Tax-Credit Hike Helps NJ’s Working Poor — and May Also Help Candidate Christie

Governor’s conditional veto could put $120M in pockets of low-wage earners, and make Democrats' signature issue his own

Gov. Chris Christie caught Democrats who control the state Legislature off guard last week when he proposed increasing a tax credit for the state’s lowest-paid workers. It’s the Democrats who have been trying unsuccessfully for the past several years to get Christie to reverse a cut to the same tax-credit program that he enacted in 2010.

And while the Democrats embraced the governor’s proposal last week — which came in the form of a conditional veto of a bill they sent him that also sought to increase the top-end income tax rate on earnings over $1 million — it’s likely Christie will have the most to gain as he now begins to focus even more on running for president in 2016.

Christie is expected to formally announce his intentions to join the GOP presidential primary field tomorrow during an event at Livingston High School, his alma mater. And during the announcement he’s likely to promote his proposal to boost the state’s Earned Income Tax Credit.

Under the conditional veto he sent back to lawmakers on Friday at the same time that he line-item vetoed their budget bill for the next fiscal year, the tax credit would go up to 30 percent of the federal credit, meaning roughly 500,000 of the state’s lowest-wage earners will keep a combined $120 million instead of seeing it go into the state budget.

“We’re now going to cut taxes for the working poor in this state,” Christie said while making the announcement in the State House. He also said the increase of the credit would bring New Jersey in line with New York, which also offers low-wage workers a credit that equals 30 percent of the federal credit.

Lawmakers in both the state Assembly and Senate are expected to approve Christie’s proposal in votes scheduled to be held today in the State House.

New Jersey is one of 26 states that offers its own version of the Earned Income Tax Credit. Income eligibility here ranges from $14,590 for workers without children to $52,247 for those with three children or more, according to New Jersey Policy Perspective, a liberal think tank based in Trenton. The change will give back up to $600 annually to the lowest earners.

“The tax code shouldn’t push people who are working hard but not making enough to get by further into poverty — yet it does,” said Jon Whiten, the organization’s deputy director. “This EITC increase is an important step towards righting that wrong and making the state’s tax system fairer, while improving the lives of half a million families and boosting the economy.”

Christie, as a candidate in 2009, made cutting taxes a top priority. Though he’s been able to enact a series of business-tax cuts totaling more than $2 billion since taking office in 2010, he was not able to convince Democratic legislative leaders to pass the across-the-board income-tax cut he once made a signature issue. And he’s also drawn criticism for favoring the wealthy, rejecting on five separate occasions the Democrats’ attempts to make millionaire’s pay more of their earnings to the state.

[related]But by increasing the Earned Income Tax Credit, Christie gets another tax cut to promote on the stump as a presidential candidate, said Matthew Hale, a Seton Hall University political science professor. And it also gives him some cover on the tax-fairness issue.

“He could be using this as a way to say he cut taxes for the working people of New Jersey,” Hale said. “He can say that with a straight face.”

Yet it’s been Democrats in New Jersey who have been trying since 2010 to restore the tax-credit cut after Christie lowered the state’s credit from 25 percent to 20 percent of the federal level, since New Jersey was in the midst of a revenue crunch during the past recession.

But even as state spending has increased since then by roughly $4 billion and businesses were given more than $2 billion in tax breaks, the tax credit for low-wage workers was never adjusted back upward.

Assembly Budget Committee Chair Gary Schaer (D-Passaic) made that point in his response to Christie’s announcement last week.

“While increasing the tax credit for working-poor families is the right thing to do, it comes after the governor repeatedly rejected several efforts to boost this credit,” Schaer said. “The working families he looks to help now are the same ones his policies have been hurting for years.”

And Senate President Stephen Sweeney (D-Gloucester) said Christie’s earlier cut over the past five years has cost the same workers $250 million.

But that point is likely to be missed by national reporters covering Christie as a presidential candidate. Also likely to be overlooked is that, using the same logic as Christie when he portrays the increase of the credit as a tax cut, many of the same working poor have seen their [|net property-tax bills increase] thanks to Christie, after he reduced funding for Homestead property tax relief. That state program benefits homeowners making less than $75,000, and that relief comes in the form of a tax credit as well.

“The sound bite that comes out of this all over the world is, ‘I cut taxes,’” Hale said.

The federal credit is also something that was expanded on the national level by President Ronald Reagan, the late Republican who is revered by many in the GOP, including Christie, more than 20 years after he was in the White House.

And if Christie ultimately makes it out of the Republican primary and faces off against presumptive Democratic nominee Hillary Clinton, he’s likely to come up against a candidate who is expected to stress income inequality and fairness for the middle class.

But Hale envisioned how a potential interaction between Christie and Clinton on tax fairness could go in his favor during a presidential debate.

“I think he can say, ‘Unlike you Mrs. Clinton, I’ve actually cut taxes for the working class,’” Hale said.

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