Efficient Municipal Tax Credit

The State of New Jersey (not unlike many States and the US overall) is facing a huge budget crisis. Governor Christie campaigned on budget reform and though his approach has been like a bull(y) in a china shop, he has significantly reduced NJ’s projected budget. The issue that many New Jersey residents have with Christie is that the cuts have disproportionately impacted urban municipalities and neighborhoods. This comes at a time when the residents of these municipalities have already been stretched to the limit because of the nationwide recession and housing crisis.

If making the poor worse off isn’t enough, Governor Christie is pushing for tax breaks for the wealthy. His reasoning is that NJ’s tax structure causes many of our wealthiest citizens to move outside the state. This reduces the State’s revenue, but as important, those are the individuals who are likely to build new businesses in Jersey. The declining population of New Jersey lends merit to Christie’s claim. This is further enhanced by Topretirements.com ranking New Jersey as one of the top 10 worse places to retire.

If the Donkeys and Elephants can work together, there may be a way to give both sides what they want. More importantly, the citizens of New Jersey will be better off. The State should develop what I call the Efficient Municipality Tax Credit (EMTC). This would be a tax credit similar to the Neighborhood Revitalization Tax Credit (NRTC), which has been used effectively to revitalize neighborhoods through business investment, real estate rehabilitation, and social programs. The EMTC would be a tax credit given to wealthy individuals who direct most of their donations to this program. Municipalities and School Boards would then submit applications to the State for funding through the EMTC Program. Only those municipalities and school boards that meet improvement measures in education, crime, and/or the municipal budget would qualify.

As an example, John Doe makes $1,000,000 a year. He typically donates $50,000 a year and his tax liability is $75,000. If John Doe makes a donation of $90,000 to the EMTC Program, his taxes would be reduced to $25,000. In this example, John Doe saves $15,000 and gets the goodwill from helping a neighborhood improve. The urban municipality gets $90,000 in EMTC funds, which was likely lost as part of New Jersey’s budget reform. Governor Christie gets to say that he reduced taxes to the rich and Speaker Oliver gets to say that she increased funding to urban municipalities.

This is a very simple example and much of the logistics will have to be worked out, but this could be the perimeters of landmark legislation. If Christie makes this happen, he will prove me right when I said that he is the politician who is going to lead political reform. More importantly, this might convince me to have a beer with him.

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GrannyVendetta