1 / 24

New Jersey’s Budget & Tax Outlook

Pro-Growth Tax Cuts, Reduced Red Tape, Budget and Spending Discipline Are Building a More Competitive New Jersey. New Jersey’s Budget & Tax Outlook. State Treasurer Andrew Sidamon-Eristoff Common Sense Institute of New Jersey March 26, 2013. FY 2014 Budget (In Millions).

nichole-whitehead
Download Presentation

New Jersey’s Budget & Tax Outlook

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Pro-Growth Tax Cuts, Reduced Red Tape, Budget and Spending Discipline Are Building a More Competitive New Jersey New Jersey’s Budget & Tax Outlook State Treasurer Andrew Sidamon-Eristoff Common Sense Institute of New Jersey March 26, 2013

  2. FY 2014 Budget (In Millions)

  3. Spending & Budget Discipline • Three years of balanced budgets without broad-based tax increases • Increases due mostly to higher pension fund contributions and increased debt service • 2 percent cap on annual municipal tax increases is working • NJ average residential property tax bill increased just 1.4% in 2012, the lowest since 1991. • Landmark pension and health benefits reforms are “bending the curve” • Reforms are saving local governments $444 million in FY14 • Reduced rate of growth in State’s bonded debt • FY12 rate of growth in bonded debt was 1.94%, lowest since 2007

  4. Three Years of Pro-Growth Business Tax Relief (In Millions) * Proposals became operational on January 1, 2012.  FY12 estimate for the Transitional Energy Facility Assessment based on actual liability, FY13 estimate based on anticipated collections, and estimates for FY14 through FY16 based on typical collections for recent years.  For all other taxes, estimates based on 2007 and 2008 data and do not reflect projections of growth in tax bases, inflation, demographics, or dynamic scoring.

  5. Positive Trends in FY 13 Revenues • For the first eight months of fiscal year 2013: • Income tax collections up 8.6% • Sales tax collections up 2.1% • Overall, the State’s major revenue sources are up 4.4% • January and February revenues ahead of budget • In January, sales tax collections were 4.1% while overall revenues were 2.5% ahead of budget. • In February, sales tax collections were 2.9% while overall revenues were 9.5% ahead of budget. • March and April revenues, particularly capital gains from 2012 dividends, bonuses and capital gains, will be critical to overall results for the fiscal year.

  6. Current Economic Picture More Jobs and More Workers • NJ’s private sector employers added more than 66,400 jobs in 2012, largest gain since 2000 • 117,600 new jobs since February 2010 • New Jersey’s unemployment rate was unchanged in January at 9.5 percent • The state’s labor force participation rate and employment to population ratios remain above national averages

  7. Impact of Labor Force Participation

  8. Key Indicators • Economic Growth: Philly Fed says NJ economy grew 2.9 percent from January 2012 to January 2013. • Personal Income is Rising • 3rd quarter saw 7th consecutive new high – annual rate of $473.8 billion – year over year growth was 2.27 percent • NJ wages were an average of $58,300 per worker

  9. Housing and Auto Sales Gain • Housing is Recovering • Housing permits were up 39 percent for calendar year 2012 versus national increase of 28 percent • Car Sales Improving • New car sales were up nearly 9 percent in 2012 – best level since 2008

  10. Behind the Growth • Lower Taxes • $2.35 billion in pro-growth business tax cuts over five years -- we are now in Year Three • Business-Friendly State Government • Red Tape Review Commission • Business Action Center one-stop shopping • Spending Restraint

  11. Restraint on Growth of Bonded Indebtedness Growth: FY 2008: 6.7%; FY 2009: 4.9%; FY 2010: 3.9%; FY 2011: 3.1%; FY 2012: 1.9% Total outstanding debt grew by $6.04B in FY 2012 to $79.09B. Three major factors: • Increase in net pension obligations of $1.98B; • Increase in OPEB obligations of $3.32B; and • Transportation Capital Plan bonding of $0.7B.

  12. Tax Competiveness • Continued success in promoting economic growth will depend in large part on the competitiveness of our tax policy • At the state level, a sound tax policy recognizes the reality that we face vigorous competition for jobs and investment within our region • Tax is not the only consideration, but important • Key: avoid “outlier” status • NJ is a regional outlier in personal income, corporate and estate/inheritance tax rates

  13. NJ’s Tax Rates Are Not Competitive Within the Region (Income Tax) Effective tax rates as of 1/1/13

  14. NJ’s Tax Rates Are Not Competitive Within the Region (Corporate) Effective tax rates as of 1/1/13

  15. NJ’s Tax Rates Are Not Competitive Within the Region (Sales) Effective tax rates as of 1/1/13

  16. NJ’s Tax Rates Are Not Competitive Within the Region (Estate) Effective tax rates as of 1/1/13

  17. NJ’s Tax Rates Are Not Competitive Within the Region Effective tax rates as of 1/1/13

  18. New Jersey: Competitive Outlier Effective rates as of 1/1/13 *Reflects impact of NY rate recapture beginning at $100,000

  19. Effective Rates for Typical Households at Selected Income Levels NJ brackets. Income is at the lowest level of the bracket, married filing joint with two dependents and itemized deductions NY brackets. Inclusive of changes to rates enacted in December 2011

  20. NJ’s Progressive Income Tax • NJ’s highly progressive tax structure features the highest rate – 8.97 percent – in our region • New York has cut its top rate to 8.82 percent • The effective tax rate for someone earning $1 million a year is 6.88 percent, four times the rate for someone earning $100,000 a year • In terms of slope, most progressive structure in the region, perhaps in the country • Enhanced volatility

  21. What’s a Millionaire Worth to NJ? • In NJ, millionaires are worth a lot • We are heavily reliant on our highest earners • The top 1 percent accounted for 38 percent of our $11.1 billion in Gross Income Tax receipts in FY11 • It would take 34 taxpayers earning $100,000 a year to replace the loss of one taxpayer earning $1 million • It would take 420 taxpayers earning $100,000 a year to replace the loss of one taxpayer earning $10 million a year • It would take 1,000 taxpayers earning $100,000 a year to replace the loss of one taxpayer with the average income of someone earning more than $10 million

  22. Win-Win Outcome • We need more millionaires! • In 2010, New Jersey had 14,800 taxpayers reporting income of $1 million or more • They not only pay income taxes, but substantial sales, property and other taxes • Their tax deductible donations help support many philanthropic causes and nonprofits and contribute to our overall quality of life

  23. Sustainability • Tax policy should support a revenue base that is broad, stable and sustainable over time • Policies that narrow the tax base or target small groups of taxpayers can increase volatility • Extreme volatility undermines budget planning • Uncompetitive tax policies can undermine growth • Tax system should extract a sustainable amount from the economy • Revenue drives spending • Responsible leadership restrains demand for public services to match sustainable revenues

  24. Thank You!

More Related