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.