The COVID-19 Crisis Proves the Point: New Jersey Needs More Revenue to Support Workers, Families, and Businesses
TRENTON, NJ (March 31, 2020) – The COVID-19 pandemic has dramatically changed New Jersey’s budget process, as the state is taking in significantly less revenue in income, sales, and corporate businesses taxes than previously projected. The state’s Rainy Day Fund will not be enough to offset the economic fallout from COVID-19, according to a new report by New Jersey Policy Perspective (NJPP), and state lawmakers will need to enact new sources of revenue to protect against cuts to vital services and provide relief to the workers, families, and businesses who need it most.
“New Jersey does not have the resources to weather an economic downturn right now,” said Sheila Reynertson, NJPP Senior Policy Analyst and author of the report. “That is a direct result of tax cuts given to wealthy families and big corporations that have drained New Jersey’s budget coffers. If state lawmakers want to avoid brutal cuts to public services and programs that families rely on, especially during times of crisis, they must raise new revenue.”
The new report, The COVID-19 Crisis Proves the Point: New Jersey Needs More Revenue to Support Workers, Families, and Businesses, finds that New Jersey has failed to bring in enough revenue to cover its annual expenses since at least 2002. This shortfall was exacerbated by the 2016 cuts to the state sales tax and elimination of the estate tax. Making matters worse, the report finds that New Jersey has lost a cumulative $15 billion in revenue from tax cuts made under the Christie administration alone.
State lawmakers have made steady progress toward fixing New Jersey’s finances over the last two years by reinvesting in important assets like public education, from Pre-K to college, NJ Transit, and tax credits for low-paid working families. The state has paid for these investments by restoring fairer taxation on wealthy individuals and big corporations, allowing it to reduce budget raids on dedicated funds for environmental protection and affordable housing. Last year, the state also made its first deposit into the Rainy Day Fund in over a decade. This progress is now at risk due to the economic fallout from COVID-19.
“The COVID-19 pandemic may have altered the state’s finances, but it shouldn’t change the state’s priorities,” Reynertson added. “State lawmakers must continue investing in New Jersey families in this extraordinary time of need. We can do that, regardless of how much federal aid New Jersey receives, by embracing new sources of revenue that make the tax code fairer and the state’s finances stronger.”
The report concludes with recommendations for state lawmakers to make the tax code fairer and raise enough revenue to protect against budget cuts and expand the social safety net. These options include overhauling the state’s income tax code with new brackets between $250,000 and $2.5 million, extending the 2.5 percent corporate business tax surcharge, closing tax avoidance loopholes used by large corporations, reforming taxation on inherited wealth, and repealing the 2016 sales tax cut.
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