There are three tax ideas that may pass in the New Jersey Legislature. They are important because they are good ideas. They are important because, well, New Jersey is not exactly a paragon of sound tax policy.
Garden State idea number one: Raise the gas tax. I have said this a thousand times. The gas tax is a good tax. The best way to pay for government is through a user fee, when possible. The gas tax is a proxy user fee. You drive, you buy gas. The revenue is used to maintain the roads so you can keep driving. It's a very old and simple concept. New Jersey needs money for its transportation trust fund. A bipartisan group of legislators wants to raise the tax from 14.5 cents a gallon to 37.5 cents a gallon.
If you need money for roads, this is the best way to raise it. Actually, a mileage tax or tolls would be the best way, but this is the most practical way to raise it. It's not perfect. Gas taxes are regressive (as are most user fees) -- as people continue to drive more fuel-efficient vehicles the tax will not raise revenue like it used to. Still, this is eminently better than paying for roads with sales or income taxes as other states have done.
Garden State idea number two: Increase the earned income tax credit. I generally don't like credits, exemptions, and deductions, but if we're going to give someone a tax credit, let's give it to the people who need it. The EITC helps the working poor and dispossessed. The proposal in New Jersey would raise the state EITC from 30 percent to 35 percent of the federal credit.
Some of my conservative friends decry the waste, fraud, and abuse associated with the EITC. I think those problems are exaggerated. They can also be addressed through better administration. But the credit requires people to work, and I would rather see tax expenditures for the poor than for just about anyone else who receives tax welfare.
Garden State idea number three: Repeal the estate tax. The same bipartisan group that wants to raise the gas tax and EITC wants to repeal the estate tax. This is a trifecta as far as I am concerned. The estate tax is a terrible tax for a lot of reasons. I know my friends at New Jersey Policy Perspective will disagree, and I respect that, but the tax is grounded in the politics of envy and jealousy. Rich folks have money through hard work or good luck -- and other folks want it. I reject the idea that society has a claim to your property merely because you are dead.
Moreover, every estate tax lawyer I have ever talked to says the rich move before visiting the great country club in the sky. Maybe some of the really rich don't move because they have the best lawyers money can buy. They don't really pay the tax. But there is a steady stream of old rich folks setting up residence in Florida to avoid the tax man. The tax actually hits the sort-of rich the hardest, as they don't have the resources to figure out how to escape the tax and are often caught unawares.
In any event, hats off to Sens. Paul Sarlo (D) and Steve Oroho (R) for taking the lead on three very good tax proposals.