President Obama's Weekly Address 5/12/12: Congress Must Act on "To-Do List"

In this week’s address, President Obama called on Democrats and Republicans to come together and act on his Congressional “to-do list,” which will create jobs and help restore middle class security. In this make-or-break moment for the middle class, these five initiatives have bipartisan support and will help create an economy that is built to last. While some believe we should return to the same policies that led to the worst recession since the Great Depression, the President believes we must take action to speed up the recovery and ensure that our economy once again rewards hard work and responsibility as we keep our country moving forward.

President Obama's Weekly Address 2/18/12:Continuing to Strengthen American Manufacturing

WASHINGTON, DC— In this week’s address, President Obama spoke to the American people from the Boeing Plant in Everett, Washington about our efforts to strengthen American manufacturing and job creation here in the United States. He described how we can support businesses like Boeing, which is hiring thousands of Americans across the country, through steps like removing tax breaks for companies that send jobs overseas and giving them to companies that create jobs at home. The President is committed to continue assisting businesses in selling their products around the world, and the United States is on track to meet President Obama’s goal of doubling exports within five years. The President believes that by boosting American manufacturing and supporting our job creators, we can create an economy that’s built to last.

President Obama's Weekly Address: Helping American Businesses Succeed

WASHINGTON, DC— In his weekly address, President Obama told the American people about companies that are “insourcing” – choosing to bring jobs back and make additional investments in the United States. To help with this, the President invited business leaders who are insourcing jobs to a White House forum this week to see how others can follow their example. The President is committed to assisting businesses bring jobs back to this country, and will soon announce tax proposals that reward companies that invest in America and eliminate tax breaks for companies that move jobs overseas. He has also put forward a proposal to streamline government to make it easier for businesses large and small to get support in selling their products at home and around the world. The President will continue taking action every day to grow the economy and help more Americans find jobs.

Congressman Rush Holt; "The Latest News On the Debt Ceiling"

Americans are rightly disgusted by the news from Washington. If Congress and the President fail to act within days, or maybe just hours, the United States could be in the unprecedented position of defaulting on our obligations. In essence, the President would be required by law to conduct programs – including Medicare, Social Security, and the national defense – that, by law, he could not pay for.

What would happen next? Interest rates would rise, sending shockwaves through the economy. Home loans, car loans, and student loans would become far more expensive. Businesses, already finding credit unavailable, would have a harder time meeting payroll. The dollar’s status as the world’s most trusted currency would be threatened. And our credibility in the world markets would vanish. Surely, more layoffs, lower pay, and reduced economic activity would result.

This is an unnecessary, artificial crisis. It is not the result of a natural disaster or terrorist attack. It is solely the result of Republicans in Congress holding America hostage. They are threatening a crisis unless Congress enacts their extreme, ideological agenda – an agenda that demands hundreds of billions of dollars in cuts to Medicare and Social Security, all while protecting tax loopholes for oil companies, corporate jet owners, and billionaires.

What is especially troubling is Congress has now wasted weeks in these hostage negotiations instead of doing the real, difficult work required in this economy: putting people back to work. Solving the jobs crisis would do far more to reduce our nation’s deficit than any plan now pending in Congress. In fact, the long-term deficit would improve dramatically if we simply ended the Bush tax cuts for the very wealthy and Big Oil. Removing the Bush tax cuts would do more to reduce the deficit than Speaker Boehner’s bill.

To those who insist that, by refusing to allow America to pay its bills, they can teach the nation a lesson, I ask this question: would you teach yourself a lesson by refusing to pay your credit card bill?


The moment has long since passed to end this self-induced crisis. Let’s raise the debt limit and move on to the real work of rebuilding the American economy.
Sincerely,

Rush Holt

NJPP - Special budget update: Take two

You might have seen media coverage of the Rev. Jesse Jackson in New Jersey the other day. He talked to reporters in the hot sun on the steps of Citigroup building in Jersey City about the need to invest in schools, cities and people - not throw tax breaks at financial institutions which are just hoarding capital in this lousy economy.

