been short-changed and allowing the millionaires tax for Corporations to expire on Dec 31st this year will be disastrous. Clean energy programs for the poor and mass transit capital projects are already defunded; climate programs are underfunded and delayed when they need to be expanded to meet the moment; and a cut to the corporate business tax will make matters worse resulting in a direct cut of $48 million to green and blue acres,” said Eric Benson, Clean Water Action, NJ Campaigns Director. “We are running out of time to make a meaningful impact on emissions before the worst impacts of the climate emergency become our NJ children’s future and we can’t afford to let New Jersey’s richest corporations, who have thrived in the last three years, off the hook.”

“Allowing the CBT surcharge to sunset would be yet another giveaway to the wealthiest corporations who already exploit tax avoidance loopholes to maximize short-term profits,” said Richard Lawton, Executive Director of the NJ Sustainable Business Council. “Since 98 percent of New Jersey businesses have revenues that make them exempt from the surcharge, eliminating it would only compound the unfair competitive advantage that large out-of-state companies already have over local businesses who do their part as responsible citizens to make New Jersey a great place to work and live.”

“The Christian church began our 40 day tradition of reflection, confession and renewal this past week on Ash Wednesday. We confessed that we are in bondage to sin and submit too readily to the idols and injustices of economic life. We often rely on wealth and material goods more than God, and close ourselves off from the needs of others. Too uncritically we accept assumptions, policies, and practices that do not serve the good of all,” said Rev. Sara Lilja, Executive Director of Lutherans Engaging in Advocacy Ministry NJ (LEAMNJ). “Today we call on all people of faith to question the decision of the Governor to let the Corporate Business Tax surcharge expire. Cutting the CBT puts vital funding for public services at risk — like investments in public infrastructure, health care, and public schools. Just as the federal government is pulling back on SNAP assistance for hard working families, or TANF benefits to those most in need, we as a state must continue to assist. If the pandemic taught us anything, it is that we rely on “essential workers” for our daily life, we must continue to support all New Jerseyans; and continue to fund programs that support families in the hight cost state.”

Keeping the Corporate Business Tax surcharge in place generates more than $600M per year and at a time when future federal windfalls are in doubt, making this revenue stream permanent is more essential than ever,” said Matthew Hersh, Director of Policy and Advocacy of the Housing and Community Development Network of New Jersey. “Corporate landlords are raising rents at unconscionable rates — between 20 and 40 percent statewide – while benefiting from huge tax breaks. NJ has long been a leader in many sectors, but when it comes to housing the approximately 200,000 neighbors in need of an affordable home, we continue to fall short. Working closely with the Murphy administration and our legislative allies, we have made great strides toward funding and allocating the Affordable Housing Trust Fund, creating the Affordable Housing Production Fund for towns with unmet Fair Share housing obligations, prioritizing first-time and first-generation homeownership and emergency rental assistance. But we cannot take our foot off the pedal now as we HouseNJ: the CBT is a key part of funding these priorities, and we cannot and should not reverse course.”

“It is unconscionable that New Jersey lawmakers would give tax cuts to the state’s largest corporations that make millions of dollars in profits every year instead of investing those funds in transformative policies that would narrow our massive racial wealth gap and create a more equitable New Jersey for everyone,” said Harbani Ahuja, Associate Counsel, Economic Justice, New Jersey Institute for Social Justice. “$600 million could go a long way in funding programs like Baby Bonds, to enable low-income and low-wealth Black and other children of color to build wealth and economic security.”

“Now is the time to address the future of New Jersey’s economy. The Corporate Business Tax has significantly supported investments and policies critical for maintaining the high quality of life New Jersey has to offer,” said Kelly Conklin, President of the Main Street Alliance Board. “As it stands, the CBT is New Jersey’s third largest source of revenue. To sunset the surcharge, of which only 2% of New Jersey businesses are taxed, will not help small businesses. Main Street businesses will have to pick up the revenue tab left by large multinational corporations, adding an undue burden to the struggles small businesses face year over year to make their margins, keep pace with inflation, retain their employees with competitive benefits and manage personal responsibilities. To sunset the CBT is to forfeit $664 million a year and force families in this state to spend an entire second income on child care. To sunset CBT is to give away $664 million to companies recording record profits while simultaneously laying off tens of thousands of employees. Without this funding public infrastructure like our roads, public spaces, schools and more will crumble. Corporations that qualify for the CBT have long avoided paying their fair share of taxes, placing the responsibility on small businesses and other vulnerable communities. Eliminating the Corporate Business Tax surcharge is not in the best interest of small businesses in New Jersey.”

Watch a livestream of the event here.

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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 left behind.

Stop the Sunset: Corporate Tax Cut Would Benefit the Biggest and Most Profitable Businesses

Posted on by Sheila Reynertson

Editor’s Note: This report was updated on March 15, 2023 to reflect that the proposal to eliminate the Corporate Business Tax surcharge would cost New Jersey $1 billion in annual revenue, according to Governor Murphy’s FY 2024 Budget in Brief. A previous version of the report estimated it would cost at least $600 million annually.

