Category Archives: As a Matter of Fact

As A Matter Of Fact…Reality Check: Income Taxes Don’t Impede Economic Growth

by Jon Whiten | Published in NJPP Blog: As a Matter of Fact …

As Gov. Chris Christie prepares to unveil the specifics of his proposed 10-percent income tax cut at next week’s budget address, he’s working under a key tenet of conservative economics: that high tax rates harm economic growth.

There’s just one problem, according to a new national report by the Institute on Taxation and Economic Policy (ITEP): that tenet doesn’t match up with reality.

These claims are based largely on misleading analyses generated by Arthur Laffer, long-time spokesman of a supply-side economic theory that President George H. W. Bush once called “voodoo economics” because of its bizarre insistence that tax cuts very often lead to higher revenues. Recently, Laffer’s consulting firm has been very successful (with the help of the American Legislative Exchange Council, Americans for Prosperity, and the Wall Street Journal’s editorial page) in spreading the talking point that the nine states without personal income taxes have economies that far outperform those in the nine states with the highest top tax rates.

In reality, however, residents of “high rate” income tax states are actually experiencing economic conditions at least as good, if not better, than those living in states lacking a personal income tax.

The report pits the nine “high rate” states identified by Laffer (a list that includes New Jersey) against the nine states that don’t have a broad-based personal income tax in three categories: growth per capita, median family income and unemployment rate.

From 2001 to 2010, the “high rate” states have seen stronger growth per capita and less erosion of median family income, while the average unemployment rate has been the same as the un-taxed states.

The bottom line, according to ITEP?

“There is no reason for states to expect that reducing or repealing their income taxes will improve the performance of their economies.”

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Filed under As a Matter of Fact, blog, Gov. Chris Christie, income taxes, Institute on Taxation and Economic Policy (ITEP), New Jersey Policy Perspective

As A Matter Of Fact…Business Leaders Agree: Raising the Minimum Wage Makes Sense

by Jon Whiten
Published in NJPP Blog: As a Matter of Fact …

While legislative leaders’ efforts to raise New Jersey’s minimum wage to $8.50 an hour have taken a backseat in recent weeks to the governor’s proposed income tax cut, similar legislation in New York is gaining the backing of some high-profile business advocates.

First up was a Daily News op-ed co-authored by New York City’s billionaire mayor Michael Bloomberg that used free-market ideology to argue for bolstering the minimum wage.

“[The minimum wage] helps taxpayers by reducing the number of people who might otherwise have to rely on public assistance to survive,” Bloomberg and state Assembly Speaker Sheldon Silver wrote. “Taxpayers benefit when government dependency is low – and so does the economy.”

The Daily News piece was followed a few days later by an editorial in business bible Crain’s that called for the minimum wage to be raised to $8.50 an hour and tied to inflation going forward. Crain’s said opponents’ arguments that a wage increase will destroy low-paid jobs just aren’t true; it pointed to New York’s 2004 raising of the wage as an example.

“If the change had a cataclysmic effect on businesses that depend heavily on minimum-wage workers, we certainly missed it,” the paper wrote. “Neither, quite obviously, did it shower undeserved riches on the bottom rung of workers.”

If and when the minimum wage bill here in New Jersey starts to pick up steam again, we can only hope some of the state’s leading voices for business will, like Bloomberg and Crain’s, avoid a knee-jerk dismissal of the proposal, and look instead at how it will help our entire economy to flourish.

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Filed under As a Matter of Fact, blog, Michael Bloomberg, minimum wage, New Jersey, New Jersey Policy Perspective, NY Daily News, taxpayers

As A Matter Of Fact ….What Do Taxes Pay For? A Better Quality of Life for Our Children

January 25th, 2012, by Jon Whiten Published in NJPP Blog: As a Matter of Fact …


While it’s a well-worn cliché that “nobody likes to pay taxes,” one question isn’t asked often enough: what do those taxes pay for?

According to a new national study, they pay for a higher quality of life for our children.

Investing in Public Programs Matters: How State Policies Impact Children’s Lives, released last week by the Foundation for Child Development (FCD), finds “a strong relationship” between state tax rates and the overall quality of life for children.

The report’s key findings are that “higher state taxes are better for children,” and that “greater investments in government programs are strongly related to better quality-of-life for children in a state.”

