NEWARK, NJ — There are two ways New Jersey can dig itself out of its looming coronavirus budget crunch: make cuts or find more revenue. But according to nearly 100 Garden State economists, the choice is a no-brainer – keep vital social programs off the chopping block.
On Tuesday, 96 economic experts from universities across New Jersey sent a letter to Gov. Phil Murphy and leaders in the state Legislature, urging them to balance the budget with tax increases on the state’s wealthiest residents and corporations instead of turning to “counterproductive” cuts.
The signatories included professors and educators from Rutgers University, Seton Hall University, Monmouth University, Ramapo College, Princeton University, Drew University, Stockton University, The College of New Jersey and Saint Peter's University.
Read the full letter here.
According to the economists, rolling out sweeping budget cuts would actually make the economic downturn from COVID-19 much worse.
“Cutting spending on housing, public transportation, and healthcare removes spending from New Jersey’s economy when it is most needed and hurts the people who need it the most — those who have been disproportionately affected by COVID-19. Growing evidence indicates that these adverse effects are stratified by gender, race/ethnicity, and disability status, and they come at a time when the nation has pointed a spotlight on the need to eliminate such disparities, especially by race.”
It isn’t only the state's most vulnerable who will be left hurting if cuts are made, the economists added:
“Cutting local aid to cities and towns for services such as fire protection, park maintenance, and public works erodes public safety, household well-being, and the quality of our infrastructure. Reducing funding for early education, K-12, and higher education reverses our long-standing investment in human capital — including recent new commitments — with long-run consequences for worker productivity and economic growth.”
The money has to come from somewhere, the educators acknowledged in their letter. But instead of making cuts, New Jersey should find new sources of income to balance its budget.
Making a few changes to the state’s personal income tax and corporate tax are “fair” ways to do this, they said.
Citing a recent study from New Jersey Policy Perspective (NJPP), the economists wrote:
“Modest adjustments to income tax rates on those earning $250,000 and more would raise approximately $1.5 billion in new revenue each year while making the overall tax code fairer. Extending the temporary corporate tax surcharge of 2.5 percent on businesses with profits of $1 million or more would provide $425 million in additional annual revenue to invest in critical assets and services.”
Some experts and pundits on the opposing side of the table have argued that saddling New Jersey’s wealthiest residents and corporations with higher taxes will drive them out of the state at a time when their contributions are needed the most.
But other experts have called the theory of millionaire flight a “myth,” saying that there’s no evidence of it in New Jersey.
“As we learned after the Great Recession, we cannot cut our way out of an economic downturn,” NJPP President Brandon McKoy said.
“New Jersey is facing an unprecedented economic crisis that is uniquely harming low-paid workers and their families,” McKoy continued. “The economists’ letter makes it abundantly clear that budget cuts would make it impossible for the state to provide relief to the families and small businesses who need it most, while also taking money out of local economies across the state.”
“Balancing the state budget without cuts is the best way to build a strong and speedy recovery in New Jersey,” McKoy said.
See related article: NJ's Richest Not Paying Fair Share For COVID Recovery, Groups Say
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