Law360 (March 31, 2020, 7:17 PM EDT) -- A left-leaning New Jersey policy group called Tuesday for the state budget to include higher taxes on the wealthy to blunt predicted revenue shortfalls caused by measures to stem the COVID-19 pandemic.
New Jersey Policy Perspective, in a new report, said state lawmakers should expand social safety net programs and avoid budget cuts amid the expected revenue declines caused by the COVID-19 pandemic and measures meant to stave off its effects. Sheila Reynertson, the group's senior policy analyst and author of the report, said in a statement New Jersey doesn't have the resources to deal with the economic crisis.
"That is a direct result of tax cuts given to wealthy families and big corporations that have drained New Jersey's budget coffers," Reynertson said. "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."
To help avoid cuts and expand safety net programs, the group said lawmakers and Gov. Phil Murphy, a Democrat, should consider a host of tax proposals to increase state revenue. Those include creating a new income tax bracket for those making between $250,000 and $2.5 million and extending a currently temporary 2.5% corporate business tax surcharge, the group said.
In addition, the group said state leaders should make changes to taxation on inherited wealth, repeal a sales and use tax cut the state instituted in 2016 and close what it called "tax avoidance loopholes" used by large corporations.
The call for tax increases and expansion comes as Murphy's administration has said it expects to freeze more than $900 million in spending because of "precipitous declines" in tax revenue, including drops in gross income tax revenues, corporate business tax revenues and sales and use tax revenues due to required business shutdowns from COVID-19. Murphy also faces pressure to sign legislation to extend the state income tax return filing deadlines, a move that could further exacerbate state cash flow from taxes.
In the report, the group calls on reinstating the estate tax, which was fully repealed in 2018. Since the repeal, wealthy heirs have collected $923 million in taxes that could have been reallocated for other purposes, the group said.
The group also is calling for increasing the sales and use tax rate from 6.625% to where it was before 2016, 7%, while broadening the tax to include services such as chartered flights and limousine rides.
Murphy's office didn't respond to requests for comment on Tuesday. But on March 26 Murphy said during a news conference he thought the state was going to need reliable, recurring revenue. While the federal government needed to step up to help states, more was also needed, he said.
"I think taxes, like the millionaire's tax at a minimum, become more relevant as opposed to less relevant," Murphy said last week.
Murphy in January called for a budget that would extend a current 10.75% tax rate on those making more than $5 million annually to those making more than $1 million annually.
The office of Senate President Steve Sweeney, D-West Deptford, didn't respond to requests for comment on Tuesday. While Sweeney last month softened on his previous opposition to support increased taxes on millionaires and said he supported amending the corporation business tax law to keep the rate permanently at 10% for companies making more than $1 million, that was before the COVID-19 pandemic and its economic consequences on state coffers.
Danielle DeSisto, a spokesperson for Assembly Speaker Craig Coughlin, D-Woodbridge, had no comment.
But Assembly member Harold Wirths, R-Sussex, told Law360 on Tuesday that he adamantly opposed new taxes at a time businesses were suffering and people's jobs were at risk.
"We should be taking these issues right off the table and letting people know that there's no chance of new taxes," Wirths said.
Jared Walczak, director of state tax policy for the right-leaning Tax Foundation, told Law360 on Tuesday the proposals from the group weren't temporary increases to fund relief but permanent increases in a state that has some of the highest taxes in the country. He also said that during the Great Recession, most states sought to avoid significant tax increases.
"Rather, the proposal is for a multibillion-dollar tax increase in a state that already has some of the highest taxes in the country, and in the midst of a crisis when businesses are struggling to survive mandatory closures and many individuals face real financial hardship," Walczak said.
Walczak said New Jersey is the only state with both individual and corporate income tax rates in the double digits and said the state also has some of the nation's highest property taxes.
Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, also told Law360 on Tuesday that he opposed the call for new taxes, arguing that this was a time when people "should be good soldiers" and support what the federal government and the state are doing to ensure people stay employed an companies stay in business and to prevent as much damage as possible.
"This is the worst time I can think of to be promoting for tax increases," Bracken said.
The state's budget is due by July 1.
--Editing by Vincent Sherry.
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