The new tax rebates for New Jersey parents funded in the latest state budget have mostly been paid out. Now attention turns to what happens next year for the rebates, when Gov. Phil Murphy and incumbent lawmakers are no longer facing reelection.
The rebates — which are capped at $500 and have averaged $423.40, according to recent Department of Treasury data — are by law “subject to annual appropriation by the Legislature.”
The drafting of a new annual budget is still many months away, but key legislative leaders are already signaling a willingness to come up with the cash needed to keep the parental rebates coming for at least another year.
However, unclear now is whether the rebates themselves would continue to be mailed to qualified recipients as a printed check, despite cost savings that could come from converting them into direct credits on annual tax bills.
Earlier this year, Treasury officials estimated as many as 760,000 checks would be distributed starting in early July to qualified parents under the tax-relief program that Gov. Phil Murphy and lawmakers established last year during the coronavirus pandemic.
According to Treasury’s latest data, a total of 630,760 rebate checks were sent directly to qualified recipients as of Aug. 20.
Those eligible for the new tax rebates include single parents with qualified dependent children earning up to $75,000 in annual income and spouses with qualified dependent children earning up to $150,000 annually.
Single people and couples without qualified dependent children were not made eligible for the program.
The parental rebates are being funded with $319 million set aside in the fiscal year 2022 budget that Murphy signed into law in late June. So far, $267 million of that sum has been spent, according to Treasury.
When the law establishing the rebate program was enacted last September, Republicans accused their majority Democratic counterparts of playing politics with the new rebates since the checks would essentially be going out in the middle of an important election year.
Murphy, a first-term Democrat, is up for reelection this November, and control of the Legislature is also at stake this fall.
In addition to the political concerns, Republicans also questioned whether Democrats, if they hold onto a majority in both houses, would seek to fund the rebate program beyond its first year.
Most of the big decisions about the state budget are made by three men: Murphy, Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex).
2022 state budget funding
Murphy has previously indicated he is open to continuing the parental rebates. It remains to be seen whether his budget proposal for the 2023 fiscal year will include the funding needed to do so.
Asked about the future of the parental rebates, Sweeney also expressed a willingness to continue the rebate program as part of a broader focus on affordability issues.
For Coughlin’s part, his spokeswoman Cecilia Williams said the speaker “expects the (up to) $500 rebate program to continue through its enabling legislation.”
One key issue to consider will be whether New Jersey will continue to have enough money to fund the parental rebates.
Tax hike, tax windfall
The same state law that established the rebate program also hiked income taxes on residents who earn more than $1 million and up to $5 million annually, helping to generate the funding needed to underwrite the first year’s worth of checks.
But also helping to ease the annual balancing of the state budget earlier this year — required under New Jersey’s Constitution — was a broader tax windfall that helped generate a massive revenue surplus at the end of June.
Some of that surplus covered a nearly 15% year-over-year spending increase. With the state now committed to increased spending in several areas of the budget, including K-12 education and public-worker pensions, some lawmakers have raised concerns about a potential “fiscal cliff” that could be looming.
Treasury officials have estimated the state will have to spend an estimated $321,000 this year on the paper and postage needed to print and mail the parental rebate checks.
The statutory language would likely have to be changed if lawmakers decide to switch to a more cost-effective direct credit on state tax returns.
About a decade ago, former Republican Gov. Chris Christie estimated the state would save millions when he converted the popular Homestead property-tax relief program from a rebate check to a direct credit on property-tax bills.
Williams, the spokeswoman for Coughlin, said “there’s been no discussion concerning the future application of the rebate specific to whether that be as a check or credit.”
In his own statement about the rebates, Sweeney said “the details will be worked out with the Assembly and the Governor during the annual budget process.”