No surprise: Flat tax is a bad tax

Republican gubernatorial candidate Steve Lonegan is just being honest. And that’s the problem. Lonegan, a hardened conservative who is running well behind front-runner Chris Christie, is pushing a 2.9 percent flat tax as a replacement for what he calls “the state’s destructive and progressive income tax.”

He contends that the current system drives high-earners from the state and that

his plan will keep those top income earners in New Jersey, while creating jobs and better salaries for everyone else.

That is debatable, of course. What is not debatable, however, is this:

it’s the lower-income earners, many of whom are counted as strong Democratic voters, who would do worse immediately under Lonegan’s plan, according to state tax data.

A couple earning the state’s median income of $67,000 would pay $1,943 in income taxes under Lonegan’s plan, nearly 60 percent more than the $1,221.50 charged under the state’s current income tax system.

At $23,000, Lonegan’s income tax bill of $667 doubles the current $332.50 bill for both singles and married couples.

These lower-income tax brackets made up the majority of the income taxpayers in 2006, with more than 2.3 million tax filers making under the median income of $67,000.

Upper-income folks, on the other hand, would make out like bandits.

A review of tax data compiled by the New Jersey Department of Treasury indicates the state’s highest income earners — in many cases traditionally strong Republican supporters — would fare best under Lonegan’s flat tax.

Right now, married couples earning more than $150,000 pay at least $5,512 in income taxes and a rate of 6.37 percent on every dollar they make from $150,000 to $500,000, where the next tax bracket begins.

Under Lonegan’s plan, the couple earning $150,000 would pay just $4,350. That would be the same for a single tax filer, who now pays $7,428.

And the tax cuts that could come under Lonegan’s plan are even more dramatic as incomes increase. A family earning $1 million would have a $73,657 income tax bill drop to $29,000 under Lonegan’s plan.

The margins are even wider when compared with Corzine’s recent proposal to hike the tax on incomes of $1 million or more to 10.75 percent, which would be among the highest in the nation.

In 2006, the last year for which the state has complete tax data, taxpayers in New Jersey’s two highest-income tax brackets provided more than $5 billion of the total $9 billion collected by the income tax.

Lonegan doesn’t dispute this. In fact, he told The Star-Ledger that “lower-income residents can afford to pay a few hundred dollars more to foster an economic climate that would improve their chances of landing a high-paying job.”

“There will be consequences,” he said, but “in this current economy, there’s no opportunity.”

Christie, the former federal prosecutor, is promising his own across-the-board tax cut, but is offering no details — a strategy he hopes will allow him to take advantage of dissatisfaction with Gov. Jon Corzine’s fiscal policies. Promising a tax cut without offering even the vaguest details on how he plans to pay for the tax cut is irresponsible and dangerous to the state’s long-term fiscal health.

Christie may be offering a plan that can address the state’s faltering economy and heal its failing fiscal health (my sense is that it is not). We just don’t know — and we can’t judge it fairly until he puts the hard numbers on the table, something he has been unwilling to do so far.

The state’s fiscal situation must be treated as the No. 1 issue in this gubernatorial campaign. We know what Corzine would do because we’ve watched him do it for going on four years with mix results. But he has been honest about what we face and the kinds of sacrifices that we all will need to make to put our house back in order.

The state’s budget remains a mess and he deserves as much blame as anyone, though we also should acknowledge that he much of the mess was inherited, created by a bipartisan group of governors and legislators who opted to avoid confrontation.

It remains to be seen, at this point, whether any of Corzine’s potential opponents are willing to address the budget question honestly, whether they understand that cutting revenue — which is what happens when you cut taxes — can only be accomplished by slashing programs that are popular to some piece of the electorate. It is not enough to talk about waste — cutting waste and corruption should always be a goal, but does anyone really believe that it will yield enough savings to keep from inflicting pain elsewhere?

Their public statements to date indicate — to me, at least — that they are offering more of the same pie-in-the-sky promises that got us into this mess in the first place.

Author: hankkalet

Hank Kalet is a poet and freelance journalist. He is the economic needs reporter for NJ Spotlight, teaches journalism at Rutgers University and writing at Middlesex County College and Brookdale Community College. He writes a semi-monthly column for the Progressive Populist. He is a lifelong fan of the New York Mets and New York Knicks, drinks too much coffee and attends as many Bruce Springsteen concerts as his meager finances will allow. He lives in South Brunswick with his wife Annie. View all posts by hankkalet