Let’s be frank, it’s natural for people to want lower taxes. Such is what gubernatorial Republican candidate Kim Guadagno promises. Democrat Phil Murphy promises the opposite. Nonetheless there are compelling reasons why NJ needs to raise more income tax revenue.
Income tax revenue is constitutionally dedicated to fund property tax relief, which includes school aid, teacher pensions, municipal and county aid and direct relief initiatives like rebates. With NJ receiving greater income tax revenue there are morer funds available to reduce the increasing burden on property tax and meet needs for school aid and pension funding. An income tax structure which calls for higher taxes to the wealthiest achieves this objective.
Larry Summers, the economist and former Treasury secretary offers three reasons why taxes should increase.
- Aging; “Society is aging, which calls for greater spending on retirees.” Census data indicates The largest increase in NJ population from 2010 to 2016 is in people over 65 years of age,
- Inequality: “Inequality has soared with living standards stagnating for the middle class and poor. Taxes push back against inequality.” NJ ranked 43rd among states for income equality, meaning it is among the worst in the nation. The top 5% of New Jersey households made an average of $400,367 in 2015. That’s 16 times the poorest 20% getting by on $25,646 a year, Examples of this impact: Those with incomes less than $22,00 spend 5.5% of their income on Sales & Excise taxes, whereas those with $758,000 or more spend 0.7%. Similarly those with less than $22,00 spend 6.1% on property taxes, and those with $758,000 or more spend 2.2%
- Labor intensive services: “like education and medical care have become more expensive, and they also tend to be the areas where the government spends money.” Nj’s expenditures on public education per student are the 4th highest in the nation. Medical costs are the tenth highest in the nation.
Phil Murphy’s tax plan vs Guadagno’s tax plan
Phil Murphy: He’s pledging to adopt a slate of tax-policy changes that include creating a new top-end income tax rate of 10.75 percent. Analysts from the nonpartisan Office of Legislative Services have estimated such a rate which would be levied only on earnings above $1 million, could generate roughly $600 million in new revenue. His plan which involves other tax proposals, including legalizing and taxing pot smokers, would raise roughly $1.3 billion a year. Such would provide significant budget relief for a state that has suffered 11 credit-rating downgrades since Gov. Chris Christie took office, all of them largely due to a failure to collect enough money for schools, pensions, health benefits for public workers and other rising costs.
Kim Guadagno: Her plan is a novel “circuit-breaker” approach to providing New Jersey residents with relief from the state’s ever-rising property tax bills. She says It would reduce taxes by $1.5 billion, but her proposal has also met with skepticism and claims of irresponsibility, since she hasn’t identified a sure source of revenue to pay for its estimates.
Do we really want our over-strained NJ State budget to have less revenue to meet the growing costs of our essential obligations?
ISSUES IN THE GUBERNATORIAL RACE: See: Where they stand on increasing the minimum wage, legalizing marijuana, and gun background checks.