Without delving into the arguments for or against Gov. Chris Christie’s income tax cut, yesterday’s statehouse sideshow on the proposal is worth some analysis.
First, the governor tossed out the proposal knowing full well it would drop like a bomb in the Democratic caucus and send the party hustling for a response. The governor provided only one detail – that the cut would be phased in over three years, but offered no explanation of how he intends to pay for it.
Today’s news cycle has been dominated by the proposal, yet still no details have emerged on exactly where the governor plans to get the money – roughly a billion dollars – or whether the phase in will be equal, or back loaded to get the full public relations boost without the corresponding pain. Some speculated the money could come from savings from outsourced secure drug treatment programs, while others believe Christie wants to take the money from Abbott School funding. But so far, Christie is mum.
“You can expect to hear more on that from the Governor as we progress through budget preparation and the Governor’s budget speech in February,” spokesman Michael Drewniak said in an email. “But, as suggested by the Governor previously and again today, spending and income tax cuts will only come in the context of a balanced budget.”
For their part, Democrats’ response to the governor’s pledge was baffling. Several times during the caucus’ rebuttal, Assembly Speaker Sheila Oliver called the proposal “disproportionate” and attacked the plan on the grounds that it would mean more money in the hands of rich taxpayers than those in the middle class.
The attacks continued with a chart showing a taxpayer earning $50,000 per year would receive about an $80 tax cut while one earning $1 million per year would see about $7,200.
Asked if they would consider a progressive plan that scales the tax cut back for higher incomes, Democrats said that’s a proposal they would consider.
But by definition, an across the board tax cut is proportional. Ten percent is ten percent no matter if you make $1 or $100 million. The fact that 10 percent of a larger income base is more than 10 percent of a smaller base is just basic mathematics.
And the flip side of the argument is that the remaining 90 percent paid by the wealthy is also much larger than the nut paid by the middle class.
A progressive tax cut – one that means less of a discount to the wealthy – is by definition disproportionate. It might be semantics, but it’s also basic math.
If you take the math a bit further, the numbers tell a different story. Using numbers provided by the Office of Legislative Services, Democrats contend that a person earning $1 million per year would get a break of about $7,200 as a result of Christie’s plan. That would leave the $1 million earner paying about $64,800 in income tax ($7,200 is 10 percent of $72,000. Subtracting out the $7,200 leaves you about $64,800), roughly 6.5 percent of the $1 million income left in income tax.
Now subtract the $50,000 earner’s $80 tax cut from his overall tax bill of $800 and you’re left with $720. That $720 in taxes represents roughly 1.5 percent of the $50,000 income. The tax math is a bit more complicated, but you get the picture.
Where the Dems’ response could hold some water is when taking the tax savings as a percentage of income. The $7,200 saved by a million-dollar earner represents .72 percent of overal income. Using the same calculation, the $80 saved by the $50,000 earner amounts to just .16 percent of overall income.
As one Democratic lawmaker said today: “How the hell are we coming out against a tax cut? For years we’ve been labeled tax and spend Democrats. Aren’t we trying to get away from that? Why aren’t we going after him on how he plans to pay for it?”