I was struck standing there with him not just by how important it was to have someone of Jackson's stature here in New Jersey delivering a message about help for working people, but how great it was that he was delivering the Better Choices budget coalition message.

You see, sometimes, the work we do at NJPP that matters most is behind the scenes - work we get the opportunity to do because years of credible research and strategic messaging have put us in a position to influence events.

This week is a great example.

Before Reverend Jackson went before the media I briefed him at the request of our coalition partners on a paper analyst Sarah Stecker and I wrote that identified $1 billion in tax subsidies that the state has awarded to corporations the past 16 months. That work is at the core of the Better Choices push for investment in services that lift up all New Jerseyans rather than providing tax breaks to corporations and the wealthy.

Jackson is an icon of the civil rights era and one of the strongest voices fighting poverty in America. He was in New Jersey for a series of labor rallies, as well as news conference on behalf of Better Choices to talk about the surge in corporate taxpayer subsidies here in New Jersey. At our table in the Westin Newport, I outlined our research that showed 70 major corporations have been awarded a total of more than $1 billion in taxpayer subsidies on the promise to create jobs.

Citigroup is a prime example. The bank received $87 million in subsidies since 2004. The expectation was that the financial giant would justify the subsidy by hiring 3,750 people. (Citi is still 1,000 jobs shy, by its own count). The latest Citigroup subsidy was approved in March - $12.3 million to bring 400 jobs from New York State to Jersey City. Three weeks after it was awarded the subsidy, Citigroup announced it was laying off nearly 300 workers at one of its New Jersey sites. Not a very good deal for New Jersey taxpayers, as it turned out.

Jackson, over a bowl of Raisin Bran, grinned and turned the analysis into a newsworthy sound-bite: "They got the money, we didn't get the jobs. ... We should be investing in people, not corporations."

I was delighted to play my small role in Jackson's visit to New Jersey. And even if I can't resist the temptation to do a little name-dropping, more importantly I hope sharing this anecdote helps illustrate to you the important work we do here at New Jersey Policy Perspective.

More to come...

Deborah Howlett, President

As A Matter Of Fact...New Jersey revenue projections

May 17th, 2011 | Published in NJPP Blog: As a Matter of Fact …

New Jersey Policy Perspective president Deborah Howlett made the following statement about revenue projections presented today to the Assembly Budget Committee by the Office of Legislative Services:

While it’s great to hear that New Jersey tax revenues seem to have bottomed out and are beginning to climb, the state remains stuck in a very deep hole.

The Office of Legislative Services projects that revenues will approach $29.9 billion next year, an increase of $1.17billion over its current year estimates. However, even with that growth, the state’s revenue collections would still be $3.4 billion less than was collected in FY2008, the year prior to the recession. Almost all of the increase is driven by higher income tax collections fueled by the rebound on Wall Street. Revenues from sales, corporate business and other taxes are still below estimates.

The state must choose to invest these revenues wisely, using the money to restore the devastating cuts made to services and to pay into the state pension system. The money should not be used, as the governor suggested was his goal during his budget address in February, to fuel $2.5 billion in corporate tax breaks over the next five years. He’s already used $1 billion in future tax revenues to subsidize corporations and business since taking office. Those efforts have contributed to the state’s lackluster corporate tax revenue collections and have failed to create quality jobs. It’s time to abandon old, tired trickle down economic theory and embrace the reality that creating a strong, vibrant economy and attracting good, solid middle class jobs requires great schools, safe streets and the high quality of living New Jersey attained before the recession.

While the increase in revenue is welcome news, New Jersey still has far to go before it is made whole again.

As A Matter Of Fact...What did NJ get for $1 billion? About 5,000 fewer jobs.

May 5th, 2011 | Published in NJPP Blog: As a Matter of Fact …

Since the beginning of 2010, New Jersey has awarded more than $1 billion in tax subsidies as part of a strategy aimed at jump-starting the state’s economy and putting tens of thousands of people back to work.

