Legislation sponsored by Assembly Speaker Vincent Prieto and Majority Leader Louis Greenwald to require New Jersey millionaires to pay their fair share and restore a tax credit that strengthens families by encouraging hard work and reducing poverty received the approval of the General Assembly on Thursday.
The bill (A-4602) temporarily would change New Jersey’s gross income tax rate to 10.75 percent from 8.97 percent for about 14,500 of the wealthiest taxpayers with taxable incomes exceeding $1 million. In addition to eliminating a tax break enjoyed by millionaires and funding critical programs for middle- and working-class families, the bill would restore the Earned Income Tax Credit (EITC).
“This legislation is about taking a stand in the name of tax fairness so that New Jersey can adequately fund the programs and services that hard-working middle- and working-class families need,” said Prieto (D-Bergen/Hudson). “A stronger, more prosperous New Jersey lies in this plan, which proves that meeting the state’s legally-mandated fiscal obligations and building a state where all have the opportunity to live and raise a family are not mutually exclusive.”
“There is something disconcerting and fundamentally wrong about a New Jersey where the wealthy get relief while working people face roadblocks every step of the way. With this plan, we put middle- and working-class families first, knowing that trickle-down economics just doesn’t work. The proof is in years of this administration’s fiscal failure,” said Greenwald (D-Camden/Burlington). “This plan recognizes that we cannot – and will not – reach our full potential as a state if we ignore the plight of those everyday New Jersey residents who are living paycheck to paycheck or struggling to find work.”
The bill’s sponsors noted that ending the tax break for millionaires would fund core Democratic priorities in the FY 2016 budget, such as women’s health care, nursing homes and assisted living facilities and domestic violence programs, all of which have seen funding cuts under the Christie administration.
The measure also would increase the EITC to 25 percent of the federal amount, restoring another Christie administration cut and providing tax relief to low-income working families, beginning with taxable year 2015. The governor reduced the successful anti-poverty credit to 20 percent of the federal tax credit from 25 percent in his first budget in 2010, effectively raising taxes on low-income families by $45 million.
Some 528,000 taxpayers received an average state EITC benefit of approximately $430 during FY 2010, according to federal and state data.
Created in 1975 to ease the burden of payroll taxes for the working poor, the federal EITC saw expansion under President Ronald Reagan. As the nation’s largest anti-poverty program, the EITC has substantially reduced child poverty and increased incentives to work.
“A budget is about priorities, and this plan – one that emphasizes issues like working class tax relief – makes ours perfectly clear,” said Prieto. “The EITC has received strong bipartisan support over the last 40 years, because it is a manifestation of the fundamental idea that hard work should pay off.”
“The governor has done the same thing year after year – putting millionaires first at working families’ expense – so it’s no surprise that New Jersey still lags behind many states in the nation,” said Greenwald. “We know that building ways for working people to get ahead is a fiscally sound means of restoring the state’s overall economy. The anti-poverty and employment effects of the EITC will help encourage low-income workers and better enable parents to support their families while creating a better New Jersey for all of our residents.”
The measure, which passed the Assembly 47-31-1, awaits further Senate consideration.