Republican legislative leaders last week filed a measure to reduce New Jersey’s sales tax to 3.5% from 7% during the upcoming holiday season to encourage consumer spending and spark economic activity.
Senate Minority Leader Tom Kean and Assembly Minority Leader Alex DeCroce along with other GOP members of the Legislature said reducing the tax would help residents during the holiday season and potentially boost small-business activity.
The proposal would decrease the sales tax to 3.5% throughout the state and lower the tax to 1.75% from 3.5% in urban enterprise zones — which make up 37 economically distressed areas in the state — from Thanksgiving through Jan. 4, 2009.
“Given the current economic turmoil there is real concern that consumers will spend less this holiday season, further eroding our state’s economic well-being,” DeCroce, said in a press release. “Cutting the sales tax in half will encourage more economic activity in the state, both by helping consumers, who will pay less for merchandise, and businesses, who should see an increase in their sales.”
Republicans said the state collected roughly $1 billion of sales tax revenue during last year’s five-week holiday season. The New Jersey Treasury Department does not have calculations for the Thanksgiving through early January time frame, but the state collected approximately $847 million in December, according to Treasury spokesman Tom Vincz.
DeCroce said New Jersey could absorb the decrease in sales tax revenue through potential increase in business activity and, if needed, cutting the current budget. In May, Republicans proposed $1.32 billion of possible savings in the fiscal 2009 budget, which began July 1.
Gov. Jon Corzine has said he does not support the initiative. “Removing five to six weeks of revenue will not help people get through this financial storm when they are focused on keeping their jobs and homes right now, not their holiday shopping,” Corzine spokesman Robert Corrales said via email.
In looking at the state’s revenues overall, the Treasury Department last week announced that first quarter revenues totaled $6.51 billion, only $47.1 million, or 0.7% below projections. State officials anticipate that revenues for the entire fiscal year will be $400 million below projections.