While Democratic legislative leaders are balking at the $1.7 billion in tax hikes that Gov. Phil Murphy is seeking to enact in his first state budget, a group that is concerned about income inequality in New Jersey is calling on lawmakers to raise taxes even more.
Nearly $3 billion could be generated through a series of proposed tax hikes that mostly would hit the state’s wealthiest residents and highest-earning corporations, according to members of the Better Choices for New Jersey coalition, which includes groups representing organized labor, environmentalists, and advocates for the poor, among others.
The coalition’s proposed tax hikes include some of the same increases that Murphy has been calling for, including the establishment of a millionaires tax and the restoration of a 7 percent general sales-tax rate. But the group also supports the re-establishment of an estate tax in New Jersey, as well as other income-tax increases that go beyond Murphy’s tax proposals. And they want majority Democrats in the Legislature to use the next state budget (that’s due to be adopted by June 30) to work with Murphy, a fellow Democrat, to boost investment in things like public education, mass transit and tax incentives for the working poor.
“We need to make sure we are not balancing the state budget on the backs of the poor any longer,” said Renee Koubiadis, executive director of the Anti-Poverty Network of New Jersey, which is part of the Better Choices coalition.
NJ’s severe income inequality
The coalition yesterday pointed to research that was released earlier this month by the United Way that indicates 41 percent of New Jersey households are either living in poverty or fall into the category known as ALICE, which stands for asset-limited, income-constrained and employed. That’s up from last year’s estimate of 37 percent. Data from the U.S. Census Bureau also indicates New Jersey is among the worst states in the country when it comes to income inequality.
Under Murphy’s budget plan for the 2019 fiscal year, the state would establish a 10.75 percent income-tax rate on earnings over $1 million, up from the 8.97 percent rate that’s currently levied on all earnings over $500,000. Murphy has also called for the Earned Income Tax Credit to be increased for the state’s lowest wage earners.
According to New Jersey Policy Perspective, a progressive think tank that is part of the Better Choices coalition, those two changes would help to even out a disparity that currently sees New Jersey’s lowest-income households pay a slightly larger percentage of their overall income in state and local taxes than the state’s highest-earning households.
The Better Choices group is also supporting Murphy’s call for a reversal of the slight sales tax cut — from 7 percent to 6.625 percent — that former Republican Gov. Chris Christie secured in 2016 in exchange for a gas-tax increase; the latter increase was used to renew the state’s Transportation Trust Fund. And on the corporate side, the coalition agrees with Murphy’s call to revise state tax policy to prevent multistate corporations from reporting profits derived in New Jersey in other states with lower corporate tax rates or none.
Yes to corporate surcharge
The group has also embraced a proposal floated by Senate President Steve Sweeney (D-Gloucester) that would establish a corporate surcharge on businesses operating in New Jersey that earn more than $1 million in net income each year. That would undo some of the tax windfall those same corporations are enjoying because of the federal tax-code overhaul that President Donald Trump signed into law late last year, an overhaul that was opposed by most of the state’s congressional delegation. The coalition would also establish a New Jersey estate tax with a $1 million threshold, which would target residents who benefit from the new federal tax rules.
Ann Vardeman, program director for New Jersey Citizen Action, suggested those federal tax changes threaten to make New Jersey’s income disparities grow even wider unless state lawmakers act. “In that environment, we can’t continue Christie-era austerity,” Vardeman said. “We simply cannot.”
So far, Sweeney and Assembly Speaker Craig Coughlin (D-Middlesex) have been throwing cold water on Murphy’s main tax proposals, which are the higher sales tax rate and the millionaires tax.
But, after the latest state tax-collection projections were released by Treasurer Elizabeth Maher Muoio earlier this week, showing only slow revenue growth has occurred during the current fiscal year, it became less likely that the state would be able to fund increased investments the governor is seeking to make in areas like K-12 education and mass transit without at least some tax increases.
That’s set up what’s become a crucial phase in the annual state budget process as lawmakers and Murphy now sit down to bridge their differences in the final weeks before a new spending plan must be adopted. Members of the coalition said yesterday that they will be closely monitoring the actions lawmakers take as the budget process plays out in the run up to June 30.
“We want to let them know, organizations across the board, across interests, are watching,” said Analilia Mejia, director of the New Jersey Working Families Alliance.
“The Legislature must stop playing politically convenient games,” said Gordon MacInnes, the president of NJPP.