Sarlo, Oroho Honored for Efforts to Break Through TTF Gridlock

John Reitmeyer | February 10, 2017 | Politics
Two NJ lawmakers singled out by conservative Tax Foundation for making tax reform ‘simpler, more neutral, more transparent … more pro-growth’

Sens. Steve Oroho (R-Sussex), left, and Paul Sarlo (D-Bergen) are behind a federal tax workaround for small-business owners.
The bipartisan efforts of two New Jersey senators to refuel the Transportation Trust Fund last year have been recognized by a national organization that studies tax policy. Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex) were acknowledged for their work pairing a 23-cent gas-tax hike with several new tax cuts.

The conservative Washington, D.C.-based Tax Foundation has honored the New Jersey lawmakers with its Outstanding Achievement in State Tax Reform in 2016 award.

The national organization, which studies tax policy, announced its list of 12 honorees earlier this month. Sarlo and Oroho are the first New Jersey officials to be recognized with the annual award.

In making the announcement, the Tax Foundation stressed the award is given not just for coming up with proposals, but for successful efforts to reform tax policy in a way that makes it “simpler, more neutral, more transparent, more stable, and more pro-growth.” Prior recipients include New York Gov. Andrew Cuomo and former Indiana governor and current Vice President Mike Pence.

“Working for better tax policy is not easy,” said Joseph Henchman, the organization’s vice president of legal and state projects. “A piece of glass hardly compares to the efforts the recipients put in, but we do this because some recognition is important for what they achieved for the taxpayers of their states.”

Sarlo and Oroho won the award for their work on bipartisan legislation that created the framework for the complicated deal that was eventually struck between Gov. Chris Christie and Democratic legislative leaders. It ended the political stalemate that gridlocked state-funded transportation projects throughout New Jersey after the TTF went broke at the end of June.

At the heart of the deal was a 23-cent per-gallon increase of the state gas tax that went into effect on November 1. Though unpopular with motorists, the increased tax is helping to fund a $16 billion renewal of the TTF that was also approved by lawmakers and signed into law by Christie last year, providing a stable source of revenue for road, bridge, and rail projects for the next eight years. The state revenue also draws federal matching funds, meaning the full investment in transportation infrastructure will total $32 billion over the life of the TTF renewal.

But the Sarlo-Oroho measure increasing the gas tax also included a number of new tax cuts that have received less attention than the gas-tax hike. Some of the cuts went into effect immediately, while others will be phased in over the next several years.

For example, the state sales tax was reduced to 6.875 percent at the beginning of 2017, and the tax is scheduled to be cut again to 6.625 percent at the start of 2018. The threshold for the New Jersey estate tax was also increased at the beginning of 2017, from $675,000 to $2 million. The tax is scheduled to be phased out completely at the start of 2018.

The state income-tax exclusions for pensions and other sources of retirement income are also being increased through 2020 to benefit New Jersey retirees who have less than $100,000 in annual income. Exclusions of up to $20,000 of retirement income for married couples filing jointly and $15,000 for single filers were doubled to $40,000 and $30,000 on January 1, and the exclusions will eventually increase to $100,000 and $75,000 in 2020.

The New Jersey Earned Income Tax Credit for low-wage workers was also increased by five percentage points under the bipartisan legislation, and a new, $3,000 income-tax exemption was created to benefit all New Jersey military veterans.

Although the bipartisan deal with Christie wasn’t struck until mid-October, Sarlo and Oroho introduced their legislation in June, setting the framework for negotiations between the governor and Democratic legislative leaders that lasted throughout the summer after Christie shut down state-funded projects during the impasse.

While they were praised by the governor and legislative colleagues for working on a bipartisan basis, others were critical of the two lawmakers, particularly some vocal conservative Republicans who were upset with the overall gas-tax hike. The increase raised New Jersey’s per-gallon gas-tax rate from 14.5 cents to 37.5 cents, taking it from second-lowest in the country to eighth highest, according to the Tax Foundation.

Sarlo, the chairman of the Senate Budget and Appropriations Committee, said the two lawmakers decided not to allow “partisan politics to prevent us for making real progress.”

“At a time of a bitter political divide in the country that too often prevents progress on vital public issues, we gained bipartisan support for reforms that will meet the state’s critical transportation needs, provide a long-term boost to the economy, and target tax savings that will benefit small businesses, retirees, middle-class families, the working poor, and veterans,” Sarlo said.

Oroho said his goal was to make New Jersey “more competitive with other states, more fiscally responsible, and ultimately more affordable for this and for future generations.”

“Rather than kick the can down the road again, as so many have before, I worked with a bipartisan group of legislators and negotiated real tax reforms for the people of New Jersey,” Oroho said. “It wasn’t the easy thing to do, but it was the right thing to do.”