Category: Taxes

About 25 members of Indivisible Lambertville New Hope came together on April 22 to hear three representatives from the progressive policy think tank New Jersey Policy Perspective explain the state’s budget process, what the critical budget issues are, and how citizens can get involved in shaping the state’s spending so that it serves all New Jerseyans. Here’s what we learned.

First, the timing

In February of each year, after about six months of planning and analysis with agency and department heads, the state treasurer, and the Office of Management and Budget, the governor proposes a budget, to take effect July 1, and delivers what’s known as his “budget address,” in which he highlights the revenues he believes the state will take in and the spending initiatives that he thinks are particularly important. This budget is only the first step in the process — the final budget may look very different — but it is the single most important policy statement the governor makes each year.

Next, there is a series of public hearings around the state on the governor’s proposed budget. Anyone may offer comments at these hearings, which become part of the public record, and the hearings are often the venue for advocates to make their case for more funding for their particular causes.

After the hearings are finished, the action moves to the Legislature, where appropriations committees in both houses conduct hearings with each of the agency and department heads and make changes to the governor’s proposed budget, on both the spending and the revenue-projection sides. Those hearings are going on now, and will be finished by the middle of May.

Between the middle of May and the end of June, which is the deadline by which a budget must be passed, the governor and the leaders of both houses — Senate President Steve Sweeney and Assembly Speaker Craig Coughlin — negotiate to synthesize all the changes into a revised budget. Both houses must pass this budget. The governor can then sign it, veto it, veto it conditionally and send it back for changes, or veto individual items in it. New Jersey’s constitution requires a balanced budget, so when the governor signs it he is “certifying” that the spending in the budget will not exceed projected revenues. If the July 1 deadline is not met, the government shuts down until a budget is adopted and signed.

What’s in the 2020 budget?

According to NJPP’s “rapid reaction” analysis, Governor Murphy has proposed a $38.6 billion budget that includes several significant things that will help those who are struggling the most to get by:

• $200 million more than 2019 for K-12 education
• $68 million more for pre-K expansion
• $100 million more for NJ Transit
• Restoration of $59 million for the Affordable Housing Trust Fund
• $33.5 million more for the new free community college fund, as well as increases for both Tuition Aid Grants and the Educational Opportunity Fund
• An increase in the earned income tax credit to 39% refundability, up from 37% last year
• The largest pension payment in state history
• Big savings in public employee health care benefits
• New revenue in the form of a true millionaires’ tax
• A $1.1 billion surplus

Of this list, perhaps the most important thing on which to focus is the millionaires’ tax. Right now, New Jersey has a “$5x-millionaires’ tax” — a 10.75% tax on earnings over $5 million. Governor Murphy’s proposal would apply that marginal tax rate to earnings over $1 million (right now, earnings between $1 million and $5 million are taxed at 8.97%).

Doing this would generate significant new revenue after many years of tax revenue cuts, and would take some of the tax pressure off middle-class families. But the Legislature has been cool to the idea, citing a concern that raising taxes in an already high-tax state will drive our wealthiest residents out. There is a real possibility that the millionaires’ tax won’t make it into the final budget.

What you can do:

• Call your state legislators — if you don’t know who they are, you can find out here — and tell them you support the millionaires’ tax and you want them to make sure it stays in the budget. Every call makes a difference. They need to hear from their constituents that they should do the right thing, especially this year since the Assembly is all up for re-election in November.
• Ask your legislators to make a public statement in support of the millionaires’ tax. This can help sway legislators who are undecided.
• Write postcards to your legislators in support of the millionaires’ tax.

More generally, to stay up to date on the status of the budget, follow good Statehouse reporters from NJ Spotlight, The Star-Ledger, The Record (they will be assigning a new reporter soon), and Politico.

Contributed by Deb Kline.

Since the April Budget Springboard, ILNH constituents have been subjected to a number of actions that call for supporting the Millionaires Tax. As an organization, ILNH is officially joining the NJ Indivisible Advocacy Coalition in supporting passage of the Millionaires Tax, so our numbers add weight as they advocate with NJ legislators.

So what exactly is it?

Governor Murphy has proposed that a 10.75% income tax rate be applied to all annual earnings over $1 Million. Currently, only annual income over $5 million is taxed at this rate, and income between $500,000 and $5 million is taxed at 8.97%.

While the difference may seem relatively small, it would go a long way to reducing income inequality in the Garden State. The average annual income of NJ’s top 1% is in excess of $1.5 million, whereas the rest of the state is averaging about $65,000 in yearly income.

Perhaps it’s a bit easier to understand like this: The top one percent of NJ makes 24.3 times more than the bottom 99%. The level of income inequality in NJ ranks at the 9th worst in the nation.

Many legislators, however, have voiced their opposition to Murphy’s Millionaires tax proposal. The arguments are more based in myth than fact. Chief among the misconceptions is the higher tax rate will cause the wealthiest residents to head for more attractive, i.e., lower,  tax environments – aka the “millionaire’s tax flight.” As of this writing, NJ Senate President Steve Sweeney has come out against the Millionaires tax, even though he has supported it in the past.

New Jersey Policy Perspective, the think tank which independently analyzes state spending of taxpayer dollars and the impacts, has repeatedly exposed this myth, along with several other independent organizations ranging from Stanford University, Center on Budget and Policy Priorities and others. The bottom line: Higher tax rates do not cause the wealthy to move.  

In addition, with the 2017 Federal tax changes, wealthy earners still come out way ahead. The Millionaires tax also is a marginal tax, meaning that the 10.75% doesn’t apply to the total amount earned, only to that which is in excess of $1 Million.

The Millionaires tax is highly popular – up to 75% of New Jerseyans support it. The NJ Legislature passed a similar tax five times, only to have it vetoed under former Governor Christie.

In a nutshell: We need the millionaires’ tax

• Governor Murphy has promised that the Millionaires tax will go to helping keep property taxes in check. Income taxes in New Jersey must go to property tax relief, so generating more income via a tax on the top earners will mean more property tax relief for all.
• It will help reduce the effects of extreme income inequality. Right now the top 1% of earners in New Jersey take home 19.1% of all income in the state. In the late 1970s it was closer to 10% of all income.
• It will not drive high earners out of the state. In 1994, New Jersey had 10,481 tax filers, or 0.2% of all filers, who reported income of $500,000 or more; in 2015, the state had 62,154 such filers, or more than 2% of all filers.

Call to Action:

• Call or write your state legislators — if you don’t know who they are, you can find out here — and tell them you support the Millionaires’ tax and you want them to make sure it stays in the budget. Every call makes a difference. They need to hear from their constituents that they should do the right thing, especially this year since the Assembly is all up for re-election in November.
• Call or write Senate President Steve Sweeney and tell him to support the Millionaires tax. He did so previously but has come out against it this round.
• Thank Senator Shirley Turner for coming out in support of the Millionaires tax at a town hall on 5/6/19.
• Ask your legislators to make a public statement in support of the Millionaires’ tax. This can help sway legislators who are undecided.
• Attend: The Tax Fairness and Advocacy Training hosted by NJPP on May 19 at Rutgers. Pre-registration is required: https://www.facebook.com/events/694134897667403/

If you live outside of NJ, find out if there are similar existing taxes or proposals in your state. If not, call on your legislators and tell them there’s every good reason to get it on the docket and no good reason not to.

Source: Millionaires Tax is the Right Policy at the Right Time, Brandon McKoy, president, NJPP, April 2, 2019