By Mayor Mike Halfacre, Fair Haven
Much of the debate during this year’s gubernatorial primary season has been about the economy, generally, and New Jersey’s tax and business climate in particular. Both Republican candidates agree that the Corzine/Codey/McGreevey years have been particularly unkind to our businesses and residents.
Although the old saying goes that there are three kinds of lies: Lies, Damn Lies and Statistics, there can be no dispute that by any statistical measure, New Jersey is the least friendly place in America for businesses and taxpayers.
Both former US Attorney Chris Christie and Former Mayor Steve Lonegan have vowed to make New Jersey the economic engine of America that it once was. However, a significant piece of the Lonegan Plan got a big dose of reality last week. Amazingly, that dose of reality came from Mayor Lonegan himself.
One of the centerpieces of Lonegan’s Plan is the so-called “Flat Tax”. From his website:
“My flat tax plan will start with a flat tax rate of 2.9% on every dollar earned. The rate will decrease to 2.5% the following year, and further to 2.1% in the third year. Moreover, the rate will only be changed thereafter by a super majority of the state legislature.”
Unfortunately for a candidate whose surrogates are constantly complaining about a lack of specifics, the Lonegan website offers few details about the nuts and bolts of his proposal. For example, does the proposal count gross income, investment income, earned income, child support or alimony as income? Will there be personal or dependant exemptions? For how much? What about LLC, S-Corp or other corporate earnings? No answers to these questions on the Lonegan website.
This argument is not about the flat tax. It is about the Lonegan Tax Increase Plan, during an economic recession.
Plain fact: The transition to a flat tax will raise most people’s taxes.
The current tax rates for individuals are 1.4% up to 20,000 and 1.75% between 20,000 and 35,000. The 3.5% rate covers income between 35,000 and 40,000 and 5.5% between 40,000 and 75,000.00. The rate is 6.3% between 75,000 and 500,000.
College students, recent graduates, retired or semi-retired, all would pay more in taxes than currently.
The rates are roughly the same for married couples, but the 3.5% rate does not kick in until $70,000 in taxable income.
This means that every family making less than $70,000 per year will pay more in income taxes under the Lonegan Plan.
Lonegan himself admits this:
When asked about his plan for New Jersey taxpayers... "Lonegan acknowledged that many people - about 50 percent - would be paying higher taxes" (Cindy Burton, "Christie's tax attacks don't go unanswered," Philadelphia Inquirer, 04/29/09)
Under Lonegan’s plan, BY HIS OWN ADMISSION, 50% would pay more taxes. That 50% would be the middle class, upon whose backs Corzine has already placed his massive government expansion, causing our property taxes to go up and up and up. We can’t let it happen again.
Ex-State Treasurer Peter Lawrance has run the numbers in an Op-Ed Piece on PolitkerNJ.com, and he believes up to 66% of use would pay higher taxes:
“Some 860 thousand New Jersey families would see their income taxes dramatically increase under his proposed flat tax. In fact, families with a taxable income of $70,000 would see their income tax increase over 56%. So much for helping the middle class and New Jersey's working families.
The numbers are very similar for taxpayers who file individual returns. Taxpayers with an income under $50,000 would pay a staggering increase, as much as doubling their tax burden. Over 1.4 million taxpayers earning less than $50,000 file their returns using the single status and would be penalized by this new "flat tax" scheme.
Senior citizens are particularly vulnerable to the damaging impacts of this flat tax. There were over 400,000 tax returns filed for 2006 where at least one filer was over 65 years of age with a reported income of less than $50,000. This represents 76% of the total tax returns for that year where at least one filer was over 65. The Flat Tax scheme is a staggering and indefensible tax increase for our seniors without any value or benefit.
The Lonegan "Flat Tax" scheme is nothing short of an assault on the middle class and senior citizen population of New Jersey. By my calculation, over two million taxpayers would see an increase while a million would see a reduction.”