With corporate profits at record-breaking levels and tax evasion on the rise, New Jersey lawmakers are poised to give the biggest and most profitable businesses operating in the state a multi-million dollar tax break at the end of 2023. A proposal to eliminate the Corporate Business Tax surcharge will cost New Jersey at least $1 billion in annual revenue, threatening the state’s ability to sustainably fund programs and infrastructure that families, communities, and businesses rely on.[1] This change would only benefit a select few highly profitable corporations, providing an average tax cut of $5 million to companies with more than $100 million in annual profits.

The Corporate Business Tax Surcharge is Targeted to Corporations That Can Afford It

The Corporate Business Tax (CBT) is New Jersey’s third largest source of revenue, supporting vital investments — like transportation infrastructure, open space, pre-K-12 schools, and so much more — that make the state an attractive place to raise a family or start a business. In 2018, state lawmakers amended the corporate tax code by adding a surcharge on profits over $1 million.[2] This targeted change helped the state meet its longstanding obligations, like ramping up school funding and making full pension payments, and generated sustainable funding for safety net programs and public services at the height of the pandemic.[3]

Only the wealthiest corporations are required to pay the 2.5 percent tax on every dollar of net profit above $1 million, including multi-national businesses like Amazon, Walmart, and Bank of America that do business in New Jersey but are not headquartered here. The vast majority of New Jersey businesses, 98 percent, do not pay the surcharge at all because their annual profits fall below the $1 million profit threshold. In fact, just over 2,500 corporations pay the surcharge, according to the most recent state data.[4] By targeting mega-corporations that make millions, if not billions, in profits every year, the surcharge is a sustainable revenue stream paid by the businesses that can afford it, sparing “mom-and-pop” businesses across the state.

Allowing the CBT surcharge to sunset at a time of unprecedented corporate profit margins would come at a significant cost while primarily benefiting a select few, ultra-profitable businesses. Roughly 70 percent of the corporate tax cut would go to businesses with more than $10 million in annual profits. Corporations with more than $100 million in profits would receive the largest tax cut, averaging $4,952,000.

Corporations Are Making Record Profits While Paying Less in Taxes

New Jersey’s strong CBT revenue collections in the last few years are a clear indicator that corporations are thriving, and the surcharge has neither hurt their bottom line nor driven them out of the state — an exaggerated talking point favored by business lobbyists to lower their tax obligations. From 2009 to 2021, corporate tax revenue in New Jersey increased by 212 percent, with the largest increase happening between 2020 and 2021, the latest year data is available.[5]

And while the most profitable corporations in New Jersey may be paying slightly more in state taxes, they continue to avoid paying what they truly owe by taking advantage of loopholes in the tax code and lobbying for tax cuts at the federal level. Wealthy corporations received a massive tax cut during the Trump administration, as the 2017 “Tax Cuts and Jobs Act” cut the U.S. federal corporate tax rate from 35 percent to 21 percent,[6] its lowest level since 1946.[7] The tax law also maintained blatant tax loopholes commonly used by wealthy corporations, allowing them to send their profits to tax havens like the Cayman Islands, completely disinvesting from the United States.

Tax avoidance is so common — and without consequence — that the amount of questionable tax dodging by corporations has nearly doubled in a decade’s time from $164 billion in 2010 to $235 billion in 2020.[8] Until the Internal Revenue Service rebuilds its hollowed out workforce, especially employees with experience working with complex tax filings, wealthy corporations can and will continue to reap the benefits of a rigged tax code.[9] Recouping a portion of this foregone revenue at the state level is an entirely appropriate countermeasure to these blatant efforts to minimize business tax obligations.

Maintaining the Surcharge Benefits Working Families and the State’s Finances

Revenue generated by the surcharge will be necessary to balance the state budget as pandemic-related federal assistance expires. Signed into law in March 2021, the American Rescue Plan (ARP) provided billions of dollars in flexible funding for states and local governments to begin reversing the harms done by the pandemic and promote an equitable economic recovery. New Jersey’s state government received $6.2 billion in flexible aid, helping lawmakers maintain funding for public programs and services and expand financial assistance to renters, public hospitals, small businesses, and child care providers, among others in need.[10]

Once federal funds are gone, new and recently expanded programs and services will require funding from the state, and there will be less revenue to go around if the CBT surcharge is eliminated. The state’s new universal newborn home visit program, for example, tapped $6 million in one-time fiscal recovery dollars to fund the first year. That casts doubt on whether the state will be able to sustainably fund the program in future years. Similar concerns arise around ARP allocations for programs that are normally supported by state funds, like grants for mental health services ($15 million) and capital improvement projects across the state ($50 million).

