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Policy Solutions: Need Tax & Spend Reforms for NJ

Jun 4, 2018 by AFP

Dear Senator / Assembly Member:

As budget season has kicked into high gear and the administration has announced a statewide spending freeze, please consider implementing very much needed tax and spending reforms.

Specifically, spending is the root of the problem and must be addressed before New Jersey tackles tax reform. It is impossible to have a pro-growth tax reform that raises the revenue currently required to meet obligations in New Jersey.

For reference, please see here for ALEC’s State Budget Reform Toolkit. Any of the ideas included in the ALEC State Budget Reform Toolkit would be major steps in the right direction for New Jersey. Particularly, the reforms to the public workforce (state hiring freeze, eliminating vacant positions, delaying automatic pay increases, etc.) would be impactful.

Similarly, a strong tax expenditure limit would be effective, given how much the state gives away in corporate welfare tax credits. At the very least, the state should be commissioning andindependent audit of all tax expenditures and economic development incentives to calculate return on investment for each program.

More broadly, the state must start making tough decisions, rather than subjecting taxpayers to a greater burden through higher taxes or more borrowing. The most effective tool in the country to do so is the Colorado Taxpayer’s Bill of Rights, or “TABOR” as it is commonly referred to.

TABOR contains three parts:

  • Any state or local tax increase must be approved by voters.
  • Spending cannot grow from year-to-year any more than the growth in population-plus-inflation, unless voters say otherwise.
  • If revenue comes in excess of population + inflation growth, the excess revenue must be refunded to taxpayers, unless voters say otherwise.

TABOR has refunded more than $3 billion to the taxpayers of Colorado and stopped countless more tax increases at the state and local level.

Other options for tax and spending reforms would be to establish a supermajority or 75% legislator-support requirement to raise taxes at the state level, and/or a requirement that property tax increases above a certain level must be approved by voters. Texas has very high and increasing property taxes and requires voter approval beyond 8% increases, but is considering lowering that threshold to 4%. A larger step that would provide relief is to freeze property taxes in the state entirely, as Illinois is currently considering.

On specific taxes, the first principle of course is to do no harm. The state should not only avoid creating any new taxes or raising any rates on existing taxes, but also must stop narrowing the tax base by poking holes in the tax code – New Jersey does this to the tune of billions of dollars on the individual income tax, corporate tax, and sales tax. But more carve-outs means higher rates on the rest of the state. In addition, common-sense reforms like indexing the income tax to inflation are a must.

In terms of cutting overall rates or eliminating taxes entirely, the priorities should be 1) the corporate tax, 2) individual income tax top rate (even moving to a flat rate), and 3) the inheritance tax.

But ultimately, none of these reforms are possible without reducing the growth of spending in the state. As budget negotiations continue, I respectfully urge you to please consider implementing meaningful tax and spending reforms, so that we can right the ship of the State of New Jersey towards prosperity and fiscal responsibility.

Should you have any questions or wish to set up a meeting to discuss policy solutions, please feel free to reach me directly at EJedynak@afphq.org or 862-229-4953. Thank you in advance for your consideration.

Sincerely,

Erica L. Jedynak

New Jersey State Director

Americans for Prosperity

 

Americans for Prosperity (AFP) exists to recruit, educate, and mobilize citizens in support of the policies and goals of a free society at the local, state, and federal level, helping every American live their dream – especially the least fortunate. AFP has more than 3.2 million activists across the nation, a local infrastructure that includes 36 state chapters, and has received financial support from more than 100,000 Americans in all 50 states. For more information, visit www.AmericansForProsperity.org.