Even as Governor Christie pleaded poverty to make deep cuts to essential services like education and health care, the state doled out tax credits and grants to corporations and developers in New Jersey at an unprecedented rate.

Incentives for economic investment were necessary, it was argued, to create a more business-friendly climate that would generate good jobs for New Jerseyans.

Sadly, it hasn’t worked. Not even a little bit.

Employment statewide is down more than 5,000 jobs since the beginning of 2010.

Last month, 3,847,200 people were employed in New Jersey, according to the state Department of Labor and Work Force Development’s monthly non-farm employment report, which is available here. That’s down 5,100 from the 3,852,600 who were employed in January 2010, when the state embarked on probably the most generous business subsidy effort New Jersey has ever seen. (For more, see NJPP’s report A Surge in Subsidies.) It’s also a precipitous drop – 231,700 jobs – from peak employment of 4,078,900 in 2007.

A breakdown of the data shows the state has lost 7,600 manufacturing jobs and 4,500 construction jobs in the private sector since January 2010. They also show the state has lost 24,400 public sector jobs — as teachers, police and other employees were laid off. Those 36,500 lost jobs were offset somewhat by a gain in the service sector of nearly 31,000 jobs.

The decline in employed New Jerseyans might come as a surprise to some who’ve assumed that the economy was improving because the state unemployment rate dropped from 9.8 percent to 9.3 percent during that time. (The U.S. rate, over the same period, has fallen twice as fast, from 10.0 percent to 8.8 percent, according to the U.S. Department of Labor.)

But it turns out the drop in the state unemployment rate is a statistical anomaly because, since January 2010, the state’s labor force — the number of people working plus those looking for work — actually declined to 4,493,000 from 4,522,200 as people moved away or gave up on the hope of finding a job. So the unemployment rate didn’t go down because more people are working; it went down because fewer people are looking.

Seems like there might have been a better way to spend that $1 billion....

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

FYI - Tax Freedom Day Arrived on April 12

FYI - Tax Freedom Day arrived for many, if not all of us on April 12th. Tax Freedom Day is the day of the years when it is figured that the average American worker has earned enough money to pay their federal, state and local property tax obligations for the year.

It does not celebrate whether or not the average american worker can afford those taxes however!

by Kail Padgitt -Tax Foundation

Tax Foundation Special Report No. 190

Tax Freedom Day® will arrive on April 12 this year, the 102nd day of 2011. That means Americans will work well over three months of the year, from January 1 to April 12, before they have earned enough money to pay this year's tax obligations at the federal, state and local levels.

Tax Freedom Day arrives three day later in 2011 than it did in 2010, but nearly two weeks earlier than in 2007. This shift toward a lower tax burden since 2007 has been driven by three factors:

• The Great Recession has reduced tax collec tions even faster than it has reduced income.

• President Obama and the Congress, after a long debate, extended the Bush-era tax cuts for two additional years.

• As part of the extension agreement, the Making Work Pay tax credit was replaced with the 2 percent reduction in the payroll tax.

Despite these tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.

Tax Freedom Day 2011 is later than last year largely because of income changes rather than statutory tax law changes. As the economic recovery continues, individuals' rising income pushes them into higher tax brackets. Corporate tax revenue has also seen a resurgence.

Although these income increases are the main reason for the later Tax Freedom Day, several tax law changes are also partly to blame: The federal estate tax has returned after a one-year repeal, this time at a rate of 35 percent and with an exemption of $5 million. In addition, taxes associated with the Patient Protection and the Affordable Care Act con tinue to be phased in.

Tax Freedom Day, like almost all tax burden measures, does not take into account the current year's federal budget deficit. Only taxes that will actually be collected dur ing 2011 count in the tally. In many years the deficit is fairly small as a percentage of total government spending, so Tax Freedom Day alone is a good guide to the size of government.