With rising costs, growing obligations, and looming end of federal relief aid, policymakers must provide a path of sustainability for the economic future of the Garden State. That starts with a commitment to long-lasting renewable revenue to meet the state’s current and future needs and a permanent surcharge on wealthy corporations is a smart first step.

 

End Notes

[1] State of New Jersey, Department of the Treasury, Office of Revenue and Economic Analysis, New Jersey Corporation Business Tax: Statistical Report for Return Years 2016–2018, August 2022. https://www.state.nj.us/treasury/economics/documents/pdf/stats/CBT-100-SOI-TY2016-2018.pdf#page=22;Legislative Fiscal Note for A4721, September 2020. https://www.njleg.state.nj.us/bill-search/2020/A4721/bill-text?f=A5000&n=4721_E1

[2] Chapter 48. https://pub.njleg.state.nj.us/Bills/2018/PL18/48_.PDF

[3] Chapter 95. https://pub.njleg.state.nj.us/Bills/2020/PL20/95_.PDF

[4]State of New Jersey, Department of the Treasury, Office of Revenue and Economic Analysis, New Jersey Corporation Business Tax: Statistical Report for Return Years 2016–2018, August 2022. https://www.state.nj.us/treasury/economics/documents/pdf/stats/CBT-100-SOI-TY2016-2018.pdf#page=22

[5] U.S. Bureau of Economic Analysis and U.S. Census Bureau at Federal Reserve Bank of St. Louis Economic Research Division, Federal Reserve Economic Data, https://fred.stlouisfed.org (Last updated Dec. 22, 2022). Without comprehensive public data on corporate profits in New Jersey, CBT revenue collections can be used as a proxy given that the tax is paid as a percentage of profits made in the state.

[6] The Tax Cuts and Jobs Act (TCJA), Public Law 115–97.

[7] Tax Policy Center, Historical Corporate Income Marginal Tax Rates, Tax Years 1942-2022, February 2022. https://www.taxpolicycenter.org/statistics/marginal-corporate-tax-rates

[8] The Washington Post, As IRS audits waned, big businesses racked up unapproved tax breaks, July 2021. https://www.washingtonpost.com/business/2021/07/14/corporate-tax-break-irs/?itid=hp-more-top-stories

[9] ProPublica, How the IRS was gutted, December 2018. https://www.propublica.org/article/how-the-irs-was-gutted

[10] New Jersey Policy Perspective, New Jersey Has Less than $1 Billion Left in American Rescue Plan Funds, August 2022. https://www.njpp.org/publications/blog-category/new-jersey-has-less-than-1-billion-left-in-american-rescue-plan-funds/

Unions, Advocates, and Policy Experts Urge Lawmakers to Say No to Corporate Tax Cuts

Posted on by NJPP Staff

On Friday, members of For The Many NJ sent an open letter to Governor Murphy, Senate President Scutari, Assembly Speaker Coughlin, and members of the Senate and Assembly Budget Committees calling for the extension of the Corporate Business Tax surcharge.

“This is exactly the wrong time to be giving the most profitable corporations a $600 million tax cut. Such a gift for corporations and their shareholders takes away resources from our schools and infrastructure and undermines funding for areas that promote opportunity for all,” the letter states.

The Corporate Business Tax surcharge is a 2.5 percent tax on corporate profits exceeding $1 million. The surcharge is paid by the top 2 percent of the wealthiest corporations operating in the state, including multi-state corporations like Amazon and Walmart that make profits in New Jersey but are not headquartered here. The tax cut is estimated to cost the state at least $600 million annually.

“The wealthiest 2 percent of businesses should be paying more, not getting a tax cut when everyday New Jerseyans are struggling,” the letter continues. “We keep hearing about kitchen-table issues and middle-class New Jerseyans. How will corporate tax cuts help them?”

The letter was signed by 28 organizations and labor unions, including: New Jersey Policy Perspective, New Jersey Institute for Social Justice, ACLU of New Jersey, Latino Action Network, 32BJ SEIU, CWA, and the New Jersey Education Association.

The letter calls for lawmakers to extend the Corporate Business Tax surcharge so the state can continue investing in the programs that make New Jersey an engine of economic growth and opportunity.

A copy of the letter can be read here.

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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.  

Letting the Corporate Business Tax Surcharge Expire Will Give a Huge Tax Cut to the Most Profitable Businesses

Posted on by Nicole Rodriguez

In an interview with Bloomberg TV earlier today, Governor Murphy said that he plans to let the Corporate Business Tax (CBT) Surcharge expire at the end of the calendar year, giving the biggest and most profitable corporations a $600 million tax cut. The CBT surcharge is only paid by the top 2 percent of the wealthiest corporations operating in the state, including out-of-state corporations like Amazon and Walmart. This announcement comes one day after the governor’s State of the State address where he slammed states that hand massive tax cuts to wealthy individuals and mega-corporations. In response to the announcement, New Jersey Policy Perspective (NJPP) released the following statement.

