Editorial by Senator Tom Kean and Assemblyman Alex DeCroce
Published in The Times of Trenton on Friday, October 24, 2008
Now more than ever, New Jersey consumers and small businesses need a break. Stocks have been on a roller coaster ride — more down than up. Businesses are closing. And jobs are disappearing. The economic downturn is hurting us all.
This is an international crisis that can only be solved through the cooperation of financial regulators and banks worldwide, but, fortunately, there are some things the state of New Jersey can do to help its residents right now.
One of the best ideas is a sales- tax holiday. It would save thou sands of jobs, prevent hundreds of small businesses from failing and help every New Jerseyan weather the crisis.
But we have to act quickly. The holiday shopping season will be make-or-break for many shops, res taurants and small businesses.
Right now, the prognosis for their success is bleak.
The New York Times reported that this year could be one of the worst in the last 25 for Christmas sales, while the Strategic Research Group expects 1,000 to 1,500 stores to close shop in the two months following Christmas, costing thou sands of jobs.
Fear is driving people away from stores, car dealerships and restaurants. Many workers will lose their jobs and businesses will go bankrupt if we don’t step in at this critical time to give shoppers the maximum incentives to get out of the house and buy.
Republicans want to reduce the sales tax from 7 percent to 3.5 percent (from 3.5 percent to 1.75 percent in urban enterprise zones) on Nov. 28. The holiday would end Jan. 4.
The tax holiday won’t fix everything. Far from it. But it’s designed to be the spark that ignites a long- term revival of the state’s economy. It will provide more and more immediate aid than any other stimulus proposal being considered in this state.
We believe the reduced sales tax will draw additional shoppers from neighboring states, boosting sales for New Jersey merchants. At a time of economic hardship, slashing the tax will motivate residents of Pennsylvania and New York to cross borders when they shop. Just as important, the lower tax will be a powerful incentive for New Jersey consumers not to shop in Delaware or other states that now have lower sales taxes.
Critics say reducing the tax for five weeks could reduce revenues by an estimated $500 million. That estimate assumes that sales will be about what they were last year. It’s not likely that sales will generate $500 million in sales-tax revenue this year, unless something is done to stimulate sales.
The history of states that have sales-tax holidays suggests that sales will surge. It’s quite likely that the state will lose little or no revenue, because rising sales will boost tax collections. Even if the holiday does cost the state a short-term drop in sales tax revenue, it will pay for itself in the long term.
The workers who don’t lose their jobs will continue to pay taxes and won’t need state unemployment, health and welfare benefits. The businesses that don’t go bank rupt will grow, pay taxes and hire workers when the economy revives. There is plenty of room in the state’s $33 billion budget to find savings that can be used to make up for any temporary shortfall in state revenue.
Several months ago, Assembly and Senate Republicans proposed a “Common Sense Plan for an Affordable New Jersey,” which identi fies $1.32 billion in savings from cutting wasteful spending.
The Common Sense plan also contains a long-term strategy for economic growth, many portions of which Gov. Jon Corzine and Democratic legislative leaders are now advocating.
If the Legislature enacts just one-third of the proposed budget cuts in the plan, it would more than make up for any potential loss in sales-tax revenue from the holiday. And the economic reforms would help set the stage for long- term economic growth of the kind that hasn’t been seen in the state for the past six years.
New Jersey’s economic problems aren’t just the result of what happened recently on Wall Street. The Garden State’s economy has been free-falling for several years. Our businesses pay a crushing tax burden, and the regulatory climate for entrepreneurs and small business ranks among the very worst among states.
The financial crisis is focusing bipartisan attention on reforms that will fix New Jersey’s economy and create long-term growth in jobs and economic security. Republicans have been advocating these reforms for years.
But long-term reforms won’t provide immediate relief. That’s why we need the tax holiday to jump-start the economy before this year is out. The holiday is the first and only proposal that would provide immediate relief to everyone in the state, not the few groups tar geted by the governor’s economic plan. The holiday requires no appli cation forms, no “checks in the mail,” no rebates or delays, no new borrowing.
You buy — you save. It’s that simple.
It’s a plan this state can easily afford to do, and it’s also a plan the state can’t afford not to do.
Link to Post:
http://www.senatenj.com/index.php/tomkean/what-if-the-states-sales-tax-took-a-holiday/1918
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