New Jersey Governor Chris Christie made a bold and reckless promise in his January State of the State address: a personal income tax cut for all. His plan is to gradually reduce income tax rates by 10 percent across the board, at a cost of $1 billion a year once fully implemented.
Democratic lawmakers and public interest advocates were quick to point out one very big problem with Christie’s plan: the state simply cannot afford it. The Governor has yet to say how he would pay for it, yet the likely scenario is more cuts to education spending and local aid which would, in turn, force local governments to increase property taxes to make up the difference. As Senate President Stephen Sweeny said, “it’s taking money out of one pocket and putting it in another.”
And, now thanks to an analysis by the nonpartisan NJ Office of Legislative Services (OLS), we know exactly which pockets will be fuller as a result of Christie’s grand plan. It’s no surprise given Christie’s past allegiance to millionaires that the wealthiest New Jerseyans stand to gain the most from a billion dollar cut in one tax (personal income) that will likely force an increase in another (property).
Even if property taxes are not increased as a result of Christie’s proposals, New Jersey families are already paying more in property taxes in recent years thanks to Christie’s reductions in property tax credits and rebates (all of which could be restored for a smaller price tag than the proposed personal income tax cut).
OLS’s findings are consistent with the Institute on Taxation and Economic Policy’s (ITEP) research on the share of income New Jerseyans pay in state and local taxes. Both OLS and ITEP agree – low and middle-income families spend a greater share of their income on property taxes than on income taxes. The reverse is true for New Jersey’s wealthiest families, which is why a cut in income taxes, accompanied by an increase in property taxes, will make an unfair situation even worse.
Rather than a “tax cut,” Christie’s plan is more accurately characterized as a “tax swap.” New Jersey Policy Perspective’s Deborah Howlett called the plan “a gimmick." Indeed. The plan is based on projected revenues which may or may not materialize. The Governor said that if they do, however, this tax cut will be at the top of his list of ways to spend whatever extra money trickles in. There are more important things at the top of a lot of his constituents’ lists, however, including restoring those property tax credits.
Photo of Governor Chris Christie via Bob Jagendorf Creative Commons Attribution License 2.0