Want lower taxes? Murphy should focus on pensions, aid to some schools

By Jack Ciattarelli 

On his inauguration day, Phil Murphy received two gifts any new governor of New Jersey could only wish for – the lowest unemployment rate in 17 years and hundreds of millions of dollars in new tax revenue based on U.S. Supreme Court decisions on internet sales and sports betting. It wasn’t enough. In his first budget, Murphy raised other new and existing taxes more than $1.5 billion, including New Jersey corporate and personal taxes, despite both already being among the highest in the nation. Murphy’s political justification was, “We need to make New Jersey stronger and fairer.” His policy justification was, “The Trump tax reforms lowered corporate taxes” and “People need to pay their fair share.” While businesses and people may never leave a country over taxes, they will leave a state. Moreover, if you try to offset federal tax decreases with state tax increases, you only make your state an outlier. That’s exactly what’s happening to New Jersey. The proof . . . For the fifth year in a row, New Jersey’s business climate has been ranked dead last in the country. And the annual United Van Lines study shows New Jersey is, once again, one of the leading out-migration states in the country, with nearly 50 percent listing “jobs” as their reason for leaving. 

Stronger? Fairer? Murphy [has presented] his second budget. This is no time for more things we can’t afford, like last year’s ‘free community college’ proposal. This is a time to face facts. This is a time for fixing what everyone, including top Democrats, understands as the problem – spending and taxes. First, the governor can make New Jersey less starved for tax revenue and stop the crowding out effect in the budget by addressing spending, with laser focus on state employee/retiree pension and healthcare benefits. Yes, in part, the trust funds are in deficit because the state failed to make annual payments. But they’re also in deficit because people are living longer and the benefits are too generous, especially when compared to what private sector employees receive. The necessary fiscal reforms, especially specific to new hires, are obvious and well-documented. Second, the governor must improve New Jersey’s business climate and incentivize job creation by repealing taxes, not raising them. We can do this by eliminating the state’s corporate tax over a 10-year period (i.e., 1 percent per year), which is better than selectively issuing tax credits. It is madness to levy a tax on businesses only to then issue credits to reduce the tax. 

In addition, we need to reform taxes on capital gains, including those earned from IPOs on New Jersey-based companies. We should also make the gain on the sale of a family-owned business tax free. And we should repeal last year’s new tax bracket on our most successful citizens, who are taking up legal residence in low tax states like Florida and North Carolina. Third, on property taxes, the governor must accelerate state school funding reforms. It was bad enough that the budget he introduced last year was status quo on school funding, but the continued excessively generous subsidy of school districts that have experienced significant revitalization – like Hoboken and Jersey City – is unfair and making middle class suburban homeowners poorer. How long will suburbanites have to pay more in property taxes because they receive less aid for their own schools? The fact is, reducing property taxes is impossible unless we reform state school funding. One small and quick property tax fix would be a moratorium on reassessments when a homeowner does a home improvement. Stronger? Fairer? How about honest? Specific to truly fixing New Jersey, let’s be honest. It’s spending and taxes. 

Jack M. Ciattarelli is former state Assemblyman and candidate for governor in the 2017 Republican gubernatorial primary.