The Need to Collect Uncollected Taxes in New Jersey

Reliable sources tell us that New Jersey has the eighth largest economy in the nation; that New Jersey is the second wealthiest state in the federal union, enjoying a median household income of $71,919 per annum. So why is that budget time each year, New Jersey is always short of money?

There never seems to be enough cash on hand to fully fund education, the state pension systems, needed infrastructure repairs and improvements, and other worthwhile and useful programs. The state budget, $38.4 billion dollars, is largely funded by the State Income Tax, at $20 to $21 billion; the State Sales Tax, at $9 to $10 billion; and the Gross Receipts Tax of $3 to $4 billion.

The Income Tax, thanks to the W2 and 1099 forms, is largely collected by employers within our state. And, as exists with the Federal Income Tax, there is somewhat of a problem reaching full compliance with the law among many self-employed large and small cash business owners in New Jersey.

Regarding the Sales Tax, the state relies on thousands of retailers and other large and small cash business owners to collect the taxes due. There are many collectors but too few auditors.

These cash business owners are required to collect and report to the state on a regular basis. To make these small business owners, in effect Revenue Agents, is both an imposition and a burden that they do not need or necessarily want.

I am suggesting that if the Sales Tax was more efficiently collected and enforced, much of New Jersey’s money problems would cease to exist. Adding to the collection problem is the “underground” economy, the large and small business cash transactions; the prevalence of cash businesses in New Jersey does not lend itself, as a system, to full compliance. Further, Internet and Catalog purchases often fail to charge and collect taxes due. Simply put, there is too much tax revenue that is not being fully collected. Were it to be, there would not be a need to raise the gasoline tax or any other existing tax yet to be conceived.

Perhaps shifting the responsibility for tax collection, as much as possible, to the wholesale level would make collection and enforcement more effective. Generally, Wholesalers are larger businesses and may have the staff to deal with tax matters.

It’s my firm belief that if the tax was fully or nearly-fully collected, we could raise an additional $3 to $6 billion dollars or more to fund the budget. These much needed additional revenues would go a long way to solving our education, pension and infrastructure needs, as well as our dire property tax problems.

No one has a monopoly on ideas. I am confident that the people of New Jersey and their elected officials can develop other innovative ideas, approaches and solutions to the problem of tax collection. The very test of any tax is the ability to collect it. If it cannot be fully collected, it should be revised, replaced or eliminated. Any reasonable idea should be given full and due consideration. The seriousness and severity of our fiscal problems deserve a comprehensive study of the way New Jersey does business.

The subject of sales tax collection has been raised with legislative leaders over time. A reluctance or outright refusal to discuss and examine this issue openly is bewildering. Isn’t it reasonable to discuss the prospect of raising revenues without resorting to raising taxes? Some say the reluctance or refusal to engage on owners who serve as tax collectors throughout New Jersey. I believe our elected officials owe their allegiance and their duty to the millions of their fellow citizens who pay sales tax on a daily basis. They bear the burden of responsibility to ensure that the taxes duly paid are fully collected. I’m sure I need not remind anyone that we are already the most taxed population in the United States.

As I see it, our legislators have three options in dealing with our financial problems:

1. Raise taxes;

2. Cut taxes;

3. Grow the economy.

I would add #4. Collect the taxes already in existence.

Is there anyone in New Jersey who actually believes that all the Sales Tax money paid is being fully collected by the state? It is inconceivable to me that with New Jersey’s economy approaching $1 trillion dollars we are only collecting $9 to $10 billion in Sales Tax revenues.

Very Truly yours,

Ray Geneske