It’s time to add one more tax break to the list being considered by lawmakers in Trenton as they try to come up with a bipartisan deal that would result in a renewal of the state’s going-broke Transportation Trust Fund.
Inserted yesterday into an ongoing conversation about improving New Jersey’s overall “tax fairness” that’s been playing out in the State House over the past several months was a declaration by Senate President Stephen Sweeney (D-Gloucester) that boosting a tax credit for the state’s lowest-wage workers needs to be at the foundation of any effort to make state tax policies more equitable.
Sweeney’s statement comes as the Senate has been facing criticism from the left this year for publicly toying with the idea of making several tax-policy changes, including phasing out the estate tax, that many have viewed as being only beneficial to the wealthy.
But his public push for increasing the state’s Earned Income Tax Credit yesterday drew praise from anti-poverty advocates and other groups. And while the state Assembly has already approved a measure seeking to boost the credit, it remains to be seen whether the change will make it into what lawmakers hope will be a broad, bipartisan tax-policy deal that’s enacted by the end of June.
The decision by Democratic legislative leaders to put changes to longstanding state tax policies on the table this year stems from their desire to see the state’s gas tax hiked to renew the New Jersey Transportation Trust Fund. The fund pays for more than $3 billion in annual road, bridge, and rail-network improvements throughout New Jersey, counting federal matching dollars, but the current five-year financing plan is set to expire on June 30.
Christie has yet to say exactly how he plans to renew the fund, which is deep in debt and has already reached its. While he hasn’t embraced the gas-tax hike sought by Democrats, he also hasn’t ruled out striking a broader deal with lawmakers that would involve trading the hike for other cuts sought by Republicans to provide overall tax fairness.
That’s led Democrats -- with Sweeney and others in the Senate taking the lead -- to discuss a series of possiblethat would come with an increase in the gas tax, which at 14.5 cents is the second-lowest in the country. The list of proposed tax breaks has included phasing out New Jersey’s estate tax and also increasing how much income from pensions, annuities, 401(k) plans, and other sources of retirement income can be exempted from the state income tax. Creating a New Jersey income-tax deduction for has also been floated in talks of a broad tradeoff.
But the talks have drawn, since many in New Jersey are not subject to the estate tax, which exempts the first $675,000 of assets. They’ve also argued any gas-tax hike would hit the state’s working poor the hardest by eating into a bigger percentage of their overall income than those in higher tax brackets.
Sweeney attempted to reframe the discussion yesterday by saying any talk of establishing “tax fairness” should also involve making life easier for New Jersey’s lowest wage earners.
He threw his supportsponsored by Sen. Shirley Turner (D-Mercer) that would increase the state’s Earned Income Tax Credit from 30 percent of an identical federal credit up to 40 percent of the federal credit. The change would affect more than 500,000 low-income workers and increase the average state credit from $675 to $900.
“If there’s going to be that conversation, the working poor cannot be left out,” Sweeney told reporters during a news conference in the State House. “If you’re going to do anything you have to start there.”
“We’ve got to be better,” added Turner, a longtime proponent of increasing the credit. “We can do better, and by increasing the Earned Income Tax Credit we will do better and the people who are struggling the most will do better.”
If the increase is ultimately enacted, it would leave New Jersey tied with Washington, D.C., among those offering the most generous credits linked to the federal tax break.
The proposed boosting of the credit won praise yesterday from anti-poverty advocates and other groups, including New Jersey Policy Perspective. The liberal think tank based in Trenton has been among theof the proposals to phase out the estate tax and allow charitable contributions to be deducted from state income taxes.
“If you want to find a way to really implement tax fairness, the best and most efficient way to do it is to enact the increase in the Earned Income Tax Credit,” said Gordon MacInnes, the organization’s president.
If approved before the end of June, the increase in the tax credit would be the second in the past year. Christie -- on the eve of announcing a bid for U.S. president last year that he ultimately abandoned -- asked Democraticto support boosting the credit from 20 percent to 30 percent of the federal version. They quickly agreed, setting the credit at its current level.
The governor’s office did not respond to a request for comment on the new push to increase the credit again, but a spokesman earlier this year said any discussions would have to occur within the context of a new state budget that must be approved by June 30, a deadline set in the state constitution.
Bradley Schnure, acting director of communications for the Senate Republicans, issued a statement yesterday suggesting the GOP caucus would be willing to take a close look at Turner’s bill.
“Senate Republicans are always willing to discuss opportunities to reduce the tax burden and provide tax relief for the people of New Jersey,” he said.
And though Sweeney and Assembly Speaker Vince Prieto (D-Hudson) have been enmeshed in a high-profileover the best way for the state to help cash-strapped Atlantic City avoid bankruptcy, they appear to be in agreement when it comes to helping the state’s working poor. An identical Assembly version of the sponsored by Prieto passed the lower house back in March.
“I’ve said all along this progressive bill represents real tax fairness and should be a centerpiece of our effort to combat poverty,” Prieto said. “Hopefully we can now get this bill to the governor’s desk sooner rather than later.”