tax reform and budget
TRANSCRIPT
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Tax Reform and Budget Solutions
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Tax/Budget Principles
Make New Jerseys tax systemcompetitive
End overreliance on property taxes Rein in public sector salary,
pension and benefit costs Reduce unfunded pension and
health care liabilities and long-termdebt
Invest in job growth Fight for fair share of federal
revenue
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A Tax System Out of Whack
PropertyTaxes
$23.7 Billion
Sales Taxes
$8.1 Billion
IncomeTaxes
$11.7 Billion
Corporate Tax$2.7 Billion
$22.5 Billion
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Rebalancing the Tax System
Property Taxes$24 Billion
Sales Taxes$ 8 Billion
Income Taxes$11.7 Billion
Corporate Taxes
$2.7 Billion
Property Taxes$20 Billion
Sales Taxes$ 12 Billion
Income Taxes$11.1 Billion
Corporate Taxes$2.0 Billion
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Making NJ Competitive
Property taxes in New Jersey becomecompetitive with neighboring states.
Hard cap placed on school district,municipal and county budgets andemployee contracts.
Low and middle income tax rates remainamong lowest in the nation.
Upper income tax rate cut from 10.75% to8.97% -- rank drops from 3rd to 7th in nation.
Corporate tax rate drops from 9.36% to7% -- rank drops from 6th in the nation to 25th,below NY, PA and other competitive states.
Sales tax rate remains at 7% -- tied for 12thin the nation (combined state/local and salestaxes).
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Daggett Plan: Following the Money
$4 Billion Property Tax Cut
$620 Million Income Tax Cut
$750 Million Corporate Tax Cut
$130 Million Dedicated Funding for
Open Space, Tourism, Free Beaches
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Sources and Uses
$1.6B Existing Property Tax Relief $3.9B Broadening Sales Tax
$5.5B Total Sources
$(4.0)B Property Tax Cut$(.62)B Income Tax Cut$(.75)B Corporate Tax Cut
$(5.37)B Total Uses
$130m Net to be dedicated for open space,tourism, free beaches
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The Daggett Tax Cut
PROPERTY TAX INCOME TAX CORPORATE TAX
25%PropertyTax Cut up to$2,500 for allHomeowners.All Seniors get
$2,500.
Top BracketCut from
10.75% to8.97%
Corporate TaxRate Cut from9.36% to 7%
SALES TAX
Broadened to Tax MoreServices: Rate Stays at7% with No Tax onNecessities
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Broaden Sales Tax Base
Growing service sector now makes up60% of economy, yet sales tax is primarilylevied on goods and has been shrinking asa share of NJ tax base.
Plan would extend sales tax to broad
array of household, personal andprofessional services rendered toindividuals.
This results in an additional $3.9 billion inrevenues
Plan would continue to exempt food,clothing, educational, medical, funeral andbusiness-to-business services.
Sales tax rate of 7 percent still ranks 12thin nation in state-local sales tax rate.
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A Hammer to Cap Property Tax Growth
Property taxes grew an average of 5.9%from 1998 to 2008, more than twice the2.8% average CPI increase.
Plan limits annual growth in schooldistrict, municipal and county budgets andemployee contracts to the CPI index.
Any jurisdiction approving a budget oremployee contract exceeding the CPIwould forfeit property tax cut.
Left unchanged, property taxes will risefrom $24 to $42.7 billion over the nextdecade. Under the Daggett cut and cap,property taxes would grow to just $27.7billion, a savings of $15 billion.
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Open Space, Tourism & Beaches
Sales tax expansion includes a $205 million tax onseasonal rentals.
Only 19% of vacation rental taxes would be paidby New Jersey residents.
Dedicates $100 million annually to preserve open
space. Allocates an additional $20 million for tourismpromotion, tripling guaranteed funding to promoteNJs second-largest industry.
Creates a $10 million fund to offset annual loss ofbeach badge fees for any shore town or countywilling to make any beach free.
Like existing hotel-motel tax, shore and ski townscan levy 3% local option tax to cover cost oftourism services or reduce property taxes.
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The $8 Billion Budget Gap
Expiring Tax Revenue ($1.1B)Property Tax Rebate ($1.6B)Pension Contribution ($2.5B)Federal Stimulus Dip ($1.6B)
Forecast Budget Growth,Non Recurring Revenue ($2.0B)
Forecasted Revenue Growth $0.8B
TOTAL GAP ($8.0B)
Note: Estimates by OLS
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Addressing the Gap
Expiring Tax Revenue ($1.1B)Property Tax Rebate ($1.6B)
Pension Contribution ($2.5B)
Federal Stimulus Dip ($1.6B)Forecast Budget Growth,Non Recurring Revenue ($2.0B)
Forecasted Revenue Growth $0.8B
TOTAL GAP ($8.0B)
Note: Estimates by OLS
Addressed throughtax plan
Salary growth reduced
lowering liabilities
Freezing cost increasesthrough budget process