While everyone agrees the tax system in New Jersey and the Country is broken, instituting the Lonegan Tax Plan, which would increase the taxes most of us pay, during an economic downturn, could not come at a worse time.
Chris Christie, on the other hand, provides realistic, concrete proposals to reduce our overall tax burden, reduce corporate taxes and taxes on small businesses, (including the double tax on S-Corps) all of which will encourage investment in New Jersey, without penalizing the middle class and elderly at a time when the economy and the Democrats have penalized us enough already.
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12 comments:
The median income in New Jersey is right about $70,000.00.
Let's assume Mayor H is right that everyone making over $70K gets a tax break and below it a tax increase.
How does that sit with the claim that Lonegan's tax increases will be "on the middle class."
Wouldn't that make it on the lower classes?
A family can qualify for SCHIP up to $70,000.00.
Almost half our counties have a cost of living number above $50K, some up to $70K.
Those numbers mean the family of four are subsisting - just getting by. Isn't that really "poor" and not "middle class?"
What about the family of 5 and 6?
Where exactly are the lower class, middle class and upper class numbers in New Jersey?
Isn't it different in each county? In fact, very different?
Talk amongst yourselves :-)
and CC's plan is?????? Not going to change my vote on a letter that doesn't explain the other plan. Candidly I'm tired of Republican lite candidates. Looking for something that busts out of the old mold.
Tommy,
Punishing recent college grads and those who can not find jobs that pay very well, which at this point is a whole lot of people thanks to the recession, is not a good tax system. Don't punish me and raise my taxes because I make less and will struggle for a number of years to make good money.
Now is not the time to be raising taxes on anyone. First step is to cut spending, cut departments, and take a saw to bloated government. Then we need to lower everyone's income tax, something Christie has said he would do.
Steve Lonegan would raise my taxes, and I sure as heck can barely afford another tax raise.
I am not sure of your point, Tom.
If your point is that the Lonegan Tax Hike plan will also hurt lower income wage earners, you are correct. If your point is that the Lonegan Tax Hike Plan will raise taxes on those making ALOT more than $70,000.00, you are also correct.
If the median is, as you say, $70,000, that means half make more and half make less. By definition, then, 70 K is the “middle class”. Pick some percentage to either side, and those folks will pay more in taxes, due to the marginal nature of tax rates. I am sure someone can (and will) check my numbers to see at what income the flat tax overcomes the marginal nature of the lower tax rate up to 70 k, but it looks to be around $105,000.00.
For example, a family making $100,000 per year will pay $2750 under the current tax structure. Under the Lonegan Tax Increase Plan, that same family will pay $2,900.
The marginal tax rates don’t overtake the Lonegan Tax Hike until a family makes over $105,000.00. ($3,026 marginal, $3,045 Lonegan)
What’s worse, the impact of the Lonegan Tax Hike Plan gets worse, the lower down the income scale you go.
A family “on the bubble” at $70,000.00 currently pays $1,260.00in taxes. Lonegan’s Plan has that family paying $2,030.00 in taxes, for a 61% tax increase. The family making $105,000 will see less than 1% tax increase.
Ah, here you go again.
So in other words, you favor the current progressive tax system? The current system means I have to pay 6.3c in tax for every dollar I make, while, let's say, a landscaper pays 1.4c. So why is that? Is the dollar I earn somehow less valuable than the dollar the landscaper earns?
I really don't understand why I should be punished more and more with every extra dollar I make?
The flat tax tries to make the system slightly fair, by recognizing that all dollars we earn in NJ are equal. Meaning that the dollar I earn, and the dollar a cashier earns have the same value.
Bear in mind though that even that system is not fair, because I'd still pay a much larger amount in taxes. And you'll say... yes, but you make more money! So what? We're paying taxes so the Government gives us some services back. Am I getting more Government services, because I'm paying more? No, I don't, I actually get less than a poor person gets.
So even the flat tax system is highly redistributive, but the current progressive tax is downright confiscatory.