Since 2008, however, deficits have increased dramatically. As a result, Tax Freedom Day may give the impression that the burden of government is smaller than it is. If the federal government were planning to col lect enough in taxes during 2011 to finance all of its spending, it would have to collect about $1.48 trillion more, and Tax Freedom Day would arrive on May 23 instead of April 12—adding an additional 41 days to the nation's work for government. This date for a deficit-inclusive measure is the latest since World War II.

Click >>> Here to read the full report.

NJPP Monday Minute 1/24/11: Job creation or corporate welfare?

Large corporations and small businesses will receive more than $800 million in tax breaks if the governor signs a number of bills passed by the Legislature earlier this month as part of its "Back to Work NJ" package. Much of the rhetoric associated with these bills is about creating jobs. Some of the legislation--specifically, one bill that allows unemployed people to receive training while they collect unemployment insurance--might have that effect. Many of the others, however, seem to benefit businesses rather than the unemployed.

Lawmakers might have a stronger case if they had followed their own law. New Jersey passed the Development Subsidy Job Goals Accountability Act in 2007, a bill meant to document the effect of tax breaks for businesses on job growth. The report is supposed to include the number of jobs created; whether they are full- or part-time; the salaries and benefits paid; and the number of current and new workers with health insurance. Unfortunately, the act has never been implemented.

Whether these tax cuts will lead to new investments in the state remains an unanswered question. There is no question, however, that in a time of scarce resources, the state stands to lose an estimated $568 million annually from the following six key business tax break bills alone.

Net Operating Losses (S1540/A3143)

One of the most costly of the bills allows businesses that pay their corporate tax liabilities as part of their personal gross income tax to combine certain losses and write them off against their income for up to 20 years. The Division of Taxation estimates the state will lose between $375 million and $400 million annually if this bill becomes law.

Under current law, gains from rents, royalties, patents, copyrights, partnerships and S corporation income are considered separate categories of business income and are deductible only against losses in the same category. For example, a business partnership that loses money in a given year can now only write off its losses against that partnership and not against any rents, royalties, patents, etc. it might have. This bill would allow the business partnership losses to be written off against profits of the other businesses. The impact of this is to allow businesses to write off much more of their bad business decisions for up to 20 years--well beyond the likely life of many of the businesses.

Single Sales Factor (S1646/A1676)

Changing the way states tax multi-state corporations has been on big business lobbyists’ wish list for a long time in New Jersey. Currently, New Jersey calculates corporate business taxes for multistate corporations based on three factors – sales, property and personnel. This bill eliminates the property and personnel factors from the calculation, leaving only sales. Multi-state corporations with significant property and personnel in New Jersey will benefit most from this; corporations that operate entirely within the state will be unaffected. The bill also establishes a special formula for airlines subject to New Jersey taxes.

The Office of Management and Budget estimates this bill will cost the state $39.2 million in corporate taxes in FY 2012; $78.4 million in FY 2013; and $98 million in FY 2014 and in future years, as it is phased in over three years. But OMB says the estimate is subject to significant fluctuations because a very few large taxpayers may account for significant revenues. When New Jersey switched to its current formula in 1978, the Division of Taxation estimated that 81 percent of tax benefits went to 200 multi-state corporations.

Closing Fund (S2545/A3353)

If the Closing Fund bill is enacted, New Jersey will have up to $50 million for grants to encourage companies to stay, expand or move to the state. The fund is aimed at companies that have received subsidies already but say they need more in order to close the deal with the state. The law would be administered by the New Jersey Economic Development Authority and the State Treasurer, who will be able to waive all grant criteria if they determine the project would significantly benefit the state’s economy. No job requirements are included in the bill. To receive a grant from this fund, a company would not need to hire a specific number of people, pay them a certain amount, provide them with health insurance or even hire them as regular employees instead of as consultants.

