The State of New Jersey is broke; especially its Transportation Trust Fund, the source for wherewithal to fix our roads, bridges and other transportation infrastructure. State Senator Steve Oroho has a fix: Let’s reduce the state’s revenue.
He’d like to eliminate the tax paid by people who receive money from large estates. This, says Oroho, will stop rich old people from moving out of the state, with the result that their money will “trickle down” to boost the state’s economy and increase the flow of funds into the state’s treasury.
We’ve heard this before, over and over again, from GOP politicians. They say that if we keep the rich, rich, we will all flourish. The first George Bush called it “voodoo economics”; the second George Bush worked to implement it and drove the nation’s economy into the greatest slump since the Great Depression. Besides, the numbers Oroho cites to support his claims just don’t add up.
Oroho says because people are leaving NJ to flee this tax, over the past ten years the state lost the ability to tax $19 billion of adjusted gross income. That’s $1.9 billion per year. Of course, that assumes that the estate tax alone (not mild weather, open spaces, going back to family roots, high property taxes) is the sole reason for people leaving.So how much revenue did the state lose, even if Oroho’s assumptions were true? Applying NJ’s top income tax rate of 8.97% to the $1.9 billion a year Oroho says we lose; the state’s loss in annual revenue comes to a maximum of about $170 million.
In other words, even if he’s right that the entire exodus is because of the estate tax, the most we could be losing is $170 million per year; about half of the $300 million we will lose if Oroho has his way and ends the estate tax. Cash strapped New Jersey doesn’t need to have this revenue stream cut in half.
Oroho claims his plan is a win-win for New Jersey?! It doesn’t seem so.
In fact, if Oroho really wants to help NJ’s fiscal situation, he should cosponsor and promote a proposal currently on the table. There’s a bill pending before the New Jersey Senate (S61) that closes a corporate tax loophole that costs us $200 million per year. It prevents corporations from avoiding taxes by shipping profits to out-of-state entities that are often no more than an empty room in Delaware.