Acting Treasurer Ford Scudder defended Gov. Chris Christie’s plan to cut the New Jersey sales tax by one percentage point during his confirmation hearing before the Senate Judiciary Committee yesterday.
He also suggested that higher wages should be driven by a growing economy, not by legislative mandate like the increase in the state minimum wage Christie recently vetoed. In addition, Scudder generally backed the governor on the ongoing Transportation Trust Fund impasse with Democratic legislative leaders.
Ultimately, all of the members of the committee but one — Sen. Nia Gill (D-Essex) — voted to send his name to the full Senate for confirmation.
A former financial analyst with a firm run by Arthur Laffer, the father of supply-side economics, Scudder, 33, has been acting treasurer for almost a year. Christie appointed him in October to succeed Andrew Sidamon-Eristoff. A Princeton native and graduate of Princeton University, Scudder had no experience in state government.
The Republican governor, who leaves office in January 2018, and Democratic leaders have been locked in a heated dispute over renewing the trust fund, leading to an ongoing shutdown of state-funded road, bridge, and rail projects that industry experts say has idled roughly 3,000 construction workers. Christie has been pushing for a broad-based tax to balance an increase in the gas tax for the fund, while Senate President Stephen Sweeney (D-Gloucester) says that would cost the state too much revenue.
Committee members from both parties were able to agree in large part yesterday with Christie’s view that Scudder is up to the task of managing the state’s $34.5 billion budget. But they seemed to make no progress — at least publicly — in moving the administration off its position that the sales-tax cut be at the heart of any bipartisan deal to renew the TTF.
Several lawmakers on the committee, led by Gill, pressed Scudder yesterday on his background working for Laffer. Laffer, one of President Ronald Reagan’s key economic advisers, is best known for his argument that tax cuts stimulate the economy and thus increase revenue, while increases have the opposite effect.
Legislators also asked Scudder to explain prior writings on issues like the minimum wage. Christie just vetoed a measure seeking to up New Jersey $8.38 minimum wage to $10.10 and eventually to $15, and Democrats have said they intend to put the issue before voters in 2017.
“The reason I’m asking you for more detail is the governor has said he’s looking forward to your insight on fiscal and tax-policy solutions. So I was asking for your insight with respect to you having participated in this issue in a policy way before, and in conjunction with your experience as the acting treasurer,” Gill said during one of the longer exchanges with Scudder, who is now a resident of Little Silver.
“I’ve not done enough research into that at present to tell you what the number should be in New Jersey, but I would say that I think everyone across the administration and in this room wants to see wages higher, but we want to see that via a prosperous economy rather than government mandates,” Scudder said in response.
But Gill soon switched to questions about the estate tax, one of the issues that’s been at the center of the ongoing debate over renewing the TTF. Democratic legislative leaders have backed a tradeoff that would see Republicans provide support for a 23-cent increase of the state gas tax to renew the TTF in exchange for several tax cuts sought by Republicans, including a phase out of New Jersey’s estate tax. Republicans here have long complained about the estate tax — New Jersey currently has the lowest threshold in the country at $675,000 — and have maintained that it hurts the state economy by encouraging wealthy business leaders to move to states with more hospitable tax climates. Christie himself also called for a repeal of the estate tax in his State of the State address earlier this year.
Christie, however, has rejected the tax-cut package proposed by Democrats and Sen. Steve Oroho (R-Sussex) amid the ongoing TTF impasse, saying it doesn’t provide enough “tax fairness” for residents who would be hit by the proposed gas-tax increase. Christie has also said the roughly $900 million that would be sacrificed if the tax-cut package featuring the estate-tax phase out were enacted isn’t substantial enough to warrant his support. He’s instead stood firm to a call to pair a 1 percentage point reduction of the state sales tax with the proposed 23-cent gas tax hike favored by Democrats.
Sen. Joseph Kyrillos (R-Monmouth) was among those on the committee yesterday who asked Scudder why the administration has continued to reject an estate tax cut that both Scudder and Christie have previously called on the Legislature to pass.
“Do you think if we cut the sales tax by a point that it would change behavior in New Jersey and create jobs and motivate the economy?” Kyrillos said.
Scudder responded by saying the key issue for the Christie administration is the broad-based nature of the sales tax, which impacts all New Jersey residents. The estate tax, meanwhile, is paid by only the very wealthy in New Jersey, those who have estates larger than $675,000 when they die.
“The idea behind a broad-based tax cut like that is you’re leaving more dollars in the hands of New Jersey residents and businesses for them to go and consume and invest more, and so you get a kind of cascading effect in the economy,” Scudder said.
But Sen. Paul Sarlo (D-Bergen) carried on the same discussion when he questioned Scudder, saying he believes eliminating the estate tax and increasing state income-tax exemptions for sources of retirement income like pensions and 401(k) plans, another component of the Senate tax-cut package, will ultimately help people remain in a high-cost state like New Jersey. The sales-tax cut proposed by Christie would amount to a $1.6 billion revenue loss once fully phased in, but much of that savings would go only to residents with the highest incomes since items like food and clothing are exempt from the sales tax in New Jersey.
“It’s just so frustrating that we went from making a large investment in our infrastructure and changing behavior to now having a discussion on a sales-tax cut,” said Sarlo, who chairs the Senate Budget and Appropriations Committee. “Some of our most vulnerable citizens are working poor, they don’t get a sales tax on their food, their clothing, their rent, the utilities they have to pay.”
“I believe we came up with a very sensible plan, how did it fall apart?” Sarlo asked.
Scudder responded by saying the issue goes back to the Christie’s desire to pair the gas-tax hike only with a broad-based tax cut.
Ultimately Sarlo and every other Democrat on the committee except for Gill voted along with the Republicans in favor of approving Scudder’s nomination, which could now go before the full Senate as early as Thursday. Gill said she cast a “no” vote due to concerns about Scudder’s qualifications and what she sees as “a policy agenda of supply-side, trickle-down tax cuts.”