We all know that one of the best anti-poverty tools available is a robust, growing economy that offers well-paid jobs to those who need them. In New Jersey, approaching full employment would work wonders for direct poverty reduction, while swelling the state’s coffers with new tax revenue, which would help pay for vital services to reach those left behind and shore up supports to help lift low-income families into the middle class.
We also know that everyone wants to grow New Jersey’s economy. But the single-minded emphasis on cutting taxes for businesses and offering corporations billions in future tax breaks to repair the devastation of the Great Recession has not worked. Our leaders promise us that the math equation is simple: Tax Cuts + Tax Breaks = More Jobs and Greater Prosperity. But in reality, this equation doesn’t add up.
- The 2016 budget will complete a five-year phase-in of billions in business tax cuts. The bill so far: $1.7 billion and growing. And every single year moving forward, New Jersey will lose about $660 million in revenue that could instead be put to good use helping to increase economic opportunities and provide greater economic security for those who need it most.
- On top of those billions in tax cuts, New Jersey continues to be in the midst of an unprecedented and record-setting surge in business tax breaks. Since January 2010, New Jersey has OK’ed $5.2 billion in these special deals - $2 billion in 2014 alone. As a comparison, over the entire previous decade, the state only approved $1.2 billion in these tax breaks.
- These tax breaks have also gotten much more generous, with the state offering more in tax breaks for corporations to do less. For example, each job promised by companies approved for tax breaks in 2014 was worth $79,000 in taxpayer dollars. That’s over four times higher than it was just five years before in 2009, when each job was worth just $18,000.
Where has all this tax cutting and subsidy offering gotten us? Hardly anywhere:
- New Jersey has only recovered 64 percent of the jobs it lost in the Great Recession, far less than the nation as a whole (132 percent) and our neighbors in New York (244 percent) and Pennsylvania (106 percent).
- As a result of our lagging job growth, state tax revenue is also falling behind. New Jersey’s revenue is still 11.4 percent less than it was before the recession, the sixth worst performance of the 50 states.
- Meanwhile, New Jersey families are feeling the pinch. New Jersey was one of only three states that saw an increase in poverty in 2013, our middle class continues to shrink and personal income growth is slower than most other states.
As Serena pointed out in the blog introducing this series saying that budgets are about priorities is a pretty well-worn cliché. But it’s also true. And when it comes to tax cuts and tax breaks, it’s important to remember that by losing revenue to tax cuts, we are making it that much harder to pay for important working- and middle-class priorities.
If these kinds of tax cuts had any economic merit as actual creators of good jobs and drivers of growth, that’d be one thing. But decades of experience has shown that they clearly don’t, and so all that New Jersey is receiving in return is a diminishing ability to invest in the public assets that are proven to build a strong economy for all New Jerseyans. It’s high time for lawmakers to rethink this strategy and work to create an economy – and a budget – that works for all New Jerseyans. Put the money where it should be.
By Jon Whiten, Deputy Director of New Jersey Policy Perspective