by Mark J. Magyar, NJSpotlight.com
Gov. Chris Christie’s proposed 10 percent across-the-board income tax cut will cost the state budget hundreds of millions of dollars more than previously acknowledged.
Budget documents and public statements by the governor and other administration officials pegged the cost of the phased-in income tax cut at $183.3 million in the first year and just under $1.1 billion when fully implemented.
But an NJ Spotlight analysis showed that the actual first-year cost of the income tax cut is $197.3 million and that the total cost in Fiscal Year 2016 could easily top $1.3 billion.
The cost of the income tax cut is a crucial issue as Christie and Democratic legislative leaders debate the relative merits of an income tax cut that would provide a $7,265 tax cut to millionaires and an $80 reduction for families making $50,000 vs. the potential restoration of $1,000-plus property tax credits for most New Jersey homeowners.
Getting the cost figures right is also critical because Christie has been campaigning hard to persuade New Jerseyans that the state can afford to make a 10 percent income tax cut and still fund other needed programs, and because Democrats are already questioning the Christie administration’s optimistic assumption that revenues will jump 7.5 percent next year when income tax collections this year are only growing at half the expected rate.
A Treasury Department spokesman last night deferred questions about the discrepancy in income tax figures until the following day, and the governor’s spokesman failed to respond to an email.
The reason for the miscalculation was easy to see.
Inexplicably, as explained in a “fiscal note,” the spreadsheet showing the year-by-year budget impact of Christie’s income and business tax cuts used Fiscal Year 2007 and Fiscal Year 2008 tax data -- four-year-old numbers -- to calculate the size of the projected tax cuts, even though up-to-date Fiscal Year 2013 tax projections appear elsewhere throughout the official “New Jersey Comeback Budget Summary.”
Christie’s proposed 10 percent across-the-board income tax cut is scheduled to be phased in over three years -- 2013, 2014, and 2015. Because the state’s fiscal year runs from July 1 to June 30, the actual tax cut would be spread across four budget years, essentially providing taxpayers with a 1.67 percent income tax cut in the upcoming Fiscal Year 2013, 3.33 percent more in Fiscal Year 2014, another 3.33 percent in Fiscal Year 2015, and the final 1.67 percent in Fiscal Year 2016.
With the administration officially projecting $11.837 billion in income tax revenue in Fiscal Year 2013, calculating the actual first-year cost of the income tax cut to be $197.3 million -- rather than $183.3 million -- was a simple matter of multiplication and subtraction.
The $14 million discrepancy -- while embarrassing -- is not an earth-shaking matter in a $31.2 billion budget.