Nicole Rodriguez, President, NJPP:

“This is a tax cut for some of the biggest businesses in the world, plain and simple. With corporate profits at record levels and millions of New Jersey families struggling to keep up with rising costs, this represents the absolute worst of trickle-down economics. To be clear, this would not benefit mom-and-pop businesses but corporations like Amazon and Walmart that make billions of dollars every year off the backs of low-paid workers.

“A day after the governor centered his State of the State address on creating opportunity for everyone, this tax cut will blow a hole in the state budget and make it even harder to fund the very programs and services that would do just that. New Jersey’s long-term economic and fiscal health will be in jeopardy if lawmakers allow more than half a billion dollars to go back into shareholders’ pockets rather than addressing the urgent needs of our communities.”

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State of the State 2023: Rapid Reaction

Posted on by Sheila Reynertson

Earlier this week, Governor Phil Murphy delivered his annual State of the State address, offering a vision of New Jersey where we can raise the standard of living, strengthen our communities, and build a thriving economy. But in a speech centered on creating opportunity for all, there were few details or new proposals on how we’d get there as a state, with little mention of the lives and experiences of New Jersey families living paycheck-to-paycheck.

To make New Jersey more affordable for working-class and low-income families, the state needs ambitious investments in those who have historically been left behind in the policy-making process — by fully funding our schools, creating more affordable housing, and expanding working family tax credits — and a fair tax code that can sustainably funds such investments. New Jersey’s prosperity must be shared with the many, not hoarded by the few, especially if we want to expand opportunity for all who call the Garden State home.

Below are the rapid reactions of what was in address — and what was missing — from policy analysts Sheila Reynertson, Peter Chen, and Marleina Ubel. 

Sheila Reynertson
Senior Policy Analyst (Tax and Budget)

In his State of the State address, Governor Murphy went out of his way to distinguish New Jersey from other states that favor deep tax cuts over high-quality education and healthy communities. But make no mistake: New Jersey’s current economic success is in spite of a tax code that remains rigged in favor of uber-wealthy families and giant corporations with record-breaking profits, undermining public services that create opportunity and help communities thrive.

Similarly, Governor Murphy conflated New Jersey being a leader in new and emerging industries with his offerings of corporate tax subsidies, as though businesses would have never chosen to expand in the Garden State without them. This is simply not true. Taxes are rarely at the top of the list of reasons why businesses would choose to relocate or expand in a state. And an ever-larger body of evidence clearly demonstrates that tax subsidies have a much lower rate of return on investment than people-centered investments like affordable child care, pre-K education, and college tuition aid — the tried and true building blocks of a strong state economy.

Instead of more corporate tax cuts and credits, lawmakers should demand corporations pay what they truly owe so that New Jersey can fund programs that foster opportunity for all:

  • Stop the $600 million corporate business tax cut for New Jersey’s wealthiest corporations scheduled to take effect Jan 1, 2024.
  • Close the giant tax loopholes that multistate and multinational corporations use to shift taxable income out of state and invest those funds in programs that support working families and strong communities.


Peter Chen
Senior Policy Analyst (Children and Families)

For a speech that focused at the outset on pathways of opportunity in New Jersey, there were few new policies highlighted for kids and families.

Although there was a much-needed victory lap for more funding for schools and a state-level child tax credit, concerns facing families with children such as child care, preschool, and housing costs got little air time, even though Governor Murphy and the Legislature have made progress in those areas. Considering PK-12 schools account for nearly half the state’s annual budget, it was surprising to see education get less attention than liquor licenses and soccer.

But what are the policies that will help make a fair shot at economic success a reality for New Jersey families? A few suggestions:

  • Expand working family tax credits: The Earned Income Tax Credit and Child Tax Credit both put money back in families’ pockets to help them pay for basic costs. Expanding these two programs would give families the cash they need to meet New Jersey’s high cost of living.
  • Reform cash assistance programs: WorkFirst New Jersey needs reform to help people in extreme poverty get back on their feet and stop the cycle of poverty. These reforms almost crossed the finish line once. Without a cash assistance program that focuses on ending poverty instead of punishing it, opportunity will remain an illusion.


Marleina Ubel
Policy Analyst (Criminal and Legal Systems)

The Governor spent a great deal of his speech focused on “justice,” security, and safety. Unfortunately, those words were tied to exaggerated rhetoric around car thefts, which are already declining. The Governor also touted some questionable criminal justice investments and policy priorities, like spending $10 million dollars of American Rescue Plan funds on automated license plate recognition technologies for law enforcement and allowing police to pursue stolen vehicles in high-speed chases — a reckless and, frankly, deadly policy change.

This approach to criminal justice is a theme in Trenton, unfortunately. There is also pending legislation that would ramp up the penalties for stealing a car to a second-degree crime, a change that is most likely to harm young Black and brown residents. Increasing penalties and enforcement does not work. It has never worked. “Tough on crime” approaches do not lead to security and safety, and they certainly do not advance “justice.”

