Category: Testimony

New Jersey Should Replicate ACA Penalty to Keep Coverage Affordable

Posted on by Raymond Castro

Below are prepared remarks delivered to the Senate Commerce Committee today on S-1877.

Thank you for the opportunity to testify on the need to preserve the individual health insurance market in New Jersey. While New Jersey has made major progress in reducing the uninsured, there are still about 700,000 New Jerseyans without coverage. Congress’ recent repeal of the shared responsibility penalty in the Affordable Care Act will undoubtedly cause that number to rise unless something is done.

This penalty provided an important incentive to ensure that younger, healthier people obtain insurance and spread the risk in the health insurance pool. Without robust participation of these individuals in our health insurance marketplace, premiums will climb and the market will become destabilized.

NJPP supports restoration of this requirement at the state level in New Jersey if steps are taken to also ensure that insurance is affordable. To achieve that goal we urge that S-1877 be amended to require that all revenues generated by the penalty be used only in ways that will make insurance more affordable, such as for state premium subsidies or to help fund reinsurance.

We also recommend that S-1878, which would establish a reinsurance plan and is also being considered by the committee today, be passed at the same time. We believe that the combination of these bills would create a synergy that would substantially reduce premiums for New Jerseyans. It would also be smart to allocate at least $2 million for outreach to make insurance more accessible, attract healthier people, and maximize federal funds.[1]

Because insurers need time to adjust their rates for next year, this has become an urgent matter. Unless legislation is enacted within the next four months to address this problem, next year about 150,000 middle class New Jerseyans will have to spend much more in premiums, thousands more will become uninsured, state charity care payments will increase and New Jersey will lose federal Medicaid funds.

Unfortunately, some of this is already happening. Even before the federal penalty was repealed, premiums for most plans this year in New Jersey went up by 8.5 percent[2] (as part of an overall increase of 22 percent[3]) because the Trump administration threatened to weaken the enforcement of this requirement. This affected nearly half of everyone in the individual market because these consumers exceeded the income guidelines for subsidies.[4] We estimate they will pay up to a stunning $65 million more in premiums this year.

That means the average person in the marketplace paid $400 and a four-person family paid $1600 more this year just due to the weakening of the federal provision. Those costs could double next year without a shared responsibility penalty.

The long-range implications of not replacing this provision are staggering. Based on our analysis of national data from the Congressional Budget Office,[5] premiums in New Jersey will increase 10 percent a year in most of the next 10 years, and about 340,000[6] residents will become uninsured. Because the largest decrease in coverage would be in Medicaid, the state would also lose billions in federal matching funds. At the same time, we can expect a major increase in state charity care payments, which have been reduced by more than half due to the ACA.

Restoring this penalty is one of the most cost-effective ways that the state can reduce premiums since it costs the state nothing other than administrative costs and avoids a major loss in federal funds.[7] Another advantage is that very few New Jerseyans would be affected by the penalty. About 189,000 New Jerseyans paid the penalty in 2015 which meant that about three-fourth of all the uninsured were exempt from the federal penalty. These households represent only about five percent of all tax filers.

Under a state penalty even fewer people might be affected, depending on the state policies that are established. For example, the bill understandably exempts individuals who earn less than the income threshold income for state taxes ($10,000), which is twice as low as the federal threshold ($20,000). That exemption alone could reduce the number of persons who would have to pay the penalty by over 40,000.

The mandate also would encourage many of the uninsured to seek insurance that is affordable which they may not know about. National research shows that about half (54 percent) of everyone uninsured and eligible for a plan in the marketplace would be better off financially if they bought a bronze plan rather than paid the penalty.[8]

Endnotes

[1] State Medicaid outreach funds would receive a federal match of 50 percent.

[2] New Jersey Business, Majority of Horizon Individual Premium Increases Due To Federal Changes, October 17, 2017, based on Horizon charges, https://njbmagazine.com/njb-news-now/majority-horizon-individual-premium-increases-due-federal-changes/

[3] Raymond Castro, Sabotage of the Affordable Care Act Puts Middle-Class New Jerseyans in the Crosshairs, November 21, 2017, https://www.njpp.org/healthcare/sabotage-of-the-affordable-care-act-puts-middle-class-new-jerseyans-in-the-crosshairs

[4] 400 percent of the federal poverty level which is $82,000 for a family of three, well below the state’s median family income of $95,000 in 2016.