The report, along with the annual KIDS COUNT data book that ranks New Jersey fifth — comes as states around the country, including New Jersey, are reacting to fiscal crises with austere, cuts-only spending plan, and it shows the folly of such an approach.

“Although states are currently revenue-starved, this is exactly the wrong time to reduce taxes,” says FCD president Rudy Takanishi. “The revenues generated by taxes should be used to invest more in the education and health of our children. Policymakers must recognize that the cost of shortchanging children today is too high a price to pay in the future.”

There’s good news here for New Jersey: the Garden State ranked first in the nation on the Child Well-Being Index, barely edging out Massachusetts. This finding, based on 2007 data, reaffirms the need to resist further cuts to education and other crucial public programs.

The stakes — our children’s well-being, and our state’s future prosperity – couldn’t be higher.

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Filed under As a Matter of Fact, blog, Child Well-Being Index, education cuts, Foundation for Child Development (FCD), Kids Count, New Jersey Policy Perspective, quality of life, tax cuts, Taxes

As A Matter Of Fact…New Jersey Offers Goya $80 Million to Create Nine New Jobs




October 24th, 2011 | Published in NJPP Blog: As a Matter of Fact …

Imagine you are a New Jersey job seeker (one of 418,000 unemployed in the state as of September, 2011, according to the state Department of Labor and Workforce Development) and you read in the news that a firm will be getting a state subsidy to hire 175 new workers. You would be thrilled to see those new job opportunities in the state, right?

But, in the case of Goya Foods, Inc., only nine truly new jobs are being created.

Nine.

Of the other 166 “new” workers, 66 would be moved from Goya’s location in Bethpage, New York and 100 already work for Goya as contractors based in Secaucus, according to documents from the state Economic Development Authority (EDA). So these “new” workers are actually existing employees.

Those 100 current contractors may be counted as new workers because they will be converted to direct payroll employees or become part of a professional employer organization (PEO). The National Association of Professional Employer Organizations describes PEOs as enabling “clients to cost-effectively outsource the management of human resources, employment benefits, payroll and workers’ compensation.” Counting current workers as new workers might be technically correct under the subsidy law — but it just doesn’t make sense.

The state’s tax subsidy for these nine new workers is being offered under the newly revised Urban Transit Hub Tax Credit (UTHTC) statute. It is intended to provide an incentive to a firm by lowering its state corporate business tax obligation so that a company will make capital investments in buildings in urban areas near transit and create jobs.

Earlier this month, the EDA approved the $80 million-plus UTHTC for Goya Foods. The company would get that tax credit for building a new 600,000 square foot headquarters/distribution center in Jersey City, a half-mile from the Jersey City PATH station. Aside from the 175 “new” workers, 316 current Goya workers would move to the new facility from Secaucus. Goya’s current headquarters in Secaucus would be converted to a manufacturing facility and 53 jobs would be moved there from elsewhere in Secaucus, but would not be part of the $80 million subsidy.

Further, Goya is to benefit from the expansion of one of the state’s Urban Enterprise Zones to include the part of Jersey City where Goya plans to relocate, according to the Jersey Journal. Urban Enterprise Zones offer companies a host of tax benefits. The company is also seeking a 20-year property tax abatement for its new headquarters/distribution facility in Jersey City, which would lower the firm’s property tax bills; the Jersey City Council will vote to introduce the measure this week, with final approval to possibly come in the second week of November.

But that all may not be enough to keep Goya in New Jersey, according to EDA documents.

New Jersey is competing with New York state, because Goya is also considering moving North Jersey workers to an 892,943 square foot site in Suffern, New York, in Rockland County. No public information was provided by the EDA about the subsidies that may have been offered by the state of New York to woo Goya.

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Filed under As a Matter of Fact, blog, Economic Development Authority, Goya Foods, Jersey City NJ, New Jersey Department of Labor and Workforce Development, New Jersey Policy Perspective, tax abatements

As A Matter Of Fact…The importance of Social Security


September 22nd, 2011 | Published in NJPP Blog: As a Matter of Fact

By Mary Forsberg

Social Security is an American mainstay, as much a part of our culture as baseball, hot dogs and apple pie. Established in 1935, it now provides benefits to over 50 million people, about one in every six U. S. citizens. While three-quarters of those receiving benefits are retirees or elderly widow(er)s, 19 percent receive disability insurance payments and 4 percent receive benefits as minor children of parents who have died.

