Monday, June 24, 2019

Contra the "Progressives," NJ’s Tax Structure Looks Quite Fair (At a Glance)


New Jersey politics at the state level is dominated by the Democratic Party. Nevertheless, the Legislature has been at odds with the Governor. One of the key issues is Governor Murphy’s demand for a “millionaires tax,” which is adamantly opposed by Legislative leaders Senate President Steve Sweeney and Assembly Speaker Craig Coughlin.

The NJ Star-Ledger Editorial Board’s Tom Moran, who has been critical of Murphy, posted the case for raising taxes on millionaires in a recent editorial, despite NJ having one of the highest income tax rates in the country. I’m not going to critique every one of Moran’s reasons. Suffice it to say that Murphy claims that millionaires “like myself” should pay their fair share. The rest of this post is roughly what I posted as a comment to the editorial.

But a picture is worth a thousand words. What I will do is show an interesting chart included in Moran’s article, Why Murphy is right about millionaires. And how he’s blowing the politics, published in the print edition (but not the online version) of the Star-Ledger on 6/16/19.

The chart was compiled by the Institute for Taxation and Economic Policy, New Jersey Policy Perspective, a "liberal" think tank. Here is the chart, including the caption:

"Our income tax is steeply progressive, but the property and sales tax are regressive. Count all state and local taxes, and under Gov. Phil Murphy's budget proposal, each income group pays about the same share of its income in taxes, hovering around 10%.

  • Under $25K (bottom 20%)          9.6%
  • $25K-$47K (low-mid 20%)          9.1%
  • $47K-$76K (middle 20%)            9.9%
  • $76K-$133K (mid-high 20%)      10.4%
  • $133K-$319K (next 15%)            10.1%
  • $319K-$921K (next 4%)              10.0%
  • $921K and up (top 1%)                10.5%

The methodology appears to focus only on taxes paid, leaving out collection of government benefits funded by taxes. When you factor in those programs, lower income people undoubtedly collect a lot more in relation to taxes paid than upper income folks. Factoring in the receiving side of the tax issue, the tax burden on low income people is undoubtedly much lower, probably even negative for some.

But leaving that aside, only a so-called Progressive can look at this chart and see unfairness. Remember that these are percentages, not actual taxes paid. In percentage terms, they are roughly equal. But in dollar terms, they are anything but equal. For example, a person making $1 million @ 10.5% pays $110,000 in NJ taxes, 45.8 times as much as the $2400 paid at the rate of 9.6% on income of $25,000.

Only a so-called Progressive would call that regressive. On its face, this raw data indicates that, based both on fairness and mathematically, there is no case for raising the upper income tax rates. Keep this in mind the next time you hear some Progressive like Murphy call for "the rich" to "pay their fair share."

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