In response to the state’s estimated $10 billion budget surplus and unused federal aid, Assembly Republicans offered a tax relief plan to make New Jersey more affordable for its residents.
Republicans have maintained relief should be provided to New Jersey taxpayers faced with rising costs due to inflation after the Murphy Administration estimated during budget hearings May 16 the state surplus is between $6.9 and $7.8 billion. Additionally, the state has not allocated nearly $3 billion in American Rescue Plan funds.
“When the state is sitting on extra money because of overtaxation, you can guarantee the government will spend it,” said Assembly Budget Officer Hal Wirths(R-24). “We plan to send it back to the taxpayers.”
At the top of the Republicans’ plan is an income tax cut for the middle class and poor. The measure would adjust the income threshold of the four lowest tax brackets to account for the effects of inflation since January 2000, which they estimated to be 68%.
“Our plan benefits mostly low-wage and middle-class families, because they are the ones most affected by inflation,“ said Wirths. “But everyone will see some kind of relief whether it is through lower property taxes or rebates.”
Additionally, it eliminates the $50,000 tax bracket for joint filers, which created a built-in marriage penalty in the tax code. Married couples who file a joint tax return and earn $110,000 would see their tax reduced by about $1,600, while a single filer earning $70,000 would get a reduction of $1,000.
The package of proposals includes rebates to combat inflation, fully returning energy tax receipts to towns over two years to lower property taxes, and restoring school funding cuts passed in 2018 that cut so-called “adjustment aid” to nearly 200 districts across the state.
“Taxpayers can’t wait for relief. The cost of food, gas and goods is going up every day,” Assembly Republican Leader John DiMaio (R-23) said. “Unlike other short-term budget proposals, Assembly Republicans’ comprehensive plan gives people the money in their pockets that they need now and long-term tax reforms that will continue to save them money over time. Tax cuts don’t cost money, because this money belongs to the taxpayers.”
Response to Coughlin
The DiMaio/Wirths proposal is a response to Assembly Speaker Craig Coughlin’s declaration he would not pass budget that does not have tax relief after both the State Senate and Assembly budget committees were told on May 16 that New Jersey’s tax revenues are about $7 billion over what Gov. Phil Murphy projected just two months ago.
“The revenue update shared with the Legislature today demonstrates a surplus of billions of dollars beyond what was anticipated in the Governor’s proposed budget,” said Coughlin. “We have additional money this year, and New Jersey needs tax relief now. In this year’s budget, I will insist on the largest tax relief program in state history.”
Deputy Treasurer Aaron Binder offered during testimony that the Murphy Administration would work with Trenston lawmakers to use the additional revenue boost to provide greater property tax relief, more funding for debt reduction, and to build up the state’s surplus in the face of a potential economic downturn.
Murphy in his budget previously proposed allocating $4.2 billion in a surplus fund, $1.3 billion in to pay off debt and support capital construction, and $3 billion for his ANCHOR property tax rebate program
State Senate Budget Chairman Paul Sarlo (D-36) noted after the hearings the state needed to be prepared of a coming economic downturn. State officials pointed to sales tax growth slowing in April and the first quarterly income tax payments declined by 24% as two indicators of revenues showing decline.
“We should increase the size of the state surplus so we are prepared for economic downturns that are likely to come,” Sarlo tweeted. “The surge in state revenue is welcome, but it comes with warnings. We can’t expect it to continue. We have to be prudent and responsible in how we manage resources.”
Savings and Tax Cuts
Sarlo offered the objectives of giving immediate relief to taxpayers and planning for a future downturn can be achieved in the same budget.
“I am open minded to plans to cut taxes or deliver savings to NJ residents in other ways. An increased surplus is achievable at the same time. We can find the right balance that is prudent & responsible, that helps taxpayers & the economy,” he said.
Coughlin echoed Sarlo’s call to do both as he stated while there are “reasons to be cautious on the horizon, we will also make sure to leverage our surplus so we are ready to weather any storm coming our way.”
But for Republicans, the tout their plan as real structural change at a time when affordability is the subject most talked about in North Jersey politics
“(Everyone) knows the suffering that is going on, and no matter where I go people are saying, ‘I have a difficult time affording anything,’ and that’s why we want to do structural changes, long-lasting changes, but we need immediate relief,” said Wirths.