Op-Ed: A different take on the state of NJ taxes

October 7, 2009

New Jersey State Treasurer David Rousseau recently wrote an op-ed for The Record in Bergen, NJ criticizing the state’s last-place ranking in our 2010 State Business Tax Climate Index:

In a recent annual study, the Tax Foundation corralled a database full of skewed statistics to pass judgment on states’ postures toward business, rating tax burdens on an overly-simplistic scale of amounts assessed and collected. …

Findings are not reliable when they are based on distorted and misleading data. For example, local governments in New Jersey are disproportionately reliant on the property tax for revenue to pay for its schools and municipal services compared to their peer governments in other states.

It’s not surprising, then, that many of the top states in the Foundation’s rankings, including South Dakota, Wyoming, Alaska and Nevada, all allow other local taxes.

So, what the Tax Foundation won’t tell you is how that combined local burden of property taxes, local sales taxes and local income taxes in another state compares to the property tax-only burden in New Jersey.

Mr. Rousseau’s criticisms seem to conflate our State Business Tax Climate Index (which measures how states tax) with our State and Local Tax Burdens (which measures how much states tax) and our property tax rankings (which are just lists of median property taxes by state and county pulled from Census data).

In an op-ed published today, I address some of Mr. Rousseau’s arguments:

New Jersey has the highest median property taxes by a mile, the second-highest state-level sales tax rate, the third-highest individual income tax rate. And we haven’t even gotten to the business taxes yet.

When taxes are the measure of comparison, New Jersey is in a class by itself. Its taxes not only have high rates, but they are substantially more convoluted than in other states. …

One of Rousseau’s arguments against the Tax Foundation’s research is that the state’s “local property tax burden is offset by direct aid in the form of rebates, credits and reimbursements.” That’s just the sort of complexity that prevents taxpayers from understanding the system. Those rebates and exclusions are designed to make politicians look as if they’re offering tax relief when they’re actually just taking a dollar with one hand, then giving a dime back with the other. …

The State Business Tax Climate Index does not, as Rousseau claims, simply add up tax collections and favor the states that collect the least. Instead, we reward states for having neutral tax codes that don’t distort economic decisions – whether it’s through high rates on the wealthy or tax credits for new businesses or sales tax exemptions for certain goods or services.

Read the full op-ed, “A different take on the state of NJ taxes.”


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