This op-ed appeared in the October 9, 2016 edition of the Bergen Record.
New Jersey Policy Perspective recently released a report detailing nine key decisions that sent our state spiraling downward towards financial crisis, without enough funds to cover its past, current and future obligations, invest in the assets that grow a strong state economy or provide an adequate safety net for its neediest residents.
Little did we know that if we waited just a few more weeks, we could’ve added number 10.
Late on Friday, New Jersey’s three most powerful politicians – the Governor, Assembly Speaker and Senate President – announced a reckless plan which stands to cost current and future taxpayers tens of billions of dollars, further decimating the state’s ability to do much of anything that matters. They did so at a near-5 pm press conference, of which reporters were notified 18 minutes in advance and at which zero questions were taken. Given how careless the deal is, no wonder they wanted to steal away into the weekend and then pushed the deal through both houses of the legislature in 7 days without a single public hearing.
The proposal finally – after decades of inaction – increases New Jersey’s fuel taxes to support desperately needed investment in our roads, bridges and public transit. And it includes a 17 percent increase in the state’s Earned Income Tax Credit to ensure that the gas tax does not worsen the plight of working families earning less than $45,000 a year.
So far, so good. But unfortunately, that’s where sensible policymaking ends and the dangerous deal-making begins.
The Christie-Prieto-Sweeney plan also includes a package of tax cuts that, when all’s said and done, will cost New Jersey about $1.4 billion a year while disproportionately helping the most well-off families in the state. The centerpiece of the plan ends estate taxes on a few thousand of New Jersey’s wealthiest families each year.
Why are strong words like “reckless” and “dangerous” used to address the Christie-Prieto-Sweeney plan? Because New Jersey is already broke and is in no position to watch another $13 billion disappear for essential services and valuable investments over the next 10 years.
Moreover, it is not possible to achieve “tax fairness” from an action that would mostly help heirs to large fortunes and sprinkle hardly noticeable tax cuts around to everyone else.
On the tax cuts alone, most New Jersey families would save somewhere between $6 and $10 a month while trying to survive in high-cost New Jersey on no more than $79,000. Once you factor in the increased fuel taxes these same families will have to pay, even this paltry “savings” evaporates completely. How the word “fairness” can be used to describe a deal that richly rewards a few families while handing pennies to the rest of us defies common sense.
Here’s an example: If you are a family of two adults and one child trying to survive on, say, $50,000 a year, you probably have very little money left after you pay the rent and taxes, buy the groceries and gas to get to work. But you may on occasion go out for a $30 dinner. And at that dinner, instead of having to pay an additional $2.10 in sales tax for your night out, you’ll pay an extra $1.99 – a dime and penny saved.
Yet on the other end of the economic spectrum, if you’re the heir to a very large estate, you stand to save millions of dollars. The hundred or so people who inherit estates over $5 million each year in New Jersey will each receive a tax break of just over $1.1 million, in fact. These are the only families that are doing well in New Jersey, which was one of only eight states that saw income inequality rise last year. The last thing they need is a million-dollar tax break.
And it won’t be these families who ultimately pay the price for these tax cuts. By the time the plan is fully phased in, the state will be confronted with about $1.4 billion less in yearly tax revenue to try to stabilize NJ Transit fares, reduce the property tax bills for middle- and working-class residents, or keep tuition rates down at public colleges. And the bill handed to future generations will grow by nearly $100 million each year. This will come at a time when all of those essential services and investments have already been shortchanged over the past two decades because of secretive, swift and confusing actions taken by governors, legislators and the Supreme Court.
New Jersey’s only chance to make a comeback must begin by not digging the hole any deeper. That’s the hole that makes New Jersey 50th in income growth following the Great Recession, 49th in its credit rating and 4th in the tuitions it charges at its public universities.
If our political leaders won’t halt the downward slide, then it will be up to their legislative colleagues to step up and say “Enough!”
