May 27, 2009
Examining the Tax Plans of Three New Jersey Gubernatorial Candidates
With Primary Election Next Tuesday, Two Tax Foundation Reports Analyze Income Tax Proposals from Corzine, Christie and Lonegan
Washington, DC, May 27, 2009 - With a primary election next Tuesday and candidates in the New Jersey gubernatorial race talking taxes, mirroring the national concern with revenue and spending, the Tax Foundation is releasing two reports: one examining the tax plan of incumbent Governor Jon Corzine (D) and the other comparing proposals from former U.S. Attorney Chris Christie (R) and former Bogota mayor Steve Lonegan.
In Tax Foundation Fiscal Fact No. 171 and No. 172, director of state projects Joseph Henchman prefaces the analysis of the three candidates' plans by putting into context New Jersey's bleak fiscal outlook. New Jersey officials now say that the shortfall is up to $9 billion, after income tax collection for April 2009 turned out to be 38% off.
"Fiscal policy in the Garden State reads like a 'what not to do' for policymakers and stakeholders," says Henchman. "The corporate income tax combines a high rate, onerous rules, and lavish subsidies for the politically connected. The sales tax is one of the highest in the country. The state is one of five in the country to adopt a heavy individual income tax on high-income earners, which has reduced economic activity in the state. New Jersey residents also pay more property tax per capita than residents of any other state."
Gov. Corzine's current proposal would eliminate the property tax deduction only for taxpayers who earn more than $150,000 in income, but eliminates rebate checks for all except senior and disabled citizens (some 500,000 households would lose the rebates). However, the top income tax rate would go to 10.75 percent, with new 10.25 percent and 8 percent brackets as well. This means 61,300 filers out of 4 million would pay more, and officials estimate the income tax increases would raise $400 million.
"States that adopt new taxes on high-income earners are ones where policymakers are persuaded to ignore concerns about long-term economic growth in favor of a short-term budget fix that avoids deep spending cuts," Henchman argues.
Lonegan has a more defined tax proposal centering on a flat income tax rate with no exemptions or deductions at a rate of 2.9% beginning with the first dollar, falling to 2.5% in the second year, and 2.1% in the third year. Lonegan argues that the economic growth induced by the sharp cut in income tax and elimination of distortive tax preferences will enable revenues to remain stable after the first year even as the rate drops.
Christie has been less definite about his tax proposal, but has emphasized that it would involve an across-the-board cut to all state taxpayers, and that it would retain many of the targeted tax credits that Lonegan's plan eliminates. Christie has also called for the reduction of New Jersey's corporate income tax, which at a top rate of 9.36% is one of the highest in the country.
"Chris Christie and Steve Lonegan both aim to cut taxes, although Christie would preserve the bracket progressivity and the array of credits and deductions," Henchman notes. "Lonegan, while eliminating them, would create the nation's first completely flat tax (although several states have flat taxes with a standard deduction or personal exemption) and the one with the lowest rate.
Fiscal Fact No. 171 can be found at http://www.taxfoundation.org/publications/show/24722.html.
Fiscal Fact No. 172 can be found at http://www.taxfoundation.org/publications/show/24723.html.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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