Tom Kean Jr. calls it a win-win.
The revenue numbers, he feels, add up: For every dollar the state loses, it gains 30 in investment. And it will lead to investment of the highest order — investment that helps local organizations make a difference in their own communities.
“It’s neighbors helping neighbors,” the state senator said.
That’s why the Republican minority leader from Westfield can’t understand how the bill allowing for charitable deductions on state income taxes — the one he cosponsored with Democrat Troy Singleton of Moorestown and the one that passed unanimously in the Senate — didn’t get any traction in the Assembly. And does not appear to be favored by Gov. Phil Murphy.
“It doesn’t make any sense,” Kean told the audience at a recent monthly meeting of the New Jersey chapter of FEI, or Financial Executives International, in West Orange.
“From a neighbor helping a neighbor sort of way, people can pick where they want to support, whether it’s a church issue, an environmental issue, a health care issue — whatever is important to them,” he said. “Every charitable group has lined up in support of this. And they thought it was going to pass the Assembly and the governor would be supportive, but they got word in December that wasn’t the case.”
Kean said the Murphy administration only views it as a potential $250 million loss in revenue for the state budget.
“They are only looking in that unique, binary way,” he said.
The Murphy administration declined to comment on the issue.
Kean, however, said it will have other opportunities, as he promises he and Singleton will bring the bill back in the next legislative session.
Kean told the audience that the decision is representative of the bigger tax issue the state has: lack of tax certainty.
“Over the last 15 years or so, New Jersey has really gained a reputation for having one of the most unpredictable tax systems and structures and regulatory climates in the nation,” he said. “It literally changes headline to headline.
“People are making decisions each and every day looking at each headline trying to determine what will the Legislature try to increase the tax on next. The signal that has been sent across the nation is an inconsistency and an unpredictability. Right now, people are looking to Virginia, Massachusetts, North Carolina (and) Georgia.
“In all those states, it doesn’t matter if there’s a Democrat or Republican in office, they have consistent tax policies and consistent regulatory policies.”
Kean said it’s time for New Jersey to act. That the shift of New Jersey being a state where families stay for generations to one where retirees flee already is occurring.
“Everybody in this room knows someone who has left New Jersey,” he said. “They’re not going to Pennsylvania for the weather. They are moving because it’s simply unaffordable.”
“The first thing you have to do is lower the income tax rate, lower a lot of the tax rates. But you also have to focus on things like charitable deductions.”
Doing so, he said, will be a start to bringing predictability to the state — while making every community better.
“Think about your hometown,” he said. “Those charities are the nimblest of entities in your neighborhoods. They know how to solve problems. A government program gets created and it never goes away, but the charitable organizations can actually solve issues and bring neighborhoods together.
“It’s the only tax policy you can create that allows for a neighbor to help a neighbor and make a difference in your own community. And it’s also one that, once we get it done, it won’t be taken away. You’re looking at ways of having a consistent tax policy over time. A charitable deduction is going to pass the test of time while doing a great good.”
It also will help right a wrong concerning the state income tax — which was never supposed to look like this when it was introduced in 1976.
“When the income tax was passed in the 1970s, there was an agreement that was made that there would be a 2% cap and no deductions,” he said. “If you look at the tax code now, only one end of that bargain was kept. You have higher taxes. It’s about time we allow the charitable deductions that will allow citizens to help their neighbors.”
FEI bills itself as a forum for senior financial executives to meet quality people and share with others the solutions to crucial issues that confront them daily. FEI dinner meetings and professional development seminars focus on the highest-quality speakers to facilitate the flow of new ideas and perspectives, as well as sound career and business decisions.
The next dinner meeting will feature Steven Gorelick, the executive director of the New Jersey Motion Picture and Television Commission, on Feb. 18 at the Pleasantdale Chateau in West Orange. Click here for more information.