A decade ago, New Jersey turned a popular state tax-rebate check into a direct credit on tax bills. The reason? The cost of processing and mailing out the checks.
Now in an election year, the state is turning back to the postal system to distribute new tax rebates.
The Department of Treasury has begun mailing “Middle Class Tax Rebate” checks to thousands of income-qualified parents who pay taxes in New Jersey. Treasury officials say they are aiming to distribute 100,000 printed checks per week, with the “vast majority” of an estimated 760,000 recipients with dependent children who meet income qualifications expected to receive their checks within six weeks.
A total of $319 million was set aside in the 2022 fiscal year spending plan to fund the rebate program, according to budget documents. Treasury officials said last week they expect to spend $386,840 on the paper and postage needed to print and mail the checks.
The creation of the new rebate program comes after Gov. Phil Murphy and fellow Democrats who control both houses of the Legislature raised taxes last year, including on millionaires, to help finance a year-over-year increase in the state budget.
The rebate checks are also being sent out as Murphy, a first-term Democrat, is up for reelection, and in a year when all 120 legislative seats will be on the November ballot.
So far, the rebate checks are averaging $297 for qualified single filers, and $425 for eligible couples who filed tax returns jointly, according to Treasury. Single people and couples without dependent children are not eligible for the rebates.
New Jersey had a history of mailing out rebate checks for the state’s popular Homestead property-tax relief program. But that ended about a decade ago when former Gov. Chris Christie converted those checks into direct credits on individual property-tax bills.
What happened in 1977
The state’s first rebate checks were funded in 1977 by then-Gov. Brendan Byrne. Cementing their place in the state’s political lore, those rebates went out in October of that year, roughly a month before Byrne, a first-term Democrat, won reelection.
Christie’s policy change — which also delayed delivery of the direct tax credits until later in the budget year, when the state generally has more cash on hand — came at a time when New Jersey’s budget was still reeling from revenue losses suffered during the 2007-2009 Great Recession.
That policy change was projected at the time to save an estimated $10 million annually.
Christie, a two-term Republican who prided himself for being straight with constituents, portrayed the mailing of rebate checks as a way to “make sure people in Trenton get reelected.” Since he ended the practice, the Homestead program has continued to operate as direct credit on property-tax bills, with checks mailed out only in certain cases.
Writing the law that way meant the tax rebates could not be provided as a direct or refundable credit on state income-tax returns, even though residents who qualify for the rebates would be submitting their returns to the state for the 2020 tax year in just a few months.
What about the cost?
Asked about the cost-effectiveness of mailing printed checks instead of providing the rebates as direct credits, Treasury spokeswoman Danielle Currie pointed to the 2020 law that established the rebate program.
“The Legislature was clear in its intent to send rebates to qualified taxpayers in July, as outlined under the law,” she said. “We are currently in the process of issuing rebates this month in accordance with the law.”
In statements issued after Murphy enacted the budget for fiscal year 2022 in late June, Democratic legislative leaders stressed the impact the rebates were likely to have.
“The budget does not include any tax increases, but it does ensure that approximately 760,000 New Jerseyans will receive an up to $500 tax rebate,” said Assembly Budget Committee Chair Eliana Pintor Marin (D-Essex).
‘Just a circular firing squad’
Still, many Republican lawmakers criticized Murphy and the majority Democrats for debuting the rebate program during an election year, harkening back to the comments made by Christie a decade ago.
They also criticized Murphy and Democrats for using funding from the higher rate levied on millionaires to underwrite the new rebates.
“That’s just a circular firing squad,” said Sen. Declan O’Scanlon (R-Monmouth) during a news conference last month.
“Taxing people, and then giving a few pennies back to other people, is not really tax relief, it’s a net tax increase,” he said.