New Jersey’s biggest fiscal problem is the growing cost of state employee pensions, health benefits and the annual payments on New Jersey’s debt, NJ Treasurer Andrew Sidamon-Eristoff told NJBIA members on April 4.
Speaking at NJBIA’s latest Meet the Decision Makers event, the Treasurer said increases in those three budget items are consuming nine out of every ten dollars of new revenue in this year’s budget, eliminating the possibility for additional tax cuts.
New Jersey’s economy has continued to grow. Sidamon-Eristoff said tax revenues were up 18.4 percent over the last three years, an average of more than 6 percent per year. At the same time, pensions, benefits and debt service payments ate up 60 percent of that revenue growth. This is in spite of the historic pension and benefit reforms Governor Chris Christie and the Legislature have already enacted.
“We’re growing sufficiently to meet these increased costs, but we’re not able to accommodate other priorities of state government to the extent that we would like,” Sidamon-Eristoff said. “We’re not doing huge things in this budget because we can’t. We can’t innovate the way we would like to.”
Sidamon-Eristoff said one of those priorities should continue to be tax reform, particularly in gross income taxes for small businesses and the New Jersey estate tax. He pointed out that New York recently increased its estate tax threshold to $5 million, while New Jersey’s remains at only $675,000. “That’s something that we would love to be able to do,” he said.
And while the tax reforms implemented in 2011 have brought New Jersey’s income tax system closer to the federal government’s, New Jersey is still one of only two states that does not conform to the federal adjusted gross income. Businesses that pay income tax instead of corporate taxes (LLCs, S corporations, partnerships and sole proprietorships) are not allowed to utilize the same deductions and exemptions that they can under federal rules. “I think it is really important to our long-term competitive position,” he said.