Taxes, and the important services they help finance, are woven into almost every part of our everyday lives. Today, Tax Day, seems like a good day to share some examples of how the tax dollars we pay support a variety of things that help our communities thrive.
It is the school down the street where our kids get their start. It is the neighborhood park where we hang out after work and on weekends with our families. It’s the bike lanes our kids use to ride to school or the train we ride to commute to work.
It’s the new road that takes us out to the airport, where we head out on a business trip. It’s the tax incentives that helped a small business get started. And it’s the community college where thousands of students get educated and trained for success in their careers.
It’s the fire station in town, the 911 operator who’s always there, or the hospital where some of our kids were born. It’s the food assistance that a struggling family needs to put food on the table. It’s the Social Security benefit that retirees rely on to get by and the Medicare coverage they use to get the health care they need.
It’s so easy to be skeptical about government and the elected officials who run it, but how government shapes our tax code is a reflection of us, our values and the priorities we care about.
Sadly, new changes to the federal tax code may make it harder for New Jersey to fund important services and programs. With the state already struggling to meet its obligations, it is now facing current and future spending cuts due to the lopsided nature of the new federal tax plan which gives huge tax breaks to corporations and wealthy families.
According to a new state-by-state analysis of the 2018 tax law, the distributional impact of the new tax plan overwhelmingly benefits the country’s wealthiest families. In New Jersey, it sends 69 percent of the benefits to the top 20 percent of wage earners, and the top 1 percent – those who make $924,600 or more – receive an average tax cut of $21,700. Yet, the poorest 20 percent of New Jerseyans – those who make an average $15,800 in annual income – receive an average tax cut of just $140. Those individual tax cuts are scheduled to expire in 2025.
Now, Congressional Republicans are considering making these tax cuts permanent, claiming they would help the middle-class. However, according to an ITEP analysis, extending the temporary tax provisions in 2026 would not help the middle-class any more than the enacted tax law does in 2018. If that happens, the top 5 percent of New Jersey earners would again receive the lion’s share (68 percent) of the benefit while those in the bottom 20 percent would get an nearly invisible 19 cents a week tax break – essentially a 0 percent share of the benefit.
The implications of this law could not come at a worse time for New Jersey. The reality is that the federal tax plan is fundamentally flawed and poses a significant risk to New Jersey’s economic future. According to the latest analysis from the Center on Budget and Policy Priorities, the federal tax plan exasperates income inequality, weakens tax revenue at a time when the nation will need more to care for the aging Baby Boomer generation and introduces more tax loopholes to be taken advantage of by those with the means to do so. Furthermore, it leaves millions without health coverage with the repeal of the provision that requires individuals to purchase health insurance or pay a penalty.
All told, the new federal tax plan will lead to enormous federal deficits of about $1.5 trillion over the next ten years that are likely to lead to deep spending cuts to important public services that New Jersey families rely upon. Over a quarter of New Jersey’s budget (26.7 percent) is made up of federal grants.
New Jersey’s lawmakers should be vigilant in their long-term response to these fundamental changes by pursuing policies that both shore up the state’s depleted rainy day fund and make our tax code more equitable. They can do so by focusing on the new revenue proposals targeted toward corporations and wealthy households as proposed by both Governor Murphy and Senate President Sweeney. Taxing earnings of $1 million at a higher rate, restoring the sales tax, closing corporate loopholes and making large businesses pay their fair share; these targeted tax changes can help New Jersey make the kind of investments needed to get the state back on its feet and protect itself against harmful federal cuts down the line.
This Tax Day, let’s be honest about one thing: New Jerseyans care deeply about everyone paying their fair share. Supporting the kinds of services and programs that develop and maintain thriving communities is important to the state’s future, and making sure that everyone contributes – particularly those who have significantly benefitted from recent changes in the tax law – is foundational to securing the long-term, sustainable growth and investment that New Jersey needs.