[5] CBO, Repealing the Individual Health Insurance Mandate: An Updated Estimate, November 8, 2017, https://www.cbo.gov/publication/53300

[6] Raymond Castro, Ibid.

[7] The current payments are $695 per adult and $347 per child or 2.5 percent of family income, whichever is greater.

[8] Matthew Rae, et al, How Many of the Uninsured Can Purchase a Marketplace Plan for Less Than Their Shared Responsibility Penalty? November 2017.

The Time for True 'Tuition Equality' is Now

Posted on by Erika J Nava

This is prepared testimony delivered to the Senate Higher Education Committee today on S-699 and S-700.

Thank you for holding the hearing to hear two bills today dealing with mixed status families.

New Jersey has the opportunity to achieve true “tuition equality” by allowing those that qualify for in-state rates under the Tuition Equality Act to also qualify for state financial aid. Many of these students are Deferred Action for Childhood Arrivals (DACA) status holders who are facing unprecedented federal attacks – and ultimately deportation – under the Trump administration.

While there is little state policymakers can do to prevent this huge step backward at the federal level, there are actions they can take that would honor New Jersey’s history as the golden door for immigrants, and make our state a more welcoming, inclusive place. Our state legislature could start by allowing undocumented students to access state financial aid.

Most of the beneficiaries of DACA came to New Jersey in their parents’ arms. They graduated from our high schools. Many worked to help their undocumented parents make ends meet and have become vital members of our communities, building a stronger and more productive place to live.

If New Jersey fails to act, many of these young students would be forced to drop out of school as they would no longer be able to keep their work-permitted jobs. But, even without work permits, these students should be given the opportunity to pursue higher education. We all benefit from having a more educated population and we should not be the state that blocks their passion for higher education. After all, we have told them since they were young children that there is no better way to succeed in America than to graduate from college.

Sure, the state boosted educational and economic opportunities for undocumented students living in the state by allowing them – if they met certain requirements – to pay in-state tuition rates instead of much higher out-of-state rates at public colleges and universities. This has helped more students in New Jerseyans pursue a higher education, which will put them – and New Jersey – on a path towards greater economic opportunity.

But the cost remains a huge barrier for these students and their families, who have lower-than-average incomes and are blocked from accessing the need-based financial aid available to their low-income peers.

All New Jersey students who show promise to succeed and meet the financial requirements should be able to access the same programs as their classmates, regardless of their status. Let’s be clear: the best way to get a return on the investment made educating these young folks from preschool through 12th grade is to create a clear pathway to an attainable college education – and the increased earnings and economic impact it brings.

For working class undocumented high school graduates, no financial aid equals no college and fewer economic opportunities, which is bad for all of us. These young folks aren’t going anywhere. Cutting the rungs off the ladder of opportunity helps build a permanent underclass of uneducated immigrants who struggle to escape poverty, which is a drag on the state.

Not allowing access to aid also wastes considerable taxpayer investment – of tens or hundreds of thousands of dollars – in these students before college.

From Spring 2014 to Fall 2015, about 500 new students – defined as those who had never enrolled at the institution before, including transfer and first-time students – have now enrolled under the law. Surely, the 500 or so striving students fighting long odds and benefitting from the tuition equity law could benefit from the state tuition aid that 77,000 of their low-income peers received last year. And we know that New Jersey could make this dream a reality without breaking the bank.

New Jersey should follow the lead of eight other states, from bright blue California to deep red Texas, and allow these students to apply for aid. The key word here is “ apply.” Not all students that apply would receive aid, they would have to submit proof of parent’s income and show financial need.

Parents in undocumented families, like the rest of us, work hard and pay taxes all in order to give their kids a better shot at success than they themselves had. By seeking access to state financial aid for college, these families are not asking to cut to the front of the line. They are simply asking to be giving a chance to stand in line with the rest of their classmates for a chance to make New Jersey better.

‘Combined Reporting’ is a Pragmatic Corporate Tax Reform That Will Help New Jersey

Posted on by Sheila Reynertson

This written testimony, on S-982, will be delivered to members of the Senate Budget and Appropriations Committee today.

combined reporting mapThis common-sense legislation to implement combined reporting is a matter of tax fairness for New Jersey businesses that don’t have the ability to hide income in out-of-state tax shelters. It is also a matter of collecting New Jersey’s fair share of corporate tax income – up to an additional $290 million, according to OLS – to help invest in the building blocks of a strong, healthy economy.