Garden State Film & Digital Media Jobs Act (S690/A2905)(S2545/A3353)

Despite the fact that Gov. Christie suspended New Jersey’s film subsidy program in July 2010 because he said the state couldn’t afford it and the fact that many other states are limiting their film and digital media credits, the Legislature has passed a bill that significantly increases New Jersey’s film and digital media tax credit. The bill will increase the credit from $10 million to $50 million for filmmakers and from $5 million to $10 million for digital media producers. The Office of Legislative Services estimates that this bill would cost the state $45 million a year. As long as at least 60 percent of total production costs occur in New Jersey, filmmakers and producers would continue to be entitled to a credit of up to 20 percent of their production costs (and 22 percent if those transactions take place in an Urban Enterprise Zone) on their state corporate business or gross income taxes.

According to a recent study by the Center on Budget and Policy Priorities, the cost of film credits generally far outweigh their benefits. The study found that most of the in-state jobs created from film-related work are part-time, temporary positions. New Jersey has commissioned its own study on the effectiveness of its film tax credit, but the report has not been released.

Historic Property Reinvestment Act (S659/1951)

The Historic Property Reinvestment Act establishes tax credits for the rehabilitation of historic properties – both private homes and business properties. Homeowners can receive a 10-year credit of up to 25 percent ($25,000) of the rehabilitation cost applied against their income tax liability. The business owners’ credit is not capped and can be taken against their corporate business tax and insurance premiums tax liabilities. At least 40 percent of the rehabilitation must be done on the structure’s exterior. If the tax credit is greater than the income tax liability, the bill allows excess credit to be carried forward for four years and unused credits to be sold.

A December 30, 2010 article in the Wall Street Journal profiled the conversion of the 10 buildings on the 15-acre Jersey City Medical Center campus, which would be eligible for tax credits of up to $87 million under this bill. The conversion of the Medical Center into luxury apartments and 45,000 square feet of amenities, including a pool and fitness center, is an example of what should not be subsidized. Such projects do little more than increase developers’ profits at the expense of public services.

The executive branch estimates the credit would cost the state $15 million in FY 2012; $25 million in FY 2013; $40 million in FY 2014; and $50 million in FY 2015. The Office of Legislative Services estimates no revenue loss in FY 2012 and a loss of $22.2 million in FY 2013; $29.9 million in FY 2014; and $37.6 million in FY 2015.

Business Retention and Relocation Assistance Grant Program (BRRAG) Expansion (S2370/A3389)

On January 6, the Legislature passed and Gov. Christie signed an expansion of the BRRAG program that provides tax credits to businesses based on the number of their employees in New Jersey. The expansion increases the amount a business can be paid for each employee working in New Jersey and sets up a complicated five-tier system that increases the subsidy amounts and duration depending on the size of the company. The credits now are accessible to any industry the state Economic Development Authority determines is desirable to maintain in the state. Before this expansion, BRRAG targeted the biotechnology, pharmaceuticals, high-technology, financial services, manufacturing, logistics and transportation industries.

The Office of Management and Budget estimates the expansion will result in a state revenue loss of up to $18.6 million annually, beginning this year.

The six bills included here contain many unknowns. It is possible they will create new jobs; it is equally possible they won’t. What is fact, however, is that all of them will result in a revenue loss to the state at a time when the state needs every cent it can collect. When times are tough, fiscal discipline should apply to everyone, not just those with a voice in the state capitol.

Note: Estimated total cost of all six bills is between $542.8 - $567.8M

NJPP Monday Minute 12/6/10: CORPORATE TAX CUT BILLS LACK FISCAL ANALYSIS

Over the next three weeks, Democratic leaders in the Legislature plan to consider 30 bills they claim will "jump-start" the state's economy and create jobs. A sampling of the first seven of these bills (all of the others haven't yet been publicly identified) makes clear that "jump-start" means cutting corporate taxes and expanding already generous business tax credits.

Because much of this legislation championed by the Democratic majority is co-sponsored by legislators in the Republican minority, it's abundantly clear that the bills are on a fast-track through the Assembly and the Senate. The legislation is likely to land on the governor's desk for his signature by early January.

