As A Matter Of Fact...State pleads poverty to reduce tax credits for working families, but has enough to provide tax credits for corporations

April 18th, 2011

For working families struggling to make ends meet, the state Earned Income Tax Credit is a necessity, and the Christie Administration’s 25 percent reduction in the credit this year for about a half million New Jersey families is a devastating increase in the taxes they owe.

Today, on tax day, it’s important to note that a parent with two children working full time at the minimum wage of $7.25 an hour (about $15,000 a year) will owe $300 more in taxes – or more than a week’s wages.

These are the same families who are also being targeted for other cuts in services that are essential to their independence. Last year about 48,000 uninsured parents who received the state EITC were denied health coverage through NJFamilyCare. That number is expected to rise to 92,000 parents this year.

It is getting to the point in New Jersey where, for many marginal families, it simply doesn’t pay to work. Aside from stripping those working families of their independence, it creates an even greater cost to the state.

The governor’s favorite rock star, Bruce Springsteen, recently cited a Legal Services of New Jersey report in a letter to the Asbury Park Press, writing, “the cuts are eating away at the lower edges of the middle class, not just those already classified as in poverty, and are likely to continue to get worse over the next few years.” The census data backs up his assertion. From 2005 to 2009 lower income groups increased, the middle class shrank and the number of wealthier people increased in New Jersey. Economics plays a role in this, but so does state policy.

This cutback in tax credits for working families comes even as the Christie administration and the Legislature are expanding tax credits for corporations in New Jersey.

For example, last month the state awarded Campbell Soup a $41 million tax credit to renovate its corporate headquarters, move 49 jobs from Cherry Hill to Camden and hire 50 new employees at the Camden site over the next 10 years. The credit includes $6.3 million for new furniture. Campbell qualifies for the subsidy, officially called the Urban Transit Hub Tax Credit, which is aimed at redeveloping urban centers, because its offices are within a mile of the Walter Rand Transportation Center.

The total cost to the state to fund that tax credit to Campbell Soup is nearly as much as the $45 million in savings gained by reducing the state EITC.

So who needs this help the most, one of the largest corporation in America or working New Jerseyans who can barely make ends meet to support their children? It’s unfortunate example of why the state needs a more balanced approach — one that doesn’t focus only on cuts in services, but also balances the demand for shared sacrifice fairly between working families and giant corporations.

Interested in learning more about the Earned Income Tax Credit? Check out this piece by the Center on Budget and Policy Priorities:

A Hand Up: How State Earned Income Tax Credits Help Working Families Escape Poverty in 2011