Now is the time to update our corporate tax code and get in line with the 25 other “combined reporting” states, which include every single state in the Northeast.

When New Jersey’s legislature last addressed business tax reform in 2002, combined reporting was mostly left off the table. And an appointed commission assigned to review the new law essentially tabled the possibility of expanding combined reporting. At that time, only 16 states had fully adopted combined reporting. Since then, 9 more states plus Washington D.C. have passed legislation to require this pragmatic corporate tax policy.

These states recognized that the failure to include combined reporting in their corporate income tax structures gives profitable multistate corporations free rein to artificially shift income out of the state and avoid paying taxes. Combined reporting uniformly stops these corporations from taking advantage of the tax loopholes that have remained in place, and new ones that corporate accountants may come up with in the future.

Claims that this tax policy is too burdensome for these corporations are unfounded. 94 percent of New Jersey’s largest employers already maintain facilities in at least one combined reporting state. The continued willingness of these large corporations to maintain operations and even expand business in combined reporting states speaks volumes about the neutral impact this tax policy has on economic development. For these corporations, combined reporting is nothing out of the ordinary and is accepted as another cost of doing business.

Expanding combined reporting in New Jersey would level the playing field for all businesses in New Jersey while increasing the resources that states need to be able to invest in vital services like higher education, transportation infrastructure and public safety – services that all businesses rely upon and consider when making long-term plans. A diverse group of 37 leading New Jersey organizations – from advocacy to labor to environmental to faith groups – understand this need and have asked the legislature to implement this policy in a letter of support (see attached).

While the benefits of combined reporting for New Jersey are clear, some opponents suggest this reform would have a number of harmful effects. But, on the whole, that’s not the case. Specifically, here is what combined reporting would not do for New Jersey.

It would not harm economic growth.

Combined reporting has become so commonplace that any arguments that it would harm New Jersey’s economy make little sense, and aren’t supported by any evidence. States around the country – with booming and sluggish economies – have combined reporting. In fact, of the 10 states with the fastest post-recession job growth – from North Dakota to California to Texas to Alaska – 9 have this policy. The only one that doesn’t, Washington state, isn’t able to adopt combined reporting because it doesn’t have a corporate income tax. Of the 10 states with the slowest growth over the same time – including New Jersey – only 4 have adopted combined reporting.

It’s no wonder this is the case. State and local taxes paid by corporations average less than three percent of total corporate expenses, with state corporate income taxes representing less than 10 percent of that three percent, on average. So it is highly unlikely that the adoption of combined reporting would have a significant enough impact on most corporations’ bottom lines to affect decisions about whether to invest in New Jersey; those decisions will continue to be driven by the fundamental economics of the investment.

It would not lead to widespread lawsuits.

The US Supreme Court has rejected the claim that combined reporting unfairly taxes corporate income earned outside the taxing state and has twice upheld combined reporting as a fair and legal means of taxation. The proposed bill is modeled after legislation developed by the Multistate Tax Commission and includes court-approved model language. With 25 states now having enacted this common-sense policy, large multistate corporations view it as nothing out of the ordinary and accept it as another cost of doing business.

It would not be an administrative burden for the Treasury Department.

The adoption of comprehensive combined reporting will require some effort to educate state personnel and taxpayers alike, but by no means will it be an enormous administrative burden. Keep in mind: it is not a completely new situation for the Treasury Department because we already require casinos to report income in this matter. What’s more, assistance is available from the Multistate Tax Commission to help state auditors get up to speed.

It is important to remember that multi-entity corporate groups are the only ones affected by combined reporting and the very small increase in complexity is well justified by the need to stop abusive corporate tax sheltering in New Jersey.

Reject Estate Tax Repeal & Boost Assistance for Poor Families

Posted on by Raymond Castro

By Raymond Castro and Sheila Reynertson

The 2017 budget presents the state the perennial challenge of funding core priorities that address the needs of all New Jerseyans. Like years past, the price tags of these priorities are daunting in the face of a state economy that continues its slow recovery. What is different this year is a call for a generous tax cut for a handful of New Jersey’s wealthiest families. We strongly recommend that the state halt efforts to repeal the estate tax given the enormous obligations on the table.

For example, the budget proposes a $1.862 billion pension payment, which is a fraction of what is actuarially required. By shortchanging this key priority, the unfunded liability will continue to balloon.

