Wednesday, January 21, 2015

NJJP: They Want to Make NJ's Backward Tax System Even Worse

John Whiten

The governor made clear in last week's State of the State message that his quest to deliver further tax cuts to some New Jersey taxpayers is not over.

Put aside for a moment the fact that lower taxes don't drive state economic growth (and actually hurt that growth), and that businesses don't relocate primarily based on their tax bills.

With any tax cut, it's also worth asking: Who would benefit? While the governor gave no details in his address, he clearly favors tax cuts to help those New Jerseyans who already pay the smallest share of their income to taxes, as I note in a new op-ed published in Sunday's Star-Ledger.

You see, New Jersey already calls on low-income and middle-class New Jerseyans to pay greater shares of their incomes in state and local taxes than their wealthy neighbors. New data from the Institute on Taxation and Economic Policy's latest "Who Pays?" report lays it out:

  • New Jersey's poorest households - those earning less than $22,000 a year - pay 10.7 percent of their income in state and local taxes.
  • Households earning just a touch more - between $22,000 and $43,000 - pay 9.2 percent of their income. In the middle, households earning between $43,000 and $71,000 a year pay 9.1 percent of their income, and those earning between $71,000 and $119,000 pay 9 percent.
  • In contrast, households with incomes of more than $758,000 a year - the top 1 percent - pay just 7.1 percent of their income in state and local taxes.
  • And while the governor was vague in his call for the Legislature to "lower taxes further," not mentioning any tax in particular or the size of a reduction, it's not hard to figure out just what he likely means.

In the last few years, the governor has championed a 10 percent across-the-board income tax cut, and has expressed support for reducing or eliminating the estate or inheritance taxes. Any of these tax changes would greatly favor those who already pay the lowest share of their income in state and local taxes. In the process the tax cuts would sap the state's resources so much it would substantially damage the state's ability to pay for essential public services that average people rely on each day, like our public schools.

The bottom line: New Jersey must focus on building a better future, but these tax cuts aren't the way to do it.

Read the new op-ed here.

1 comment:

Anonymous said...

The Who pays report is misleading. The poor pay a higher % of taxes because they spend every penny they get. So even though they may pay no income tax they pay sales tax property tax and sin taxes on liqueur and cigarettes. The rich don't pay sales tax on the part of their income they dont spend.