March 25, 2006
Trenton Times -- N.J. again trails in return on tax dollars
Things aren't all bad for New Jersey taxpayers.
The state's per capita income has increased steadily, reaching $41,332 last year, an amount topped only by Connecticut
But New Jersey's lofty incomes also mean the state is falling further behind other states in getting its money's worth from the federal government.
The Tax Foundation, in its annual analysis of federal tax burdens, found New Jersey increasingly isolated at the bottom when it comes to getting money back from the federal government.
"The problem isn't the number of dollars New Jersey gets back from Washington," said Scott Hodge, Tax Foundation president. "It's the number of dollars New Jersey taxpayers send Washington in the first place."
New Jersey has ranked last in the nation since 2001 in comparing federal tax burdens, but the latest ranking showed New Jersey in 2004 received just 55 cents back for every $1 it paid to the federal government, down from 57 cents in 2003 and 69 cents in 1994.
New Hampshire ranked second-to-last in 2003, at 65 cents, but it improved in 2004 to 67 cents. Connecticut is now second-to-last at 66 cents, but it's held steady at that since 2002.
New Mexico, meanwhile, gets $2 back for every $1 in federal taxes paid, the best return ratio. New Mexicans earn $26,191 per capita.
What can be done about this?
Not much, according to the Tax Foundation.
The average American pays $6,369 in federal taxes, but in New Jersey the average person pays $8,999. In New Mexico, the average person pays $4,927.
Hodge said states such as New Jersey with greater numbers of high-income taxpayers have more people paying the highest tax rates.
Technically, New Jersey isn't losing any money from the federal government. Rather, it's theoretically missing out on money it otherwise would get if the federal income tax structure was less progressive.
Under that tax structure, the federal government spends $6,409 per person in New Jersey and $10,628 in New Mexico.
"Incomes and taxes have grown in New Jersey over the last decade, which is why the ratio has fallen from 69 cents to 55," said Curtis Dubay, a foundation economist. "No federal spending program can make up that difference."
Poor rankings in various tax analyses are nothing new for New Jersey.
Per capita, the state has the highest property taxes in the nation, the fifth-highest corporate tax, the 15th-highest income tax and the 16th-highest sales tax. Property taxes assuredly will increase this year and with the state facing a $4 billion state budget deficit, Gov. Jon Corzine proposed boosting other taxes when he introduced his budget Tuesday.
New Jersey's take from the federal government often becomes an issue in the state's House and U.S. Senate races, with challengers often charging incumbents with failing to bring home money.
"The funding formula disproportionately harms New Jersey, and we don't have strong New Jersey leadership in the Senate fighting to change those formulas," said Jill Hazelbaker, spokeswoman for U.S. Senate candidate Tom Kean Jr., a Republican state senator from Westfield.
Allyn Brooks-LaSure, spokesman for U.S. Sen. Robert Menendez, D-N.J., said Bush administration policies on homeland security and community development block grants have cost New Jersey federal money.
"It shortchanges us on a whole host of programs that are good for New Jersey," Brooks-LaSure said.
Rep. Rush Holt, D-Hopewell Township, pinned the problem on federal spending policy.
"Our needs are different, and in most cases greater, than those of other, less populous states," Holt said. "Until the nation properly funds such things as port security, transit and smart growth initiatives, New Jersey is going to continue to get the short end of the stick."
But Hodge said politicians have little control.
"The main culprit is not the lazy congressmen who don't bring home enough pork but rather the progressive income tax," Hodge said.