The budget also calls for another year of flat funding for the mandated school aid formula, which translates to a $1 billion short for direct aid for K-12 education. Operating aid to public colleges and universities is also flat funded this year, costs that will likely be passed onto students through more tuition hikes.

Another year of stealing environmental settlement money is in store, leaving the Department of Environmental Protection $100 million short for key programs like lead abatement and cleaning up dangerous pollution across the state.

And smaller programs face cuts which have real-life consequences. Programs like domestic violence services and prevention, which is facing $1.8 million in cuts, and women’s health services that provide contraception and STI prevention to over a million women don’t expect to see its $7.5 million in funding restored for a seventh straight year.

Even in this dire fiscal condition, where the state can’t meet its existing obligations or provide the proper level of public services for its 8.9 million residents, the talk of Trenton is whether we are going to blow a $400 million hole in the budget by cutting taxes for a few thousand wealthy families.

Proponents of repealing the estate tax insist that it would pay for itself because it would help attract and retain wealthy families who would otherwise avoid or leave New Jersey. They point to a deeply flawed study that claims New Jersey has “lost” more than 2 million people over the past decade, taking $18 billion in state income with them, apparently in protest of the state’s high taxes. Yet a more comprehensive analysis of the data clearly demonstrates that New Jersey’s population has remained stable and that the state income has actually grown by $103 billion in the past decade.

Putting aside the tax migration debate, the fact remains that the estate tax has always helped, not hurt New Jersey. The state is adding – not losing – wealthy families, and the revenue collected from this and the inheritance tax is growing, not shrinking.

In fact, the proposed 2017 budget expects to collect $848 million from the inheritance and estate taxes – the highest amount ever.

A tax cut that benefits just the wealthy few is glaringly out of step with budget priorities of New Jersey, will make it harder to restore earlier funding cuts and will make it nearly impossible to do much to tackle some of the state’s other big problems, like growing poverty, for example.

To address the alarming increase in extreme child poverty in New Jersey, we strongly recommend additional funding to increase the Work First New Jersey grants which would directly benefit 54,000 children. As you may be aware, we recently released a comprehensive report on this issue and the findings were startling. We should all be embarrassed that these grants have not been increased in 29 years and that we now have the tenth lowest grant in the nation when housing is factored. New Jersey also has the lowest grant in the Northeast, which is almost half New York’s level.

Because of the eroding effect of inflation, the value of the maximum WFNJ grant, which is $424 a month for a family of three, has been cut in half since the last increase in 1987. It has gone from 61% of the federal poverty level in 1981 to only 25% of the poverty level today. New Jersey spends about $360 million less annually today on WFNJ assistance to families than it did in 1997 when it was established.

You might be asking yourself, how can any family live on so little? The answer is they can’t; thousands of families in WFNJ are routinely evicted from their homes and have ended up in shelters or motels at much higher cost to the state. The impact on these children of not having a stable home is unimaginable.

Since eligibility is based on the WFNJ grant, far fewer poor children are eligible for any assistance. Whereas in the past, most poor children received help, today over 80 percent do not received any assistance. Unless something is done soon, WFNJ will cease to be a viable safety net for children.

Giving all children a shot at success is not only the right moral choice, it’s a much better investment. The newest research shows that poverty costs New Jersey $13 billion each year in reduced productivity, increased crime and poorer health outcomes.

There is no question that the WFNJ grant is woefully inadequate, even by the state’s own standards. Since 2003, the Department of Human Services has established a standard for decency that takes into account real needs of a family including the cost of housing. That standard is now $2700 for a family of three, seven times higher then the current WFNJ grant.

The research shows that many families go in and out of poverty depending on their employment situation. The trick is to provide the supports that families need while they are working to prevent dependence and the temporary cash and employment assistance they need when they lose their job or other income. Although it could be better, the state has made substantial improvements in supports for working families. However where the state has completely failed is helping the poorest families who are unemployed and have no income at all. They deserve a shot at the middle class too.

Thank you.

Want ‘Tax Fairness’? Boost the Earned Income Tax Credit

Posted on by Brandon McKoy

These are prepared remarks, on A-40, set to be delivered to the Assembly Appropriations Committee this afternoon.

