Federal Tax Cuts Have Not Caused New Jersey Taxes To Increase

Sometimes you read something that makes you wonder if you should laugh or cry. Instead, we decided to write this post on the off chance our friends over on Blue Jersey will consider facts in future blog posts dealing with federal, state and local property taxes. If you’re not a Blue Jersey reader, you may find this post useful for future reference.

Before we quote from the Blue Jersey post in question, a few facts are in order.

Since 2001 New Jersey public school enrollment has increased by almost 4 percent and federal funding for New Jersey’s public schools has increased by 69 percent. This past year the state’s public school enrollment increased by .003, that’s less than one-third of 1 percent. Federal funding for New Jersey’s public schools increased by 2 percent over last year. This past school year, New Jersey public schools spent $16,547,310,169 and the federal government contributed about 5 percent to that total, $835,799,000. (See data detail and links below.)

Since the “Bush tax cuts” of 2003 federal tax revenue has grown to an all-time high and the federal income tax has become more progressive, not less. As the New York Times reported earlier this month “contrary to a popular assumption, a disproportionate share of income taxes is paid by wealthy households” and a “steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year”

Bonus information:

Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy.

As they say, read the whole thing, but here are a few paragraphs from the second part of a Blue Jersey blogger’s missive on why federal tax cuts are driving up New Jersey state and property taxes. We commented on part one here. Yes, we know the cost per student used in his example is for illustrative purposes, but the scenario, assumptions, percentages used for enrollment increases and federal funding are without any basis in reality.

Let's say that a school has 100 students and recieves $10 per student from the federal government. Woohoo - they get $1,000. Next year, they will have 150 students, but the feds will only give them $9, or a total of $1,350.

Now we also figure that it costs $20 per student to provide education. So overall spending per student in the first year was $2,000, and since the feds picked up half, state and local government only had to pay $1,000. In the second year, total spending was $3,000, of which the feds paid $1,350. The state and local govenments, then, had to pay $1,650.

Did federal spending on education go up or down? If you look at overall federal spending, it obviously went up - 35%, in fact. However, overall education spending went up by 50%. The tab for the state governments went from 50% of the bill to 55% - an increase of $650. That's an increase of 65% in the state and local government tax bill.

Getting confused yet? Sorry for inflicting the math on you. It's necessary to demonstrate the problem with a growing education system. Funding it at a lower rate allows the federal government to claim that it is paying more while it is actually leaving an even higher burden to state and local governments.

Here's another consideration. The federal tax dollars are a progressive tax on income. State and local taxes are largely regressive taxes on property. Which pool of taxpayers is larger - those who own property or those who have income? If you said "Income", then give yourself a cookie. (Note: most non-property owners still get charged property tax through their rent, it just isn't collected as such)

So not only are state and local taxes going to be raised more than federal taxes are cut, but the burden will be shared by a smaller pool of people with less regard for their ability to pay. In other words, the poor will get poorer and the rich will get richer. And, by the way, your schools will get overcrowded. Did you see any money left over to build a new school for the new 50 kids?

NJ Public School Enrollment
Enrollment school year 2001-2002 = 1,341,503
Enrollment school year 2004-2005 = 1,390,826
Enrollment school year 2005-2006 = 1,394,779

Federal Funding for NJ Public Schools
Federal funding for NJ public schools 2001 = $495,695,000
Federal funding for NJ public schools 2005 = $821,115,000
Federal funding for NJ public schools 2006 = $835,799,000

School Year 2005-2006 - Total Cost NJ Public Schools
Total Cost of New Jersey public schools = $16,547,310,169 (school year 2005-2006)
348,695 Abbott students x $14,287 cost per student) = $4,981,805,465
1,046,084 non Abbott student x $11,056 (cost per student) = $11,565,504,704

The 31 Abbott school districts receive over 56% of property tax relief (state aid) for public schools and make up 25 percent of New Jersey’s public school enrollment.

One-hundred percent of New Jersey’s income tax is spent on property tax relief. New Jersey households reporting over $100,000 in income account for 80 percent of the state’s income tax revenue and 42 percent of state income taxes are paid by 1 percent of filers.

The state of New Jersey will also distribute $1.2 billion in property tax rebate checks to senior citizens and to homeowners and renters with incomes of $70,000 or less.

The first round of New Jersey Schools Construction funding was allocated with the Abbott school districts, representing 25 percent of public school enrollment, receiving $6 billion and the remaining school districts, representing 75 percent of student enrollment, receiving $2.6 billion. The Star-Ledger determined that the schools built in Abbott districts through this state program cost 45 percent more than locally managed and funded school construction projects.