Some ways to make New Jersey a more just state?

  • Eliminate public defender’s fees: Public defenders in the state of New Jersey come with a price tag, and in many municipalities, an application fee. Constitutional rights should not be behind a paywall. Residents in New York and Pennsylvania do not have to pay for public defenders and neither should the people who need them most in New Jersey.
  • Pass legislation to hold police accountable: A variety of bills have been languishing in the legislature. Black and brown New Jerseyans have been asking for policies that will make their communities safer, and these bills are among top priorities. None of them have made it to the Governor’s desk.

 

There was, however, a high point in the speech concerning harm reduction services, which do improve the safety and well-being of communities. New Jersey is going to be the first state in the nation to allow any pharmacy to provide anonymous and free Naloxone to any person, any time. This will undoubtedly save lives and is an important step in undoing the harms caused by the War on Drugs.

Opportunity for All is Not Possible With a Tax Code Rigged for the Few

Posted on by Nicole Rodriguez

Earlier today, Governor Phil Murphy delivered his annual State of the State address. In his remarks, the Governor reflected on the need to create opportunity for all New Jersey residents. In response to the address, New Jersey Policy Perspective (NJPP) released the following statement.

Nicole Rodriguez, President, NJPP:

“Governor Murphy is right to tout new state programs and laws that give working families a shot at success, from the child tax credit to the rising minimum wage. But with one in ten families living in poverty, and many more struggling to keep up with high costs, the state cannot afford to rest on its laurels.

“Opportunity for all requires new, ambitious investments in families who have historically been left behind and need the most help. It requires fully funding our schools, increasing tax credits and safety net programs for those with the lowest incomes, along with sound tax policies to support those programs in the short- and long-term.

“The governor slammed states that hand huge tax cuts to wealthy individuals and mega-corporations, but he was silent on how his administration will make sure New Jersey doesn’t follow that same path. Some legislators are poised to hand over $600 million in tax cuts to the most profitable corporations in the country, including Amazon and Walmart, even if it threatens the fate of the opportunity-building programs the governor highlighted in his address.

“Opportunity for all will not be possible with a tax code that favors a wealthy, select few.”

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Digital Taxation Hits a Roadblock, But Alternative Route to Taxing Big Tech Shows Promise

Posted on by Sheila Reynertson

New Jersey’s economy has rapidly changed in the 21st century, but the state’s tax code has not kept up with this progress. After a failed attempt to tax high-speed stock transactions, state lawmakers have gone back to the drawing board on ways to tax staggering profits in the digital economy, starting with a study on how the blockbuster industry is currently untaxed, undertaxed, and ways to address that. While that report has yet to be released, developments in other states are starting to draw a roadmap of how these policies could work in practice.

Last month, a Maryland Circuit Court judge ruled that a first-of-its-kind digital tax law was unconstitutional. The new law, aimed at big tech firms, would have taxed revenues derived from digital advertising services at rates between 2.5 and 10 percent, depending on the annual gross revenues of the business. The tax was estimated to raise up to $250 million per year to fund K-12 education across Maryland before it was challenged in court by Verizon and Comcast.

The presiding judge said the law violates the Constitution’s prohibition on state interference with interstate commerce and the federal Internet Tax Freedom Act (ITFA), which forbids discrimination against running an online business. The Maryland Comptroller, the suit’s defendant, has since recommended that the state Attorney General drop the appeal and revisit the matter in the next legislative cycle.

Tax experts largely agree — though not entirely — that the law’s fatal flaw was its vulnerability to an ITFA challenge, and that states should pursue other approaches to taxing big tech outside of digital advertising.

It’s the Data, Stupid

Wealthy corporations are getting a windfall through the free extraction and commercial use of the public’s personal data — from the products you buy online, to the emails you write, to where you spend your time, and so much more. Not only do consumers give up valuable information with no knowledge or meaningful ability to prevent it, but they also are being manipulated by the use of their data. That sort of manipulation has huge societal costs, including poor mental health, misinformation and political polarization, not to mention the swift growth of extreme concentration of political and economic power and the hollowing out of local news outlets.

A tax on the collection of big data is really a form of compensation for data mining, and state lawmakers have every right to impose one. But it must withstand legal challenges from the tech industry. While the Maryland digital advertising tax was ruled unconstitutional, New York may have found an alternative pathway: Senator Liz Kreuger has proposed a bill that would levy a tax on the collection of New York consumer data by commercial data brokers.

The new tax would be easy to administer because it would be calculated using an industry figure called “active (or unique) monthly users” as the tax base, according to this tax model. And tax policy experts say it actually addresses the real problem —  the tax-free accumulation and concentration of massive wealth drawn from big data — better than a tax on advertising would. Data collectors amassing consumer data would pay an annual tax based on the number of active monthly users. Revenue estimates of the New York proposal range from $57 million to $150 million a year, depending on the collection size threshold and tax rates.

