Op-Ed: Comprehensive Reform Must Start with New Jersey’s Outsized Tax Burden

Michele Siekerka | June 27, 2016 | Opinion
New Jersey has an ‘affordability problem’ that is in urgent need of resolution

NJBIA president and CEO Michele Siekerka
Our great state is at a pivotal point in its history. There are many of us who were born and raised in New Jersey, have pursued a career here, raised a family here, invested in a community here, and dreamed of seeing our next generation do the same. However, as we know, living in New Jersey continues to become more and more expensive and out of reach for many. Our state has an affordability problem, one we must address in a comprehensive manner starting right now.

The facts tell a vivid story of how hard it is for middle-class families to afford to live here. We are 51st behind all states and the District of Columbia when it comes to the cumulative level of income, sales, property, and corporate taxes. Our tax burden is so high that New Jersey is dead last among all states with the highest income outflow (over $3 billion in 2013 alone).

The latest United Way “ALICE Report” on financial hardship shows just how much the cost of living in New Jersey has exploded in recent years. From 2007 to 2012, the cost of maintaining a household has gone up 19 percent, and we are now the fourth most-expensive state in the nation for housing. We are also at the bottom of the rental rankings, with recent costs increasing 32 percent. Healthcare costs have gone up 36 percent, and taxes in New Jersey now equal 24 percent of a family’s budget.

Affordability is a challenge for middle-class New Jersey families. Structural changes in the way we generate and spend revenue are needed. And these changes must take place in a comprehensive manner, not piecemeal, as has been a longstanding New Jersey practice.

The New Jersey Business & Industry Association (NJBIA) is ready to have these discussions about making the state more affordable for the middle class and the more than 1 million employees whose employers we represent. We welcome the opportunity to have these discussions and to look at both sides of the balance sheet — taxes and spending — so we can make New Jersey more affordable for every resident.

Right now, New Jersey is at a critical point in its recovery. We are just three years into slow and steady growth. As we learned from our most recent Business Outlook Survey, our members had a positive feeling for steady growth in 2016. But then within weeks, if not days of the calendar turning to January, the piling-on of challenging economic policy proposals commenced. At that time already in play was a bill requiring businesses to offer employees paid sick leave, which is a challenge to New Jersey businesses and small business in particular. Our latest research shows that 81 percent of our members already have a formal sick-leave policy and 92 percent of those offer paid sick leave. Thankfully, the bill has stalled in the Legislature. A one-size-fits-all policy simply does not work for the businesses that already offer this benefit and want to continue doing so.

As the mandatory paid sick leave was being considered, a legislative proposal to amend the constitution to require payments to fund public pensions as a super-priority above all other budget needs was offered. Then, as that policy wound its way through the Senate and Assembly, there came the call for increasing the minimum wage to $15 an hour. On top of this legislative trifecta came the bill proposing to give employees greater rights in setting their own schedules and the new federal overtime rules, which are set to go into effect this fall that will significantly increase costs for small business. Clearly, any one of these things alone is bad for business. Cumulatively, their impact on the state’s economy is unprecedented; they raise the likelihood of a substantial increase in the cost of living for all New Jersey residents.

What we must do is focus on comprehensive reform that will, once and for all recognize and address New Jersey’s status as the state with the heaviest tax burden, as well as extremely high housing and healthcare costs. Several tax reduction proposals have been offered as part of the Transportation Trust Fund package. NJBIA has long supported a phase-out of the estate tax, an increase in the pension and retirement income tax exclusion, a state income tax deduction for charitable contributions, and an increase in the Earned Income Tax Credit.

Hopefully, these reductions will take place. But there is still more to do.

The tax reductions we support are not aimed at addressing the needs of the wealthy or “trickling down” the impact of tax reductions, as opponents of easing the tax burden claim. (In 2016, “trickling down” is nothing more than a misapplied and meaningless ’80s buzzword.)

The goal is to make it easier for the middle class to raise their families here, encourage our millennial residents to put down roots here, and establish a financially welcoming environment for our seniors. None of these things can happen if the overall tax burden remains as it is and the legislative trifecta—the constitutional mandate, paid sick leave and the minimum wage—keep moving.

I don’t think there is anyone among us who can rationally say New Jersey is an affordable place with a welcoming tax environment and a reasonable cost of living for families, millennials, and retirees. It would take decades to unravel how exactly it is that we arrived at this point, but if we start today I know we can make headway and maybe, just maybe, that dream of seeing the next generation follow in our footsteps can be achieved.

The only choice we have right now is to work together on practical solutions to address the challenges we all know exist. Among all stakeholders, everyday citizens and special interests, there is much common ground upon which we can build. Affordability resonates with everyone. Let’s all get in a room, break out the whiteboards and come up with creative, comprehensive solutions that will finally move the needle and take our great state of New Jersey from the bottom of the rankings to a more competitive and attractive place where we all would like to live.