New Jersey has been down this road before. In fact, we're still paying for earlier bouts of such foolishness.

In 2001, Judith Cambria warned in a report for NJPP that New Jersey lawmakers' penchant for cutting taxes, borrowing at unprecedented levels and manipulating pension funds would lead to trouble. Among the problems she predicted: a bankrupt transportation trust fund, high debt and large unfunded retirement liabilities for public employees. Sound familiar?

Four years later, another NJPP report analyzed the cost of Governor Whitman's sales and income tax cuts in the early 1990s. The report estimated the tax cuts cost the state $24 billion in sales and income tax revenue between 1994 and 2005. And the cuts weren't worth it. For nine out of 10 New Jersey households, the sales and income tax reductions were swamped by increases in property taxes.

But New Jersey need not be condemned to a history of repeating its mistakes.

Lawmakers should carefully and publicly consider all of the legislation and they should require at least basic understanding of what the bills will do and how much they will cost. At a minimum, each bill should be considered on three key points.

FISCAL RESPONSIBILITY

No bill should be discussed or voted out of committee without a complete fiscal analysis, known as a fiscal note. That note should estimate the revenue impact to the state (and to local governments if applicable). Particular attention should be paid to revenues that will be lost from a change in the statutes and how the state will manage those losses. Winners and losers should also be identified.

Take for example, A1676/S1646, known as the Single Sales Factor which is being considered by the Senate Budget and Appropriations Committee on December 8. The bill would change the way New Jersey taxes corporate income. Single Sales Factor has been on the table before-the last time in 2008. It didn't become law, in part, because of its cost. No fiscal estimate was available when this Monday Minute was written. The most recent credible cost estimate of such a change was made in 2001, when the Assembly Commerce, Tourism, Gaming and Military and Veterans' Affairs Committee held a hearing on a similar bill. At that time, the state Treasury estimated that switching to the Single Sales Factor would cost the state as much as $250 million annually. If that estimate hold true for this year, that's 11 percent of the $2.3 billion the state expects to collect from corporations under the tax this year. All of those tax reductions would benefit large, multi-state corporations, like Johnson & Johnson and Verizon not small businesses operating only in New Jersey.

PROPER ANALYSIS

The stated goal of the bill package introduced by the Democrats is job creation, and clearly the leadership is willing to expend state resources to that end. But it is critical, especially because the state's finances remain so precarious, that proper analysis be done to explain clearly how each bill will create jobs; how many jobs it will create; what type of jobs will be created and where specifically the jobs will be located.

This is not something New Jersey has ever done before even though it should have. In November 2007, lawmakers enacted the Development Subsidy Job Goals Accountability Act, which charged the state with the responsibility of measuring the costs and benefits of its business subsidies (bonds, grants, loans, loan guarantees, matching funds and all tax expenditures). The act required the state to produce a comprehensive analysis of its largesse to the business community by documenting the number of jobs created; the average pay and benefits for each job; and the number of workers with health insurance. The report has never been done.

POSITIVE PROOF

In March, New Jersey produced its first Tax Expenditure Report, which showed the state is losing $15 billion in FY2011 because of loopholes and exemptions in its tax code. The Tax Expenditure Report is useful because it tracks revenue losses from the bills after they become law. But it's only hindsight. New Jersey taxpayers deserve proof -- or at least reasonable evidence -- that cutting corporate taxes and providing credits, subsidies and other incentives to businesses will, in fact, stimulate new economic growth and that New Jersey will be the primary beneficiary.

New Jersey is entitled to (at least) these minimal measures of transparency and accountability from its elected officials. For too long the state has relied solely on those who benefit from tax breaks and subsidies to tell them if the program was successful. The state must do better. And the members of the General Assembly and the Senate should embrace this opportunity to tell their constituents whether taxpayers are truly getting their money's worth.