Taxing Profits Derived From Big Data

Lawmakers should also consider a separate tax on the extreme wealth generated by big data. This additional tax would get to the heart of another major issue — massive profits made by big tech companies with a near monopoly on the digital economy. The recently enacted federal 15 percent minimum tax on “book” profits offers an enforceable measure of excess profit to build upon at the state level. However, more corporate business tax reforms (looking at you, foreign tax haven loophole) would be necessary to get the most out of this capital value tax in New Jersey.

Whether it’s data mining or the profits made from it, the concept is the same: Focus on the collection of data, not the internet. It allows policymakers to take a stand on a unique industry that is building and concentrating extreme wealth while avoiding the scrutiny of an interstate commerce court challenge. It’s time for New Jersey to rightfully tax the collection of residents’ data and for big tech to begin paying what they rightfully owe.

Less Than 1% of New Jerseyans Hold Over $746 Billion in Wealth

Posted on by NJPP Staff

A tiny fraction of New Jersey families hold a staggering amount of the state’s wealth, according to a new 50-state report by the D.C.-based research organization the Institute on Taxation and Economic Policy (ITEP). The wealth inequality highlighted by the holdings of these extremely wealthy families limits economic opportunities for everyday New Jerseyans, and both reflects and exacerbates racial inequality. Tax policy is a critical way that policymakers could start addressing this inequality, but right now federal and state tax codes barely tax extreme wealth at all, and instead often favor sources of income that are derived from wealth.

“Runaway wealth inequality is an enormous problem for New Jersey, but the good news is that we have the tools to fight it,” said Sheila Reynertson, Senior Policy Analyst at New Jersey Policy Perspective (NJPP). “Closing the tax loopholes that have helped build so much of this nation’s extreme wealth is a commonsense way that lawmakers in Trenton and D.C. can combat inequality and promote opportunity.”

The report defines extreme wealth as the wealth held by households with net worth over $30 million. This tiny fraction of families holds more than one in four dollars of wealth in the U.S. ITEP estimates that total extreme wealth will reach $371 billion this year in New Jersey and $26 trillion nationally.

Other key findings:

  • A nationwide tax of 2 percent on wealth over $30 million could have raised nearly $415 billion if it were in effect this year, including $9 billion from extremely wealthy New Jerseyans.
  • This tax would affect just 1 in 330 households in New Jersey, or 0.30 percent of the population. Nationally it would affect 0.25 percent of the population.
  • Ninety-two percent of extreme wealth is owned by white, non-Hispanic families.
  • A large share of New Jersey’s extreme wealth – 40 percent – is held in the form of unrealized capital gains, meaning investment income on which these families have yet to pay tax (and may never pay tax under current law). Nationally, this share is 43 percent.
  • A tax on the stock of unrealized gains in 2022 could be expected to raise between $529 billion and $3.9 trillion nationally depending on the tax rate chosen and the percentage of gains deemed to be realized. This includes between $3 billion and $54 billion from extremely wealthy New Jerseyan. The report models six different policy options for taxing unrealized gains.

 

In addition to a wealth tax or a tax on unrealized capital gains as outlined above, the report identifies other ways to strengthen the federal taxation of extremely wealthy people, including:

  • taxing increases in wealth annually as an asset grows (mark-to-market taxation)
  • taxing increases in wealth before they are passed on to heirs (ending stepped-up basis)
  • eliminating the tax preference that makes tax rates on realized capital gains lower than on income from work
  • strengthening the estate tax
  • creating an inheritance tax

 

All of these are viable policy options for lawmakers looking to curb wealth inequality.

At the state level, tax codes are already overwhelmingly regressive when it comes to income – and are even more lopsided when it comes to wealth. State lawmakers seeking to fix this imbalance in New Jersey’s tax code also have several readily available options as identified in the report, such as:

  • implementing new or increased current top income tax rates
  • raising rates on realized capital gains income
  • enacting progressive taxation of real estate wealth
  • strengthening taxation of corporate profits and
  • reinstating or enhancing estate and inheritance taxes

 

“A very small number of households hold a staggering share of nationwide wealth, and they’ve been able to grow their fortunes in part because our tax system asks very little of them,” said Carl Davis, ITEP’s research director and an author of the report. “New and strengthened taxes on extreme levels of wealth could dramatically reduce the runaway inequality we face today.”

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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 strategic communications.

The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.

More Transparency Needed in American Rescue Plan Funding Process

Posted on by NJPP Staff

With only a fraction of New Jersey’s federal American Rescue Plan (ARP) funds remaining, a diverse coalition of labor unions, essential workers, and advocates called for more transparency in how funds are spent — and for lawmakers to provide direct relief to workers and families harmed most by the pandemic.

