NorthJersey.com

Christie's Bargaining With Tax Credit Plan

The Record (NorthJersey.com) — Thursday, April 18, 2013

By CHARLES STILE
COLUMNIST

Governor Christie, who has repeatedly protected millionaires from paying higher taxes, took to the airwaves this week as a champion of "working-class folks."

With a dash of Clintonian, I-feel-your-pain empathy, the governor offered to boost the state's Earned Income Tax Credit, which is awarded each year to some 500,000 people struggling in low-paying jobs — the "working poor, they're sometimes called." These are people who need the extra cash, he said.

What Christie failed to mention in Monday's radio interview is that he had cut the program's funding in 2010, his first year in office. Those cuts meant smaller tax refunds and less money to pay past-due electric bills or rent.

All Christie was proposing this week was to restore the credit to its original levels.

But empathy may not be the driving force behind his pledge to boost the Earned Income Tax Credit, which is paid out to recipients each year through their income-tax refunds. Christie is using it as a bargaining chip with the Democrats who rule the state Legislature. While recipients count on the credit to produce cash, Christie is counting on it to win crucial votes.

Christie said he will increase the Earned Income Tax Credit only if the Democrats support his plan to provide a new income-tax credit to property owners earning up to $400,000.

Some Democrats remain wary about the costs of that larger tax credit, which haven't been revealed, and say they will refuse to cut other critical programs, like education aid, to pay for it. Others don't want to give Christie a prop just as his reelection campaign shifts into overdrive.

But Christie is gambling that Democrats' resistance will melt once they take a hard look at the Earned Income Tax Credit offer and realize that it could potentially put an extra $60 to $330 in the pockets of low-income workers who tend to live in urban, Democratic strongholds.

"The idea that that you would hold a [low-income] tax credit hostage in order to get a tax credit passed for people who make more money, that ... takes some gall," said Ann Vardeman, an analyst from New Jersey Citizen Action, an advocacy group that provided pro bono tax preparation services for 4,000 low-income residents this year, many of them Earned Income Tax Credit recipients. Christie administration officials did not respond to a request for comment Wednesday.

Last year, Christie essentially made the same offer in his bid to sway Democrats to support a tax-credit compromise that collapsed amid slumping revenues. And in late January, Christie offered to increase the Earned Income Tax Credit funding as an alternative to the Democrats' bill to raise the minimum wage.

Christie's hardball approach is at odds with the warm, bipartisan history behind the credit, which is given to people who work but earn less than $52,000, depending on family size. Created in the 1970s, the federal credit program was expanded under President Reagan in 1986 as part of the sweeping overhaul of the nation's tax code. It became such a popular anti-poverty program that 24 states, including New Jersey, adopted their own credits to be applied to their state income tax.

It was further expanded as part of the 1996 welfare reform signed by President Clinton that trimmed benefits and dropped recipients after five years. The beefed-up Earned Income Tax Credit encouraged recipients — mostly single mothers — to remain in the workforce rather than return to welfare. Richard Burkhauser, a social policy analyst at the American Enterprise Institute and Cornell University, said the tax credit was largely responsible for the dramatic drop in welfare rolls.

"Most people don't want to give undeserving people money, but these were truly deserving people who demonstrated their commitment, and that's what America is all about," Burkhauser said. "It is disappointing that Governor Christie doesn't remember what was going on there."

Shortly after taking office, Christie warned that the recession-battered state would face a bitter period of "shared sacrifice" — meaning that every state program, even politically sacrosanct ones for the poor, could face the budget ax. That included the state's Earned Income Tax Credit, which was equivalent to 25 percent of the federal payouts until Christie chopped it down to 20 percent.

Christie argued that the state couldn't afford it and, even with the cut, New Jersey still provided one of the more generous programs. The cut saved the state $45 million, a microscopic amount in a state budget approaching $30 billion. But apparently "shared sacrifice" had its limits — the governor blocked an attempt to reinstate a tax increase on the state's wealthiest residents.

Christie also went on his own spree of offering more than $2 billion in tax breaks to casinos and corporations, hoping that they would encourage them to stay in New Jersey and hire more people. He's enacted $540 million in business tax cuts, hoping that would give companies the incentive to create "more Jersey jobs."

But a small increase in a program that would give low-income wage earners an incentive to stay on the job at a time when New Jersey's unemployment rate is 9.3 percent, nearly 2 points higher than the national average? That hasn't been a policy priority. It's a bargaining chip for his tax cut, for now.

"I think there would be a vigorous debate about it, but on the other hand, I think that this way we get the tax-cut ball moving," he said.

And if the tax-cut ball doesn't roll his way, then those working-class folks who need the extra cash are probably going to have to wait.

Top Top | NJCA in the News | NJCA Homepage