Mr. Chairman and members of the committee, good afternoon and thanks for the opportunity to testify in front of you today. New Jersey Policy Perspective wholeheartedly supports increasing New Jersey’s Earned Income Tax Credit – or EITC – to 40%, as proposed in A-40.

The EITC is a tax credit designed for families where people are working but not being paid enough to get by. Working families with qualifying children and earned incomes up to $52,247 are eligible for this tax credit; adults without children are eligible with earned incomes up to $14,590. These families – and there are nearly 600,000 of them in New Jersey – receive an essential boost at tax time each year from the federal EITC. The state credit supplements the federal one at a rate of 30%, and adds about $675 to the average New Jersey family’s credit. This is essential for low- and moderate-income working families in high-cost states like New Jersey.

Increasing the EITC to 40% would boost the annual take-home pay for the state’s lowest earners by as much as $600, enough to cover most of one month’s rent for some families. The average New Jersey recipient of this credit would get about $225 more each year.

The extra dollars that these low-wage workers and their families receive each year help keep many of them out of poverty. The EITC keeps more than 150,000 New Jerseyans out of poverty each year, including 79,000 New Jersey children.

This credit also has a proven track record of helping working families, boosting the economy and increasing kids’ chances at success.

The latest academic research on the effects of the EITC finds that parents who receive the EITC work and earn more, which helps not only them but also helps their children. These kids then do better in school, and – as they grow up – are more likely to attend college and to earn more as adults.

And on the economic side, the EITC is a direct shot in the arm for local economies, since families tend to spend these tax credits immediately and locally on short- to medium-term needs like buying clothes for their family, repairing the family car, replacing household items like furniture or catching up on past-due rent or utility bills. Due to this immediate and local spending, economists estimate that every dollar of EITC ends up generating $1.50 to $2 in local economic activity.

Increasing the state EITC to 40 percent will further boost this economic impact, generating about $120 million in new tax credits each year that will spur at least $180 million in economic activity. Like the credit itself, this economic boost will be spread around the state, bringing millions of dollars of spending to almost every county.

Unlike some of the other high-profile tax proposals being discussed right now by the legislature, boosting the EITC truly represents “tax fairness.” It is highly targeted to those who need it most, and it has an outsized impact. Investing in a program that does so much to help low-income families across New Jersey is common sense. Thank you for your time.

Increasing TANF Assistance to New Jersey Families is Long Overdue

Posted on by Raymond Castro

These are prepared remarks, on A-30/S-1829, set to be delivered to the Senate Health, Human Services and Senior Citizens Committee, as well as the Assembly Appropriations Committee, this afternoon.

New Jersey Policy Perspective strongly supports A-30 because it begins to address one of the biggest problems facing our state, the alarming increase in extreme child poverty. This increase is well above the national average, and has continued even during the economic recovery. As you may be aware, we recently released a comprehensive report on this issue and the findings were startling. We found that the increase in extreme child poverty was largely a result of the state’s failure to support TANF (Temporary Assistance to Needy Children), which is the only basic assistance available for poor families.

The TANF cash benefit, which is $424 a month for a family of three, has not been increased in 29 years. Ronald Reagan was still president, and the Bangles’ “Walk Like an Egyptian” was the top hit of the day. Because it’s been so long since the benefit has been adjusted, its value has been cut in half due to inflation, and it has gone from 61% of the federal poverty level in 1981 to only 25% of the poverty level today.

Since eligibility is based on the TANF benefit, far fewer poor children are eligible for any assistance. Whereas in the past, most poor children received help, today over 80 percent do not received any assistance. Unless something is done soon, TANF will cease to be a viable safety net for children.

What makes this particularly disturbing is that this is occurring at the same time the state has been granting hundreds of millions of dollars in tax credits to some of the biggest corporations in the state in response to the state’s weak economy, even though that same economy is also hurting struggling families.

Giving all children a shot at success is not only the right moral choice, it’s a much better investment. The newest research shows that poverty costs New Jersey $13 billion each year in reduced productivity, increased crime and poorer health outcomes.

We either pay now or pay much more later.

There is no question that the TANF benefit is woefully inadequate, even by the state’s own standards. Since 2003, the Department of Human Services has established a standard for decency that takes into account real needs of a family including the cost of housing. That standard is now $2700 for a family of three, seven times higher then the current TANF benefit level.

New Jersey also has fallen far behind many other states in the TANF benefit. It now has the lowest benefit by far in the northeast and the 10th lowest in the nation when the cost of housing is considered. We should all be embarrassed that the New Jersey TANF benefit fails to supports children as well as much poorer states like West Virginia and Kentucky.