“If used correctly, these federal funds provide a once in a lifetime opportunity to invest in families and communities harmed most by the pandemic,” said Sheila Reynertson, Senior Policy Analyst at New Jersey Policy Perspective (NJPP). “But with more than $5 billion appropriated behind closed doors and few details available to the public, lawmakers must do a better job of providing direct relief to workers, families, and communities who need the most help, and in a transparent manner that invites public input before new spending is approved.”

Roughly 85 percent of the state’s $6.2 billion in ARP funds have already been appropriated without an opportunity for members of the public to weigh in on proposals before they’re approved. Unlike typical legislative hearings where policy experts, community members, and advocates have an opportunity to testify on proposals before they’re voted on, ARP funds have been approved either by Governor Murphy or members of the Joint Budget Oversight Committee without a chance for members of the public to provide feedback.

“We urge transparency in the State’s decision-making and allocation process for these remaining funds, and that New Jersey use these funds to bolster the financial recovery and stability of countless residents still reeling from the pandemic’s economic fallout,” said Maura Collinsgru, Director of Policy and Advocacy at New Jersey Citizen Action. “This includes $500 million for the 120,000 eviction prevention applicants who have not yet received financial assistance to remain in their homes, extending funding for families who received general or emergency assistance during the pandemic and now face termination in order to sustain their recovery, and expanding staffing and infrastructure in anticipation of the Public Health Emergency’s end so none of our 2 million residents enrolled in NJ FamilyCare are left behind. We cannot ignore now many New Jerseyans’ ongoing pandemic recovery or risk undoing much of the hard work of the last two years.”

Even after ARP funds are appropriated, the public documents detailing the approved projects often lack any meaningful description of where the funds will go. For example, lawmakers allocated $300 million worth of ARP funds to water infrastructure, but without basic details, it’s unclear which communities will benefit. Another $300 million was granted to Rutgers University, but only thanks to a reporter’s diligence did we learn that a third of it will pay for new sports facilities.

“Essential workers like me saved lives during the pandemic — we shouldn’t have to worry about how to make rent or put food on the table,” said Mariana Velasquez of Make the Road – New Jersey. “But with increasing inflation, we are struggling to survive. Our elected officials have a choice: They can ignore the issues impacting our communities, or they can use remaining federal funds to provide critical relief to essential workers through hazard pay and a permanent expansion of the safety net.”

More than $2.4 billion of ARP funds were appropriated in the latest state budget that took effect July 1. These appropriations did not include direct relief for immigrant workers, hazard pay for essential workers, rental assistance, or cash assistance for residents living in poverty who maxed out their benefits through the Temporary Assistance for Needy Families (TANF) program.

“The fight for hazard pay for essential workers is one that needs to be a priority for the State of New Jersey,” said Kevin Brown, Executive Vice President and New Jersey State Director for SEIU 32BJ. “Essential workers and their families are in great need of recognition and change. They deserve fair compensation for providing a safe and reliable environment for commercial tenants and apartment residents while putting themselves, their coworkers, and their families at enormous risk. Hazard pay for essential workers is a crucial step towards equity and fairness in the Garden State, and these issues need to be discussed openly and with transparency.”

“The American Rescue Plan dollars have the opportunity to be transformative for long-festering needs where lack of investment was exacerbated by the shock of the pandemic’s impacts,” said Doug O’Malley, Director of Environment New Jersey. “More than two years after the onset of the pandemic, those needs are still there and we should have a more transparent process to give people the chance to publicly testify to the JBOC committee on the proposed spending plans. There are clear needs for our state’s environment and infrastructure from crumbling water infrastructure and lead service lines and the need for more reliable NJ Transit bus and rail service – and the public should have more of an opportunity to weigh in.”

“The State must invest $30 million to fund a comprehensive Language Access Bill ensuring that government meets the needs of our diverse families through timely, accurate translation and interpretation,” said Laura Bustamante, Policy and Campaign Manager at New Jersey Alliance for Immigrant Justice. “At no time was this need more evident during the COVID-19 pandemic. New Jersey is a leader in the diversity and size of our immigrant communities, so it is fitting that we are now leading with the country’s most expansive language access proposal. We expect nothing less than a transparent process from our government on how this ARP funding will be allocated and demand that it be allocated to programs like these that support the resilience and recovery of our communities.”

“Our children continue to struggle with the impact of the pandemic — we urge the Governor to devote a small portion of remaining ARP funds to expand community school approaches to more high-poverty public schools throughout our state,” said Greg Stankiewicz, statewide coordinator of the New Jersey Community Schools Coalition. “Moreover, we stand with our colleagues in calling for increased transparency in how the Governor and Legislature distribute these vital federal recovery funds.”

“Given the opaque process and very limited time for public input, we worry that the public’s best interest will not be prioritized,” said Joe Marchica, Co-Chair of Our Revolution Trenton Mercer. “Direct aid is the most beneficial economic stimulus method, both for people in need and the whole economy. We ask for substantial funding for hazard pay, undocumented New Jerseyans, and aid sent directly to low- and no-income people. That’s what should take priority — not more corporate tax breaks and kickbacks.”

