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Democrat’s Tax Break for Low-Wage Earners Would Be Second in Two Years

Assembly Speaker Prieto makes rare appearance before committee to urge lawmakers to boost NJ’s already generous Earned Income Tax Credit to 40 percent of federal allowance

vincent prieto
Assembly Speaker Vincent Prieto (D-Hudson) testifying before the Assembly Appropriations Committee.

The push by a key Democratic lawmaker to increase New Jersey’s version of the Earned Income Tax Credit for the second time in less than a year comes as state tax collections have continued to rebound in the wake of the recent recession, and as tax breaks for businesses have also been expanded several times by the Christie administration.

In a way, the effort looks a bit like history repeating itself. Gov. Chris Christie and Democratic legislative leaders worked together last year to increase the tax credit, which benefits New Jersey’s lowest-wage workers.

If successful, the effort would improve what is already one of the most generous state Earned Income Tax Credits in the country. Advocates for the poor say it is desperately needed, given New Jersey’s high cost of living. Assembly Speaker Vincent Prieto -- who this year is pushing a broad anti-poverty initiative -- personally testified before the Assembly Appropriations Committee yesterday to make that case.

But this not simply a matter of déjà vu. Winning support from Christie, a second-term Republican, and GOP lawmakers for another increase so soon after last year’s remains a challenge given there’s little money available right now for new tax cuts in the current state budget. The same holds true for the spending plan Christie has put forward for the next fiscal year. Prieto’s measure seeking to boost the credit passed the committee yesterday, but without any votes from Republicans.

Right now, New Jersey provides low-wage workers with a tax credit that is equal to 30 percent of the federal version of the Earned Income Tax Credit. More than 500,000 households in New Jersey qualify for the state credit, which totals about $630 for the average working family.

Christie worked with Prieto (D-Hudson) and other Democrats in the Legislature last June to bump the state version of the credit up from 20 percent of the federal credit. That effort came on the eve of Christie’s decision last year to jump into the 2016 GOP presidential primary, giving him a new tax cut to brag about on the campaign trail during his bid for the GOP nomination, which he abandoned last month.

The increase that was approved last year also reversed an earlier cut to the same tax credit that Christie enacted shortly after taking office in early 2010 while New Jersey was in the midst of the Great Recession. He said last June that since state tax collections had improved once the recession ended, the tax cut for the working poor was a top priority.

“I have always stated that I would reduce taxes for the working poor as soon as the budget allowed,” Christie said at the time.

But Prieto, the sponsor of the measure that seeks to again increase the state’s Earned Income Tax Credit, said many in New Jersey still struggle with poverty even while working fulltime, but in low-paying jobs. Increasing the state credit up to 40 percent of the federal credit would boost the benefit for the average working family up to $963, he said.

“That’s something that’s so important for working families,” Prieto said while testifying before the committee, which is something top legislative leaders rarely do. “That would really help the working poor in the state of New Jersey.”

New Jersey already has one of the most generous state Earned Income Tax Credits in the country, according to a report released earlier this year by the Center on Budget and Policy Priorities. Increasing the credit to 40 percent would put New Jersey above neighboring New York, which also has a state credit equal to 30 percent of the federal credit.

In testimony provided to the committee yesterday, Brandon McKoy, a policy analyst at New Jersey Policy Perspective, a liberal think tank based in Trenton, said the tax credit also makes a real difference for New Jersey families in danger of slipping into poverty.

“The extra dollars that these low-wage workers and their families receive each year help keep many of them out of poverty,” he said.

The proposed increase would also provide a benefit to the broader state economy, which still has not recovered all of the jobs lost to the recession, McKoy said. “The EITC is a direct shot in the arm for local economies, since families tend to spend these tax credits immediately and locally on short- to medium-term needs like buying clothes for their family, repairing the family car, replacing household items like furniture, or catching up on past-due rent or utility bills,” McKoy said.

No one testified against the proposed increase during the committee hearing. And the measure passed the committee, which is controlled by Democrats, along party lines in an 8-2 vote.

Christie spokesman Kevin Roberts, when reached after the hearing ended, repeated a concern that has been issued by the governor in the past about the impact that measures that are proposed outside of the state budget that would have an impact on it.

Revenue collections for the current state budget have remained only slightly ahead of the Christie administration’s projections. And Christie’s $34.8 billion proposed spending plan for the fiscal year that begins July 1 counts on the state Earned Income Tax Credit remaining at 30 percent of the federal version of the credit.

“Any discussion as it relates to spending in the upcoming fiscal year needs to happen in the context of the budget, and the Speaker is well aware of that position,” Roberts said.

But Christie in the next fiscal year is also planning to extend a series of business tax cuts that are costing the state an estimated $660 million in the current budget.

Committee Chair John Burzichelli (D-Gloucester) said approving the proposed Earned Income Tax Credit increase and other measures to combat poverty embody goals that lawmakers have identified for the state if the resources are available to fund them.

“We do it to establish priorities,” Burzichelli said.

“The status quo is not acceptable,” added Prieto. “Hopefully we will have the funds to be able to do it.”

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