Social Security provides a guaranteed, progressive benefit that keeps with increases in the cost of living. By dollars paid, the U. S. Social Security program is said to be the largest government program in the world. It provides a foundation of retirement protection for nearly every American and its benefits are not means-tested. The near universal participation and the absence of means-testing make Social Security much less expensive (its administrative costs amount to just 0.9 percent of annual benefits) to administer than private retirement annuities.

Debate in Washington about how to reduce the growing federal deficit often turns to reducing social security eligibility and /or benefits. A recent report from Social Security Works and the Strengthen Social Security campaign supports the importance of Social Security to families, communities and state and local economies.

Did you know in New Jersey:

• Social Security provides benefits to more than 1.4 million people.
• Residents receive Social Security benefits totaling nearly $20 million a year
• The median benefit received by a retired worker is about $15,500 a year.
• Social Security is the most important source of income for the 171,400 children living in “grandfamilies,” households headed by a grandparent or other relative.
• Social Security provides valuable disability and life insurance protection for most workers. Nationwide, an estimated 3 of 10 working-aged men and 1 of 4 working-aged women will become severely disabled before reaching retirement age.
• A 30-year-old-worker who earns about $30,000 a year and has a spouse and two young children, receives Social Security insurance protection equal to private disability and life insurance policies worth $465,000 and $476,000 respectively.

Social security has been one of the most important public programs for working family in America since the great depression and clearly provides a measure of security for the elderly, the orphaned and the disabled.

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Filed under As a Matter of Fact, blog, New Jersey Policy Perspective, Social Security

As A Matter Of Fact…Financing the American Dream

August 16th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Sarah Stecker, Policy Analyst

Last month, in order to facilitate a deal that the state had already cut, Governor Christie signed a bill significantly expanding two programs that provide tax subsidies for developers, the Economic Redevelopment and Growth grant and the Urban Transit Hub Tax Credit.

One section of the bill (S2972/A4161, P.L. 2011, c. 89) changes state law for the benefit of a single developer, the Canadian firm Triple Five Group. The deal made by the state, worth up to $350 million in tax breaks on the company’s more than $1billion investment, enticed Triple Five to resurrect the five-year-old, on-again-off-again eye sore previously known as Xanadu. The developer rebranded the half-finished mega mall as the American Dream at Meadowlands and said that in addition to “high-end” retail the mall would include an indoor ski slope, skating rink and a wave pool. The state estimated that upon completion the project would generate a whopping 35,000 permanent jobs.

The change in the law was required because Triple Five was not eligible for the grant the governor had promised many months earlier. Even though significant parts of the state – up to 80 percent of the municipalities – were eligible to host an ERG project, the area of the Meadowlands where the development was taking place was not covered by the original legislation.

The final grant amount to Triple Five depends on an analysis by the Economic Development Authority of the American Dream proposal. ERG grants can total up to 20 percent of a developer’s investment and can be paid out for up to 20 years as a portion of the tax revenues attributed to the project.

Another section of the bill amends state law requiring residential developers to produce affordable housing units in addition to market-rate units as a condition of receiving Urban Transit Hub Tax Credits. The change means developers will no longer have to put aside 20 percent of the residential housing they build for low and moderate income people. The law was meant to provide developers an incentive at the same time it would address the dire lack of decent, affordable housing in many areas of New Jersey. Municipalities now will make the decision about how much low-income housing – if any – will be included in a project.

The law also now allows developers to use any unused credits to reduce the developers’ taxes for up to 20 years from when the credit was given. At the same time, the new law increases the tax credit available to 35 percent, up from 20 percent, if a residential developer builds any housing in one of nine mass transit-accessible cities designated under the Hub law.

The change to the Urban Transit Hub Tax Credit illustrates the good that public subsidies could do (incentivize transit-oriented development) versus the risk of corporations abusing these tax breaks.

For instance, the Urban Transit Hub Tax Credit is available to corporations as well as residential developers. Campbell Soup, located ¾ of a mile from the Walter Rand Transit Center in Camden, received a $41.2 million credit in February of this year to renovate its headquarters, including more than $6 million to furnish the refurbished office space. In its application for the credit, Campbell’s officials said they would bring 95 workers to the city as a condition of the award. Four months after the grant was awarded and made public, Campbell’s announced it would lay off 130 of the 1,200 workers at its headquarters in Camden.