The low grant level along with other restrictions in TANF has also made it unresponsive to real needs in our state. While there have been major increases in unemployment and the child poverty rate, the TANF enrollment rate has gone down substantially – exactly the opposite of what you would expect.

TANF’s decreasing eligibility levels also mean much less economic opportunity for the parents which is needed to lift them out of poverty. TANF offers education and training programs, as well as support services like child care and transportation, that promote economic independence. TANF also offers emergency assistance such as for housing which parents need on a temporary basis before they can resume employment. But most parents below the poverty level are not eligible for any of these supports because, like most poor children, they are not eligible for TANF. In effect we treat most poor families as if they do not exist.

The research shows that many families go in and out of poverty depending on their employment situation. The trick is to provide the supports that families need while they are working to prevent dependence and the temporary assistance they need when they lose their job or other income. Although it could be better, the state has made substantial improvements in supports for working families such as in increasing the state EITC and expanding Medicaid. However where the state has completely failed is helping the poorest families who are unemployed and have no income at all. A-30 begins to fill this real need and extend the ladder of opportunity to all New Jerseyans.

Thank you.

Repealing TANF’s ‘Family Cap’ Makes Moral and Economic Sense

Posted on by Raymond Castro

These are prepared remarks, on S-1854, set to be delivered to the Senate Health, Human Services and Senior Citizens Committee this afternoon.

Under current law, New Jersey denies basic assistance to children who, through no fault of their own, are born while their mothers are on TANF (also known as Work First NJ). This cap, which has already denied assistance to over 20,000 babies since its inception, needs to be repealed, and New Jersey Policy Perspective strongly supports this bill to do just that.

Recent national research has shown that these policies – called family caps – do not affect parental choices as intended but instead penalize the babies, who are denied cash assistance, and the families, which are driven deeper into poverty. This is a major problem because we know that poverty impairs the cognitive development of children, which affects their performance in school, their health and their job prospects when they become adults. This is a moral issue but it is also an economic concern because it is the public that must pay for the many services these children will need later in life.

The family cap is particularly cruel because the TANF cash benefit is already so low that no family can survive on it thereby requiring emergency assistance. The regular grant of $424 a month for a family of three is just 25 percent of the federal poverty level and has not been increased in nearly three decades. That same family receives only $321 a month if one of the children is subject to the family cap, reducing their grant by 24 percent. Those children must also live with the stigma of knowing that the entire family must suffer because of them.

One of the original goals of the family cap was to promote individual responsibility, but TANF already includes many of these requirements, such as that all able-bodied parents must participate in work activities for 35 hours; termination from TANF for failure to comply with program rules; parents must start work activities as soon as a child is 12 weeks old; and a five-year lifetime limit on TANF assistance.

Many of these TANF rules are already excessive and greatly reduce the amount of time a parent has to bond with her infant at a critical time in the child’s development. New Jersey’s additional requirement that these same children be denied any cash assistance should be disturbing to all of us.

The argument that the family cap is needed because poor women have too many children also does not hold water. In fact, in New Jersey the average number of children living at home for women below the poverty level is only one (1.1).

This also raises a much bigger issue: what business does the state of New Jersey have in coercing women into having a certain number of children, just because those women happen to be poor? No other program in New Jersey that assists the poor, like SNAP and Medicaid, denies help to an infant based on when the mother was receiving assistance.

Even if the state has a legitimate interest in reducing the birth rate of low-income women, that could be done in ways that are not coercive. For example, the state could make available family planning services on a voluntary basis to every mother on TANF. New Jersey could also take other actions that better inform these mothers regarding the birth control options available to them. Using this approach, the state can achieve its objectives without infringing on the rights of women and causing irreparable harm to their babies.

Closing Corporate Loopholes Would Make Tax Code Fairer & Boost Revenues

Posted on by Sheila Reynertson

These remarks, on S-982, were delivered to the Senate Budget Committee this afternoon.

Good afternoon, Mr. Chairman and Senators. Thank you for the opportunity to speak here today, and thank you, Mr. Chairman, for sponsoring this common-sense legislation to implement combined reporting in New Jersey.

