TRENTON – Republican lawmakers proposed a 50 percent reduction in the state sales tax this holiday season, saying it would help consumers and retailers in a worsening economy.
The plan is backed by business advocates, including the National Federation of Independent Business/New Jersey. Federation state director Laurie Ehlbeck said, “The upcoming holiday shopping season will be a make or break one for thousands of small retail shops that traditionally depend on holiday sales to stay in business. Given how shaky the economy has been over the past few months, it makes this holiday season even more critical.”
The Republican plan would cut New Jersey’s seven percent sales tax to 3.5 percent from Thanksgiving through Jan. 4. It would also cut the sales tax in Urban Enterprise Zones, which already charge a discounted 3.5 percent, to 1.75 percent.
“We must do this,” said Senate Minority Leader Tom Kean Jr. (R-Union). “We cannot afford not to do it.”
Democrats were not won over by the proposal, which comes at a time when sales tax collections and other state funding sources are dropping.
“I’m not sure this is the time we should be doing that,” said Gov. Jon Corzine. “If we had unlimited resources, there’s no question we would do that. But we have to figure out what things we can afford — what will have the best long-run impact on improving the lives of the people of the state of New Jersey.”
The state expected to collect $8.7 billion in sales tax revenue this fiscal year, but officials are now projecting diminished revenue caused by the sagging economy. Republicans estimate that the tax holiday would take away half a billion dollars in revenue, but predict the loss will be largely offset by increased business activity.
In other economic news, the state Department of Labor reported that New Jersey lost 3,900 jobs last month, including 1,900 financial sector positions. Despite the job losses, the state unemployment rate dipped slightly, improving to 5.8 percent from 5.9 percent in August.