Credit: (AP Photo/Eduardo Munoz Alvarez, File)With several state agencies and even state government itself facing tighter budgets this year, social-justice advocates are raising concerns that a number of existing or potential tax and fee increases will overly burden low- and middle-income residents.
The gas tax already increased late last year, and tolls will also go up beginning March 1. New Jersey Transit next announced it plans a series of fare increases, and some are concerned about other possible tax increases as budget pressures mount.
Total tax collection revenues have lagged the pace set last year over the first half of this fiscal year. While collections could recover by the end of June, lawmakers may have to consider new ways to raise revenue to sustain spending — especially as NJ Transit faces budget deficits over the course of the next year.
Advocates remain particularly disappointed by the scheduled end of a corporation business tax surcharge in December, which the state Department of the Treasury estimates could cost $1 billion in revenue that could help support key state services.
There is already a dichotomy, these advocates say, as wealthy corporations now are keeping their income, while everyday New Jerseyans are forced to make up state revenue even as inflation continues to drive housing and grocery costs higher.
Budget address next week
Advocates also say this goes against Gov. Phil Murphy’s repeated promise of an affordable New Jersey made in his State of the State address earlier this year — and hope he will course-correct as he prepares to unveil his state budget proposal next week.
“They’re potentially increasing the sales tax, (they’re) increasing the train and the bus fares, turnpike tolls,” said Nedia Morsy of Make the Road New Jersey, an immigrant advocacy group. “And these are all the ways and the means that working families use in order to get to work for the corporations that take that profit off of their backs.”
“So I don’t think the irony is lost on anyone,” she said.
Morsy’s organization, along with 40 other social-justice groups, sent a letter to Murphy, state Senate President Nicholas Scutari (D-Union) and Assembly Speaker Craig Coughlin (D-Middlesex) last week urging them to reinstate the corporation business tax surcharge in response to other tax revenue-generating proposals.
The corporation business tax surcharge was a temporary 2% additional tax put on businesses making more than $1 million in profit that was extended during the pandemic. The social-justice groups said in the letter that low- and middle-income families are already over-burdened by taxes and fares.
Disproportional impacts
According to a recent report from the Institute of Taxation and Economic Policy, a left-leaning think tank, New Jersey generally has a progressive tax structure that includes policy benefits such as the child tax credit and earned income tax credit. However, it also shows that some state levies are regressive, with low-income families spending around 5.7% of their income on sales tax while the top 1% spend 0.9% of their income.
And NJ Transit’s plan to increase fares by 15%, and an additional 3% every year, will also directly hit the pockets of low-income residents, who are more likely to rely on public transit.
“We keep hearing it’s a transitional budget; this is a tricky transition year, because we’re moving away from some of the federal pandemic aid that’s going away,” said Peter Chen of New Jersey Policy Perspective.
“But there again, there’s this gap, and how are you going to fill the gap?” he said. “We have our answer [with the surcharge]. And I think one of the reasons why lawmakers keep going around and around in sort of scrambling, is there’s no alternative answer that doesn’t involve taxation.”
Chen said that Murphy’s first term and the beginning of his second have created progressive tax policies. He’s pushed for a millionaires tax and also extended the corporation business tax surcharge when it was set to expire, Chen said. Murphy has also expanded the earned income tax credit and the child tax credit.
“And it’s part of why it’s kind of disappointing,” said Chen of the governor’s latest moves.
Pushback from big business
Business lobbyists have largely come out against reinstating the surcharge. Main Street Alliance, a small business owner coalition, supports the surcharge because they believe big corporations — like Amazon, Walmart and others — could reinvest in the communities they do business in to improve transit, schools and more.
“(Corporations’) interest is in the profits…Their interest is not in their employees or the communities their employees live in,” said Kelly Conklin, board chair of Main Street Alliance and a small business owner in New Jersey.
Opinion on the corporation business tax surcharge remains mixed at the top level of state government. Scutari in the past has said he would be open to reinstating the surcharge, while Coughlin has remained neutral. Murphy, however, has said in the past that he doesn’t support the move. Murphy and Scutari’s office didn’t respond to additional requests for comment.
Coughlin’s office said in a statement that Assembly Democrats would “once again pass a budget that stands up for New Jersey families,” noting that next week’s budget proposal will go through a series of public hearings and reviews before it is finalized.
“Last session we addressed property tax relief, prescription drug affordability, and making New Jersey a great place to start or grow a business while making historic investments in education, and health care infrastructure — and we intend to stay on that path this session,” the statement reads. “The caucus looks forward to continuing to listen to the diverse viewpoints as we craft a responsible budget that meets the needs of our state.”
Meanwhile, advocates say that other revenue proposals will force low- and middle-income families to pay with higher taxes and fares they may or may not be able to afford. They say it’s not too late for Murphy to support reinstating the surcharge.
Morsy of Make the Road New Jersey said that Murphy’s budget address on Feb. 27 will be his opportunity “to come out publicly and say, ‘Our NJ Transit is in crisis, working families are facing skyrocketing inflation … We are reinstating the corporation business tax, or making sure that … corporations pay what they owe, because we know there are programs that are at risk.’
“We need to invest in working families. There’s ample opportunity to say that as opposed to running through a list of regressive taxes,” she added.