This bill is a matter of tax fairness for New Jersey businesses that don’t have the bandwidth to hide income in out-of-state tax shelters. It is also a matter of collecting New Jersey’s fair share of corporate tax income – up to an additional $290 million, according to OLS – to help invest in the building blocks of a strong, healthy economy. Now is the time to update our corporate tax code and get in line with the 25 other “combined reporting” states, which include every single state in the Northeast.

When New Jersey’s legislature last addressed business tax reform in 2002, combined reporting was mostly left off the table. And an appointed commission assigned to review the new law essentially tabled the possibility of expanding combined reporting. At that time, only sixteen states had fully adopted combined reporting. Since then, nine states plus Washington D.C. have passed legislation to require this pragmatic corporate tax policy.

These states recognized that the failure to include combined reporting in their corporate income tax structures gives profitable multistate corporations free rein to artificially shift income out of the state and avoid paying taxes. Combined reporting uniformly stops these corporations from taking advantage of the tax loopholes that have remained in place, and new ones that corporate accountants may come up with in the future.

Claims that this tax policy is too burdensome for these corporations are unfounded. The continued willingness of these large corporations to maintain operations and even expand business in combined reporting states speaks volumes about the neutral impact this tax policy has on economic development. Ninety-four percent of New Jersey’s largest employers already maintain facilities in at least one combined reporting state. For these corporations, combined reporting is nothing out of the ordinary and is accepted as another cost of doing business.

Expanding combined reporting in New Jersey would level the playing field for all businesses in New Jersey while increasing the resources that states need to be able to invest in vital services like higher education, transportation infrastructure and public safety – services that all businesses rely upon and consider when making long-term plans.

New Jersey Policy Perspective fully supports this bill and we hope that it will soon get a vote from this committee and from the rest of the legislature. Thank you.

Eliminating the Estate Tax Protects Inherited Wealth at the Expense of Shared Prosperity

Posted on by Sheila Reynertson

These remarks on S-1728 were delivered to the Senate Budget Committee this afternoon.

Good afternoon, Mr. Chairman and Senators. Thank you for the opportunity to speak here today.

Eliminating the estate tax means protecting inherited wealth at the expense of addressing rising poverty rates among children, a dismal share of affordable housing and higher education that is increasingly out of reach for New Jersey’s middle-class families. It means pushing aside expansion of universal pre-K education and modest but no less important investments like reproductive health care for low-income women and lead removal.

We are talking about a tax that affects an average of just 3,000 estates a year – the 4 percent of estates that have the most wealth to pass down. And on the other side of the ledger, we’re talking about a tax that contributes $300 million to the state’s priorities – and likely upwards of $400 million in the 2017 budget recently proposed by the governor.

That revenue is absolutely vital to making New Jersey a great place for everyone who lives and works here, whether or not they happen to be among the lucky 4 percent that actually pay this tax.

This bill is being proposed at a time when we have an extensive list of underfunded budget priorities. The proposed pension payment for 2017 is half of what is needed to keep the fund healthy, the school funding formula has been underfunded cumulatively by $7 billion, state funding for higher education has dropped 22 percent, $1 billion of the Clean Energy Fund has been siphoned off to plug budget holes. We apparently can’t even afford $10 million to prevent kids from being poisoned by lead. It is crystal clear that eliminating the estate tax would make this situation worse.

Despite the well-worn myth, this is not a tax that hits the average New Jersey family.

The median net worth of New Jersey households is $117,000, according to the Corporation for Enterprise Development. The threshold for filing an estate tax return is five times that amount. Even households at the top – those with the highest 20 percent of assets – have an average net worth of $366,000, still far below $675,000 – the level at which the estate tax kicks in.

What’s worse, this proposal is being considered in the midst of a modern-day Gilded Age. Here in New Jersey, wealth has become increasingly concentrated in very few hands. The wealthiest 1 percent holds 21 percent of the state’s income – a level of inequality not seen since the 1920s.

Yes, New Jersey’s estate tax is an outlier with its low threshold of $675,000 and has been for many years. Yet we consistently are one of the three wealthiest states in the country, we are adding – not losing – wealthy families, and the revenue collected from this and the inheritance tax is growing, not shrinking. In fact, it has grown by 44 percent in the last 13 years. And the 2017 budget just proposed expects to collect the highest amount ever from these taxes, at $848 million.