The fact that you don't support a certain candidate is not a reason to bash an economically superior tax system. Yes, under this, people who were underpaying are gonna pay more, and people who were overpaying are gonna pay less. But overall, the flat tax would be a boost to the economy. However, I can see the point of how this is not feasible, since there are more VOTERS who'd have an increase than those who'll see a decrease.
And you can see where Obama got his electorate. People will always vote for someone who advocates for the rich to pay a lot more, so they can get that money that they didn't earn. So you want the "rich" to pay more, because they can afford to pay more. And the "poor" to receive that redistributed income, because they need it more.
From each according to their ability, to each according to their needs. Happy May Day! Arise, ye workers from yer slumbers....
Chris,
Stop getting sucked into the Shaftan spin. Just because one does not support the flat tax, doesn't mean they are automatically in favor of the current progressive tax structure, or at least definately not the current rates.
There are other tax plans, like a fair tax or broader-based tax structure (which does not mean more taxes) that are out there.
Just because Chris Christie does not support a tax raise on individuals making low to middle earnings, does not mean he supports the current tax system. Why no lower taxes across the board rather than benefit a specific group in society while punishing another? Lonegan's tax plan follows the same path as Obama's, although it punishes different people. It's reverse class warfare, which is no better. Benefit one part of society while punishing another.
What ever happened to putting taxpayers first? Lonegan's plan only puts some taxpayers first, while raising taxes on others.
Even worse, it's political death in New Jersey. Can you see the commercials now? 50-70% of New Jerseyans will see a tax raise under Lonegan. He won't have the money to combat that claim with his lengthy explanation of "well my school funding plan will equal that out". It's too complex, a tax raise is a tax raise.
Anon 12:40, first of all, I'm not getting sucked by Shaftan's spin, since Shaftan is one of the reasons I won't vote for Lonegan.
Class warfare is what we have now. A flat tax would still be class warfare, but more reduced. The fair tax would be even less class warfare, but there are many problem implementing that.
If you want to lower taxes across the board, sure, every one would agree, but to make the system more fair would mean reducing them only on the richer tax payers, until everybody has the same rate. And this has nothing to do with Obama's tax plan. Obama wants to shift more tax burden to higher-income taxpayers, while the flat tax wants to bring a more equitable tax burden to all taxpayers.
And note that I'm not calling the flat tax "Lonegan's tax plan". I was just speaking in economic terms. Lonegan just took this idea because he's desperately running out of time, and he's looking to make an impact. Ron Paul also supported it, and it doesn't mean I would ever vote for Ron Paul.
Bottom line, I don't want to pay 42c of every dollar I make in taxes (federal and state), while a csahier for example pays only 16c. I work as hard as he does for every dollar, maybe even harder I'd say.
One more thing, if you're interested in a longer explanation of my views, it's on my blog:
http://rightinjersey.blogspot.com/2009/04/my-view-on-tax-system.html
Oh so now Lonegan is not going to cut spending? This political BS makes me sick. I am voting for Lonegan, I believe he will change his plan if it proves not the best idea, but he is the only one out there talking about substantive changes. Without a willingness to change course drastically there is going to be no real change. Enough of the pretty boy nonsense and let's elect people who are serious about real reform
Mayor those numbers are an eye opener.
I want to see an official Lonegan response.
This debate is great.
Love Art's blog.
Why does everyone discuss this stuff. If Lonegan gets in do you think a Dem Assembly and senate are going to let him do anything??The best thing about a Lonegan win is Nj legislature becomes paralyzed. This is good for NJ.Christie will lose against Corzine.Christie will drop in the polls weekly just like he has started doing.Remeber Whitman??
Anon 8:21 points out something we've all avoided mentioning: No matter the campaign promises, the Dem legislature won't pass them. Christie can promise the full elimination of the income tax, and it will still have the same chances of passing a vote as Lonegan's flat tax. Remember, Corzine went through some trouble even when he wanted to raise the sales tax, something most Dems wish for.
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