POLITICS & GOVERNMENT

Does increasing the tax on millionaires hurt or help the state’s economy?

BY Leah Mishkin, Correspondent |

On the campaign trail Gov. Phil Murphy promised to raise state income taxes on millionaires and that hasn’t changed since he’s been in office.

What has changed is New Jersey Senate President Steve Sweeney’s opinion on taxing the rich, as he explained on a recent episode of “On The Record.”

“All taxes are the last resort for one reason, Michael. We didn’t have the craziness that happened where Washington did that tax cut, that became a huge tax increase to us, and the people you’re talking about can’t write off their taxes. And I’ll dispute on what, the administration says they’ve made money, I can show you how they’ve lost money,” Sweeney said.

But the director of federal tax policy at the nonpartisan Institute on Taxation and Economic Policy, Steve Wamhoff, is now calling the Senate president out for not looking at their data in the correct way.

“Sen. Sweeney, as I understand it, is looking at our data and only looking at certain parts of it to say that actually the richest 1 percent do not get a tax cut. On average they get a tax increase. And I believe what he’s leaving out is the piece that comes from the corporate tax cut. We show that the benefits of the corporate tax cut to the richest 1 percent of New Jersey households, that gives them an average tax benefit of about 28,000 dollars, and it’s important not to leave that out,” said Whamoff.

He wrote a brief clarifying that their data shows that the highest income residents can afford to pay more, especially as a result of the new federal tax laws. Sweeney’s office has not yet commented on ITEP’s brief.

At a rally Thursday in Trenton, the author of a new report by New Jersey Policy Perspective said the numbers show the top 1 percent would still get a net tax break of roughly 2,500 dollars after federal tax cuts and Murphy’s tax plan. New Jersey is among the highest taxed states in the country, and there’s been debate over whether raising taxes on the wealthy would force them out. The Senate president says it has.

 

“The percentage of dollars collected from the wealthy is going down because they’re leaving,” Sweeney said.

But Wamhoff argues there is no evidence to support that claim, and he says it’s not something to worry about since most rich families just got a tax cut.

“I would respectfully disagree with that opinion. Our research here at NJBIA shows the impact of a millionaire’s tax would have, particularly on our small businesses. In New Jersey today, we have 5,000 small businesses that would be impacted by a millionaire’s tax. They equal over a billion dollars in adjusted gross income to New Jersey’s budget. On top of that, we have 20,000 individuals whose adjusted gross incomes to the state of New Jersey are over $54 billion. I would suggest that’s money we don’t want to mess around with,” said Michele Siekerka, president and CEO of the Jersey Business and Industry Association.

In March, Sweeney did propose a corporate business tax instead of a millionaire’s tax, but he hasn’t pushed the plans on the matter further. His office said the idea is still on the table, but reiterated all taxes are a last resort.

“Corporations, just like wealthy individuals, receive a windfall under the new federal tax law. And it makes perfect sense for Sweeney to try to take some of that back to meet their own revenue needs. But I don’t think that it’s an either or proposition. I think they’re both good ideas,” said Wamhoff.

What several of the people, including Sweeney, did agree on is bottom line, there’s a structural deficit issue in the state that needs to be fixed.

“For example, we’re not fully funding our school formula, we’re not giving municipal aid, we’re not doing lead prevention where we need, so we need additional revenue,” said Analilia Mejia, executive director of New Jersey Working Families.

How that happens is still up for debate, but there isn’t a lot of time left because if Murphy doesn’t sign the budget by the end of June there will be a government shutdown.