We are not losing wealthy families over this tax. In fact, we are creating and attracting new wealthy families who love living here. They appreciate our excellent schools, our open spaces, our walkable villages, our convenient transit system into two of the finest cities on the East Coast. But if we don’t priorities investments into these impressive assets, we won’t have much to boast about anymore.

Losing the funds from this tax would seriously threaten investments in the assets that build a strong state economy for all of us, while benefitting very few.

Still No Answers to Key Questions on Casino Expansion

Posted on by Gordon MacInnes

These are prepared remarks to be delivered to the Assembly Judiciary Committee this morning.

Chairman McKeon and members of the committee, thank you for the opportunity to examine a crucial constitutional amendment proposed for a public vote this November.

Given the public support of the governor and legislative leaders, ACR-1 feels like one of those bills destined for swift, uncritical and incomplete review. I hope not. There are numerous issues posed by expanding casino gambling that deserve careful attention by this committee, your legislative colleagues and the public. Given New Jersey’s track record with gambling – one of big promises, a lack of delivery on those promises and little long-term economic benefit – one would think there’d be more caution and skepticism about expanding casinos to North Jersey.

There’s time. The legislature has 198 days before final action to place ACR-1 on the November ballot. That is plenty of time to more closely inspect of the implications and consequences of the issues raised by expanding casino gambling to North Jersey. Before voting to proceed so quickly with approval of ACR-1, I would hope the committee would address three glaringly obvious questions:

Won’t North Jersey casinos only accelerate Atlantic City’s economic decline?

At the beginning of 2014, Atlantic City had 12 casinos. Today, it has eight. And Wall Street analysts expect at least two more to close in the next two years, long before any of the proposed North Jersey casinos would be operating. These new casinos would be competing in a saturated Northeast market that is becoming even more saturated, with eight new casinos slated to open in the next three years. Common sense dictates – and financial analysts agree – that expanding casino gambling in New Jersey would only accelerate the closure of weakened casinos in Atlantic City. What is worse is that the saturated Northeastern market is not growing, even without the approved new casinos.

Given these known facts, it is fair to ask proponents of casino expansion if their stated goal of saving and rebuilding Atlantic City is realistic – and how exactly they think that will work.

Given that North Jersey is already among the most heavily traveled and congested regions in the nation, how will the public transit and highway infrastructure be improved to accommodate new casinos – and who will pay for such improvements?

The Meadowlands and the Jersey City waterfront have drawn the strongest developer interest, complete with schematic plans. Routes 3 and 17, the Turnpike extension and Jersey City’s surface streets are already congested and in sub-par conditions. The opening of new casinos only stands to make this worse – unless a new plan to improve traffic flow and upgrade public transit is drawn up, implemented and, crucially, financed. The Transportation Trust Fund currently has no funding to pay for new projects and the governor made that situation worse by promising that there’d be no increase in the gas tax.

Presently, two large-scale developers have shown strong interest in building casinos in the Meadowlands, one attached to the Meadowlands racetrack, the other to the American Dream mall. American Dream is scheduled to open next year. With the TTF near bankruptcy and Routes 3 and 17 and the Turnpike already jammed, just one casino at the Meadowlands could convert Route 3 into an 18-hour a day parking lot. New Jersey’s transportation capital plan for 2016-21 makes no provision for any improvements to the Meadowlands area, and the 2014 Super Bowl is a reminder of how poorly mass transit deals with increased patronage.

How does the Committee know how new casinos will aid Atlantic City and the state’s perilous financial condition without proposed tax rates?

Promises of windfall tax revenues for New Jersey can’t come true without an aggressive tax rate on new casinos, if they can come true at all. The state has paid the price – literally, in hundreds of millions of dollars of lost revenue – for failing to take advantage of its East Coast monopoly in 1976 by foregoing a tax rate on Atlantic City’s casinos that reflected that monopoly. Yet no tax rate is defined in this casino expansion plan.

Some developers are telling the press that they’d be happy to tax rates as high as 55 percent for their new casinos. That’s welcomed news, and generous of said developers, particularly given another developer’s expectation that the current rates will prevail. While the tax rate should not be carved into the Constitution, it’s in everyone’s best interest to secure agreement on a proposed tax rate now, to avoid getting steamrolled by developers down the road and, once again, seeing extravagant promises broken.

Any sensible investor or citizen would want answers to these – and other – questions before putting up cash or a vote. New Jersey should learn from its past. Taking swift action on ACR-1 suggests that those lessons have not been learned by the legislature.

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