The layoffs are unlikely to jeopardize Campbell’s state subsidy because the Urban Transit Hub Tax Credit is aimed primarily at supporting capital investment. To qualify, companies must invest more than $50 million in capital improvements and employ at least 250 full-time workers. Campbell’s is complying with the law, but the state’s taxpayers might rightly raise the question of why they are subsidizing the company’s newly renovated headquarters even as Campbell’s increases the state’s unemployment rate.

New Jersey is providing hundreds of millions of dollars in tax subsidies to corporations, developers and businesses in the hopes of stimulating the state economy and creating private sector jobs. But there is a policy trade-off and it is evident in this single piece of legislation. The Administration, abetted by leaders in the Legislature, is choosing corporations over individuals: high end retail over low-income housing; renovating corporate suites over rebuilding public schools. That is short-sighted. The long-term policies of a prosperous state must address the needs of its citizens, not just its corporations.

The state Economic Development Authority expects to approve rules implementing the new legislation at its September Board meeting.

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Filed under Affordable housing, As a Matter of Fact, developers, Economic Development Authority, ERG grants, Gov. Chris Christie, New Jersey Policy Perspective, Triple Five, Urban Transit Hub Tax Credits

As A Matter Of Fact…Tax Them And They Leave? Apparently NOT


August 4th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Mary E. Forsberg

In 2008, 16,000 New Jersey taxpayers earned $1 million or more. That’s more than in any year before or since 2001 with only one exception – the boom year 2006. In that year, 18,400 New Jersey taxpayers earned more than $1 million. In the following year, only 15,900 taxpayers earned more than $1 million but their average income was $3.5 million, the highest average in any year to date. The numbers tell many stories. Did 2,400 high income people leave New Jersey between 2006 and 2008? Or was their income simply subject to the vagaries of Wall Street and the economy?

Anecdotes abound: So-and-so has a house in New Jersey and one in Florida and decided to call Florida his residence to avoid paying any state income tax (Florida has none). No one knows how often this happens.

Some things, however, are known.

According to data compiled over more than 20 years by the Internal Revenue Service, the average household income of those who move to New Jersey from other states is higher than that of households leaving New Jersey for other states.

Three states (New York, Pennsylvania and Florida) consistently account for the highest number of households moving into and out of New Jersey from elsewhere in the United States.

IRS data analyzed by NJPP in 2003 found no correlation between tax increases or cuts and movement into or out of New Jersey. It was not uncommon for the number of people coming to New Jersey the year after an income tax increase to exceed the number leaving or for the number leaving the year after a tax cut to exceed the number coming in. Further, in most years it was the case that both the number coming and leaving rose and fell in tandem.

A new report from the Center on Budget and Policy Priorities, “Tax Flight is a Myth: Higher State Taxes Bring More Revenue, Not More Migration,” provides an up-to-date rigorous examination of the unproven claims that tax hikes drive large numbers of households – particularly the most affluent – to other states. It concludes the following:

Migration is not common. Just 1.7 percent of U.S. residents per year moved from one state to another between 2001 and 2010.
The migration that is occurring is more likely to be driven by cheaper housing than by lower taxes. The difference between housing costs in two different states is often many times greater than the difference in taxes.

Recent research shows income tax increases cause little or no interstate migration. New Jersey is used as an example in two different studies examined in the report. The first, conducted by Stanford University sociologists, estimated the migration effect of New Jersey’s 2004 tax increase on filers with incomes exceeding $500,000. The authors found that net out-migration did increase for those in that income group but it also increased for those with lower incomes – and by virtually the same amount. The second report which was commissioned by the New Jersey Chamber of Commerce found that most of the people included in the study who were moving from New Jersey had less than $500,000 a year in taxable income so would not have been subject to New Jersey’s highest 8.97 percent marginal tax rate. Despite this, the governor continues to claim this study as evidence of a tax-migration effect.

Low taxes can prevent a state from maintaining the kind of high-quality public services that people value, such as good schools, mass transit, cultural facilities and recreational opportunities.

Policymakers need honest and accurate information about the implications of tax increases and tax cuts in order to address the challenging fiscal and economic circumstances that most states continue to face. State policy makers should not let false claims about taxes and migration shape their decisions.

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Filed under As a Matter of Fact, Florida, high taxes, New Jersey, New Jersey Policy Perspective, public service quality of life, tax migration