President Obama's Weekly Address 7/31/10: Moving Forward on the Economy vs. Moving Backward

Following the signing of historic Wall Street Reform legislation, the President lays out his plans to strengthen the middle class, give tax breaks to small businesses that create jobs here, invest in homegrown, clean energy, and cut taxes for working families. The President also contrasts that plan with the agenda outlined by the Republican House Leader that would return America to the policies that created this economic crisis, drastically increase the deficit, and make permanent massive tax breaks for the very wealthiest Americans.

NJPP Monday Minute 3/15/10 New Jersey's Corporate Business Tax: Who Pays What?

PAST
Because New Jersey was one of the last states to enact state-wide sales (1966) and income (1976) taxes, corporate taxes have provided important support for public services for a long time. Among the first chartered businesses in New Jersey were commercial banks, insurance companies, canals and railroad corporations and a few telegraph companies. By the mid 19th century, most of New Jersey's state revenue came from corporate taxes on a handful of railroad companies and, when the state needed money in 1884, it extended the railroad tax to other corporations. By 1900, New Jersey was known for its willingness to grant charters to monopolies when other states would not - and companies weren't even required to be physically located in the state or to contribute to the state in any way other than to pay its tax. This happy relationship between the state and corporations ended when Delaware decided to offer the same deal but with a lower tax rate.

As the state income tax and sales tax have grown, the corporate business tax (CBT) has shrunk as a share of total state revenues - from 13 percent of the total in 1980 to 10 percent in 1990, to seven percent in 2000 and eight percent in 2005. Little is known in New Jersey about who pays these taxes. The last time such information was available was in March 2002. Times were bad then as they are now. Governor McGreevey had promised not to raise sales or income taxes but had made no such promises about the CBT to the business community. In his FY 2003 budget speech, he said, "Of the 50 companies with the largest payrolls in New Jersey, 30 of them paid only the minimum corporate tax: $200 dollars per year. That's less tax than would be paid in income taxes by a single parent with a child, earning $25,000 dollars a year."

PRESENT
That has changed - to a degree. New Jersey has replaced its $200 minimum tax with payments between $500 and $2,000 based on the corporation's income. Stated tax rates for a corporation that does not pay the minimum tax also are based on income and range from 6.5 percent on net income of $50,000 or less, to 9 percent on income greater than $250,000.

The tax rate structure is the easy part to understand; the devil is in the details of the reporting structure and the increasing number of business tax credits that make it difficult to know whether New Jersey's corporate business tax is working for everyone.

In 2008, corporations in New Jersey paid just over $3 billion in corporate business taxes, making it the state's third largest state-level tax. Although the corporate business tax has long been the state's third largest state source of revenue, its relative share of total taxes collected is small (9 percent) compared to the state sales (27 percent) and income (38 percent) tax collections.

Today, 47 states - all but Nevada, Washington and Wyoming - levy what could be considered a corporate income tax. Such taxes take various forms, making comparisons across state lines difficult. Some states like New Jersey tax net income; others tax gross profits and even the definitions of those terms vary from state to state. In addition, every state allows its own set of deductions, exemptions and tax credits. Although corporations must disclose their federal taxes paid in Securities and Exchange Commission reports, individual state tax information is not required. This makes analyzing proposals for changing state tax rules nearly impossible for anyone who does not work for the Internal Revenue Service or a state tax department.

FUTURE - BETTER REPORTING
New Jersey is not known for its reporting or its transparency. Reporting is especially important with respect to the corporate business tax because so often lobbyists and politicians claim tax changes will improve the state's economy, job creation or improve the elusive business climate.

Three reports would help interested parties understand more - a unified development budget, a tax expenditure report and a corporate statistics of income report. So far, New Jersey has produced none of these reports.

Unified Development Budget
A 2007 state law required the state to produce an annual Unified Development Budget to assess the use of state resources (business tax credits and other such programs) for economic development purposes. In one place, it would list all relevant data on state spending - through appropriations and tax credits - for economic-development activities.

States such as Minnesota, Maine, Texas, Connecticut and West Virginia have enacted disclosure laws that require companies to make public the value of subsidies they receive each year. Maine and Minnesota require that companies disclose wages and benefits paid. Connecticut, Maine and Minnesota require the companies to disclose actual job creation and/or retention.

