NEW JERSEY — New Jersey would be able to raise nearly $4 billion more per year if it jacks up taxes for super-wealthy corporations and residents, hikes its sales tax and reforms its tax code, a new report claims.
Earlier this week, nonprofit advocacy group New Jersey Policy Perspective (NJPP) released a study that recommends sweeping changes in the name of “income equity.” The Institute on Taxation and Economic Policy provided modeling and analysis for the report. Read the full study and see its methodology here.
Most of the report’s suggestions involve raising taxes for the richest businesses and residents in the state through measures such as tweaking income tax brackets, raising inheritance taxes, and increasing taxes on the sale of high-value homes. Researchers also say it would be a good move to beef up enforcement by hiring more auditors.
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However, the report also recommends increasing the state sales tax from 6.625 percent to 7 percent – a move that would impact low-income residents, too.
What would an extra $4 billion a year do for New Jersey? According to the report’s author, that’s enough to enable all children to have free meals in public schools, restore state aid to schools that are being forced to cut staff and programs, and cover the entire shortfall in the state budget.
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“These reforms would set New Jersey on a more prosperous, affordable path,” NJPP senior policy analyst Peter Chen said.
“Without common-sense changes in tax policy, New Jersey runs the risk of falling back to the path it was on at the end of the [Chris] Christie administration, with a low credit rating, enormous pension and school funding liabilities, and ill-advised cuts in state employment and investment,” Chen said.
Make no mistake – there is money flowing through New Jersey, one of the more affluent states in the nation. The problem? It isn’t flowing to the right places, the NJPP says:
“Key public investments in schools, public transportation, and municipal services suffer from decades of being funded at levels far below needs. And economic growth is increasingly concentrated in profits for multinational corporate profits rather than working people’s pay and benefits.”
This deepening system of “haves and have-nots” is especially profound along racial/ethnic lines, with Black and Hispanic/Latinx workers paid lower wages and holding less wealth per household than white households, the NJPP said. See Related: Race, Wealth And Homeownership: New Jersey Still Seeing Troubling Gaps
NJPP: HERE’S HOW IT COULD BE DONE
One of the biggest proposals in the study involves tweaking the tax brackets for people earning incomes above $2 million, $5 million and $10 million.
This would be in addition to the existing 10.75 percent rate on earnings over $1 million, known as the “Millionaires Tax.” See Related: Millionaire Pushes For ‘Millionaire’s Tax’ In New Jersey
Another proposal involves hiking the state sales tax from 6.625 percent to 7 percent, restoring a Christie-era cut. This would generate about $702 million annually.
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Many daily necessities are exempt from the sales tax in New Jersey, including many groceries and medicine, researchers pointed out.
The total cost for the bottom 60 percent of households? Less than $100 per year, researchers said.
The NJPP acknowledged that increasing the sales tax would place proportionally more financial burden on lower-income residents. To help ease that burden, the state could expand its existing state Earned Income Tax Credit (EITC) and the state Child Tax Credit (CTC), researchers said.
Here are some other suggestions that the NJPP report makes:
COUNTERPOINT: ‘SCAPEGOATING JOB CREATORS’
Some pro-business advocates have argued that progressive-leaning groups like the NJPP are barking up the wrong tree when it comes to raising taxes on corporations in the Garden State, however.
“From New Jersey progressive groups last spring to the current election season, the call for corporations and large businesses to ‘pay their fair share’ in taxes remains a perennial refrain,” the New Jersey Business and Industry Association (NJBIA) recently stated in a blog post.
“But few business blamers actually look at or explain what the largest employers already do pay in taxes,” the group added.
Pointing to a recent report from the Council on State Taxation (COST), NJBIA chief government affairs officer Christopher Emigholz charged that if anyone blames how corporations are taxed on the “ills of the economy or inflation,” they either don’t know the actual data – or they’re “willfully ignoring it in order to scapegoat job creators.”
Some numbers from the COST report include:
In New Jersey, the “myopic mantra of holding corporations accountable to pay their fair share” ignores the fact that New Jersey corporations now pay 45.3 percent of the total tax burden in state – while businesses elsewhere collectively pay about 40 percent of their state’s tax burden, Emigholz wrote in a recent op-ed.
Further, New Jersey businesses collectively paid $34.1 billion in state and local taxes in FY22. The state’s largest employers now also have the highest corporate business tax rate in the nation to contend with at 11.5 percent, Emigholz added. See Related: Tax Corporations, Fund Trains; Shoving Match Intensifies In New Jersey
“We are one of the highest taxed stated in the nation in property taxes and sales tax and corporate business tax and income tax,” NJBIA president and CEO Michele Siekerka asserted on a recent edition of Comcast Newsmakers.
“We need a growing economy, not a stagnated one,” Siekerka said.
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