“We are at a critical juncture when it comes to funding climate, lead service line replacements, waste water and drinking water infrastructure, mass transit not highway expansions,” said Amy Goldsmith, New Jersey State Director of Clean Water Action. “ARP funds must be used wisely to expand the Garden State’s capacity to create family-supporting green jobs, protect our communities from harm, and lift up people and places that have largely been left behind or out of the economy in the past because of the color of their skin or the ZIP code they live in.”

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For The Many NJ 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 left behind.

New Jersey Has Less Than $1 Billion Left in American Rescue Plan Funds

Posted on by Sheila Reynertson

With less than $1 billion remaining in federal American Rescue Plan (ARP) funds, New Jersey’s unique opportunity to provide immediate relief to families and communities harmed by the pandemic is quickly slipping away. Roughly 85 percent of the $6.2 billion dollars in ARP funds have already been appropriated by Governor Murphy and state lawmakers, with more than $2.4 billion worth of federal funds included in the latest state budget. It’s hard to say whether this recent spending aligns with the Biden administration’s guidance to direct relief towards those disproportionately harmed by the pandemic, however, given the lack of transparency and publicly available information on these appropriations.

If used as intended by the Biden administration, ARP funds offer a once-in-a-lifetime chance to advance racial equity by investing in communities that were hardest hit by the pandemic and historically left behind in the lawmaking process. But with more than $5 billion appropriated behind closed doors and few details available to the public, lawmakers can and must do a better job of providing direct relief to workers, families, and communities who need the most help — and in a transparent manner that invites public input.

Newest Allocations Aid Institutions But Ignore Direct Assistance

The new state budget that took effect July 1 includes some big investments that align with how ARP funds should be spent: affordable housing development ($305 million), lead paint removal from homes ($170 million), new facilities to advance universal pre-K education ($120 million), and almost $100 million to upgrade state operations for social services.

But, despite repeated calls from policy experts, community leaders, and advocates to prioritize disproportionately harmed residents, elected leaders failed to deliver adequate direct relief to those who need it. The new ARP allocations through the budget did not include direct relief for immigrant workers, hazard pay for essential workers, rental assistance for those struggling to keep a roof over their head, or cash assistance for residents who maxed out their benefits through the Temporary Assistance for Needy Families (TANF) program. These deliberate choices made behind closed doors represent a lost opportunity to meet the moment and meaningfully improve the lives of New Jersey residents who are not paid enough to get by or cannot work at this time.

Transparency Not Treated as a Priority

Based on current, available documentation, each new allocation of ARP funds in the budget lacks any kind of description, meaning there is no way to tell who exactly benefits from hundreds of millions of dollars worth of spending. For example, lawmakers allocated $300 million to water infrastructure, but without basic details it’s unclear which communities will benefit and which will be left behind. Another $300 million was granted to Rutgers University, but only thanks to a reporter’s diligence do we learn that a third of it will pay for a new sports facility. Middlesex County’s community college and improvement authority each received $20 million, but without some context it’s difficult to determine the relevance of these one-time investments.

In other cases, the allocation goes to a new or existing program that will require ongoing funding, drawing into question the state’s commitment toward its success once the federal funds are gone. Case in point: The state’s only public hospital received $50 million for a building assessment plan, but with no guarantee that the plan will be implemented. The state’s new universal newborn home visit program was signed into law with much fanfare, but using these one-time fiscal recovery dollars ($6 million) to fund the first year casts doubt on whether the state will be able to sustainably fund the program in future years. Similar concerns arise around allocations for programs that are normally supported by state funds, like child-care subsidies ($48 million), grants for mental health ($15 million), and capital improvement projects across the state ($50 million).

The lack of information on ARP allocations calls into question whether some of these investments were necessary at all — especially for funds sent to private institutions that should have plenty of resources to cover the costs themselves. For example, $13 million has been granted to two health systems for “hospital infrastructure” and workforce education. The state should require extensive oversight of grants to private institutions at a minimum, including clawback provisions should misuse of this aid come to light.

What’s Next for ARP Funds

The state now has less than $1 billion remaining in state fiscal recovery funds that have yet to be designated — not including the $300 million in discretionary funds which the Governor can disburse in amounts of $20 million or less. The Joint Budget Oversight Committee (JBOC) will meet quarterly to approve proposed allocations above that $20 million threshold. The public has not been granted a meaningful process by which to weigh in on how the remaining dollars are spent and, based on the uneven quality of issuances so far, that must change. Lawmakers can start by allowing public testimony at future JBOC hearings — consistent with most other legislative committee hearings — so that policy experts, essential workers, and community leaders alike can weigh in on ARP spending proposals before they’re approved.

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