Although the appropriate use of scarce public resources is critical, this report has never been done.

Tax Expenditure and Fiscal Analysis
While the state budget lists all direct spending, understanding the state's complete financial picture is impossible without knowing how much is lost through the tax code. This March, New Jersey will produce its first tax expenditure report which will show the value of all subsidies provided to business and individuals through the tax code. In FY 2008, the Office of Revenue and Economic Analysis in the Division of Taxation identified 28 exclusions from the corporate business tax; since that time the number has grown.

The tax expenditure report will help analyze claims that tax credits and cutting corporate taxes strengthen New Jersey's economy, make the state more competitive and attract new jobs. In 1989, $1.9 million in tax credits were provided to businesses from a small number of programs. Ten years later those credits had increased to $88 million. Today, 18 credits exist and lobbyists bring more to the legislature every day. As offsets to income, no appropriation exists and the cost of these credits is largely unknown. The only thing known for sure is that their existence erodes corporate tax collections.

Corporate Statistics of Income Report
Little is publicly known about who pays business taxes in New Jersey although information of this nature is available for personal income taxes paid by New Jersey households. Each year the Division of Taxation publishes the Statistics of Income (SOI) report that provides data for discussion and debate. Because of this document, for tax year 2007, we know the following:

• The effective personal income tax rate (taxable income/tax paid) in New Jersey was 3.4 percent;
• 1.7 percent of personal income tax returns with nearly 26 percent of all taxable income paid nearly 46 percent of the state personal income taxes;
• The number of tax returns with incomes $500,000 and above has increased from 37,600 in 2005 to 43,200 in 2006 to 48,500 in 2007 (the most recent year aailable).
• It is not possible to do similar analysis of corporate tax returns in New Jersey. But that is not true in all states. Eighteen states - including Connecticut, New York, Pennsylvania, Maryland, California and Virginia - annually make available extensive information about corporate taxes, including how many corporations are taxed; their net incomes and at what rate they are taxed; and which sectors pay the most taxes.

When NJPP requested similar information in February, we were answered quickly and courteously but were told this information would cost $910.08 because it required 16 hours of programming to retrieve the data. We ultimately agreed to pay about a third of that amount and now know that 251,839 corporate tax returns are filed in New Jersey.

WHAT'S NEEDED - BETTER RESEARCH
There are those who would suggest that a state's tax structure is the leading cause of the current recession and that the only way out is to lower corporate taxes. One frequently used example is the Tax Foundation's annual State Business Climate Index. Its ranking of New Jersey as 50th in the nation is often cited by business lobbyists as why changes are needed. But even the Tax Foundation's own report makes a case for why the rankings have little meaning: "Clearly, there are many other non-tax factors that affect a state's overall business climate: its proximity to raw materials or transportation centers, the quality of its education system and the skill of its workforce..." In each of these areas New Jersey would score well but none of these factors is captured in its index.

There is much to say about corporate taxes in New Jersey. For further reading on corporate taxes and business incentive programs, see A Question of Balance: Taxing Business in the 21st Century (2003), Taking Care of Business - Does it Cost Too Much? (2003), Big Firms Get Big Breaks (2007), Funding for Business Tax Breaks Shows Skewed Priorities (2008) and What's the Rush? Costly Tax Changes Need More Deliberation (2008) on NJPP's website.

President Obama's Weekly Address: 5/9/09

This week the President recaps a busy week, from strides on fiscal discipline, to financial stability, to cracking down on tax havens and tax breaks for shifting jobs overseas. For his next big step, he calls for a credit card reform bill: "Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees that have become all-too common in our credit card industry." Watch Your Weekly Address to find out what he plans to do about it.

President Obama's Weekly Address: 2/28/09

President Obama explains how the budget he sent to Congress will fulfill the promises he made as a candidate, and assures special interests that he is ready for the fight.