A $500 bounty from the Democrats

A $500 bounty from the Democrats. But working poor need not apply. Assembly Speaker Craig Coughlin demanded middle-class rebates in return for his support for hiking the millionaires’ tax. The design of the rebates excludes the working poor and the wealthy. Michael Mancuso–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/–167658693/

Few will complain about receiving the rebate checks coming in the mail over the next several weeks, up to $500 for middle-class households with kids.

But it’s terrible policy, and not just because New Jersey is deeply in debt and has no businesses popping this bottle of champagne. This move is a mistake for two other reasons as well.

It’s shameless politics, sending out checks during an election year with a message from our smiling governor that echoes his campaign slogan, in case you missed the point: “When you make New Jersey fairer, we make it stronger,” he writes.

Yes, Gov. Brendan Byrne did this in 1977, and President Trump did it last year, so it’s not unprecedented. But neither is paying a bribe.

It gets worse. These rebates are designed monstrously, to exclude the working poor and reserve the most generous benefits for those with higher incomes. A minimum wage worker would get nothing. A lawyer making $100,000 would get much more than a cashier making $40,000.

The reason is that this benefit is reserved for those who pay income taxes, and its biggest benefits go to those who pay at least $500 in income taxes. That excludes the working poor, who pay no incomes taxes, even though they do pay sales taxes and property taxes.

That cashier who pays a small income tax, say $250, will get a benefit of $250. While the lawyer paying more taxes would get the full $500. Households earning more than $150,000 are, mercifully, excluded.

Keep in mind, New Jerseys’ income tax is progressive, landing heaviest on the highest earners. But when you add up all state and local taxes, that effect disappears. The bottom fifth pays nearly as much (8.7 percent) as the top 1 percent (9.8 percent).

Legislative leaders, led by Assembly Speaker Craig Coughlin, demanded this rebate in return for supporting the millionaires’ tax. Enjoy the bounty, it’s been a tough year. But know that this is slippery politics, and backward policy — especially during a pandemic when low-income workers have taken the hardest hit by far.The breakthrough budget agreement announced Thursday by Gov. Phil Murphy and legislative leaders has two big pieces, one good and one shameless.

The good part is the hike in the millionaires’ tax. This is not about class warfare, or resentment of the rich. It’s about shared sacrifice to cope with the economic collapse caused by this pandemic. The virus broke the political deadlock.

Republicans responded with the same tired arguments they’ve made for the last decade. They note that the richest 1 percent already pay 40 percent of all income taxes and predict that demanding more will cause them to flee the state.

Yes, the wealthy pay the bulk of the income tax, which is steeply progressive by design. But the sales tax and property tax are regressive, and in the final wash, New Jersey’s middle-class pays a higher share of its income in state and local taxes than the top 1 percent pays. When Republicans say the rich need relief, they are the ones practicing class warfare.

And will the rich flee? Republicans and conservative Democrats have made that claim since Gov. Jim McGreevey hiked taxes on upper-income families nearly two decades ago, and they made it again when Murphy raised taxes on incomes above $5 million two years ago.

We now have hard data from the Department of Treasury to show that this argument is a myth. The number of people earning more than $1 million in New Jersey has doubled in the last 20 years, despite those tax hikes. The sizzling real estate market in New Jersey during this pandemic, juiced by families leaving Manhattan, suggests that more are on the way.

The pandemic has forced much steeper sacrifice from working families than from the rich, inflaming this economy’s outrageous inequities. Among families earning $50,000 or less, nearly two-thirds have lost income, according to the Department of Treasury. Among those earning more than $150,000, one-third have lost income. And the stock market is doing just fine, thank you.

Raising taxes on the rich is nothing to celebrate. It’s just that we need the money.

* * *

Now to the shameless part: Their plans to spend the bulk of the roughly $390 million in new revenue.

They could spend this money to strengthen the state for the long run. They could roll back the plan to borrow $4 billion, on top of the state’s existing record-setting debt. They could clean the lead pipes that are poisoning our children or help the estimated 200,000 kids who can’t get an education because they can’t get online. They could do more to fix NJ Transit.

Instead, they’re using the money to send rebate checks of up to $500 per family during the heat of next year’s political campaign, limited to families earning $150,000 or less.

The credit is horribly designed, so that a lawyer earning $100,000 will get more than a cashier earning $20,000. It inexplicably favors married couples over single parents, even at the same income level. And while Democrats pitch it as a response to the pandemic, the checks won’t go out until next summer, when the worst of the crisis will likely have passed.

Let’s call this what is: a bribe for voters in an election year.

This proposal is the brainchild of Speaker Craig Coughlin, D-Middlesex, who normally has a closer eye on the poorest among us and added $14 million in this year’s budget for food pantries.

But Coughlin, cautious by nature, has resisted raising the millionaires’ tax, saying it could trigger a taxpayer revolt that would cost Democrats seats in the Legislature. The rebate offers some protection. When Democrats released this plan, they spoke at a podium with a banner proclaiming “Middle-class tax relief.”

As a strategy for the 2021 election, this makes sense, for Murphy and for Democrats in the Legislature. When Republicans warn that tax-happy Democrats intend to hit the middle-class next, Democrats can point to this tax cut.

“This is designed to help middle-class families,” Coughlin says.

But after the 2021 election, the tax credits will leave New Jersey with an even deeper fiscal crisis. The $4 billion in borrowed funds, about 10 percent of annual spending, will be gone by next summer, leaving an enormous hole to fill in the 2022 budget. Does it make one scrap of sense to dig that hole even deeper now

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