High taxes and record budget increases are hardly foreign to overburdened New Jersey residents. In the past four fiscal years, state leaders raised taxes by more than $3 billion and went on a spending splurge that left a $4 billion to $5 billion hole in the budget. When Garden State residents went to the polls last November to pick a governor who might offer a temporary respite, they choose Democratic senator Jon Corzine. After calling for over $1.5 billion in new taxes and a 9.2 percent budget increase earlier this year, it’s safe to assume that many voters would like to cast their ballots again.
Regrettably, Corzine’s budget is merely the culmination of what has been a dreary history for New Jersey taxpayers. Over the last several years they have endured a plague of tax and fee increases to drive record spending growth. Worse, even when revenues declined 23 percent from fiscal 2000 to 2002, spending zoomed by 21 percent. And yet, the state’s retirement system is still more than $30 billion in debt. Apparently Trenton has money to spend, just not on its pension obligations. Corzine vowed to clean up this mess, but his approach only digs a bigger hole for taxpayers and businesses.
Fiscal conservatives were already well aware of Corzine’s anemic record in the U.S. Congress. After buying his way into the Senate club, Corzine voted against the pro-growth tax cuts of 2001 and 2003, and even proposed $440 billion in new spending during the 108th Congress. Yet, in New Jersey, he campaigned as a fiscal conservative who would bring spiraling property taxes back in line and finally help struggling taxpayers. In 2005 he vowed, “I’m not considering raising taxes. It’s not on my agenda. We have a very high-rate tax structure. I’m not considering it.”
Like too many politicians, Corzine equivocated. But state legislators have a choice.
They can adopt a $1.8 billion “revenue enhancement” (including higher taxes on sales, real estate, and tobacco) and bloat general-fund outlays by 9.2 percent, further handicapping the state’s poor business environment. Or, lawmakers can reject the increases in favor of dramatically slowing expenditure growth through substantive reforms. As much as politicians lament this latter approach, considering it tantamount to calling in the Four Horsemen of the Apocalypse, the truth is that governors from across the political spectrum have opted for budget restraint over tax increases.
According to the National Association of State Budget Officers (NASBO), ten states have actually cut general-fund expenditures in the past two fiscal years. Some of these states are represented by liberal governors such as Jennifer Granholm (D., Mich.) and Ted Kulongoski (D., Ore.). Kulongoski helped usher through a 15.4 percent reduction in general-fund expenditures in fiscal 2005. How’s that for draconian? Taming state expenditures is possible. It just requires a politician with enough backbone to stand up to the special interests that demand higher spending.
NASBO data also show that Corzine’s package is the largest among the 11 governors proposing revenue increases this year, even as twenty state executives are seeking (mostly modest) tax reductions while the remainder have no major changes on their agendas.
Grassroots activists have already responded to Corzine’s call for a higher sales tax (from 6 percent to 7 percent, raising $1.4 billion in projected additional revenue). Thousands of taxpayers have written and called their state legislators urging them to oppose Corzine’s budget. The website stopthetaxman.org has been created as a portal for concerned citizens to contact state legislators. Visitors to the site can even view a video parody of Gov. Corzine rapping about his tax scheme: “You think a 7 percent sales tax is too high? I plan to tax you ’till you die.”
Despite all the grassroots opposition to the Corzine tax proposal, it remains to be seen if there will be enough traction with state lawmakers to reject it. New Jersey Republicans are almost universally opposed to the budget, but if Corzine and former governor (now senate president) Richard Codey are able to crack the whip and prevent Democratic defections, the tax increases could pass in one form or another.
New Jersey’s tax-and-spend spiral has been particularly acute during the past four years, but many voters have longer, equally painful memories of other budget plans that picked their pockets — such as Gov. Jim Florio’s tax grab (well over $3 billion in inflation-adjusted terms). Unless state Democrats want a repeat of the post-Florio election debacle in 1991 (when Democrats lost control of the legislature), they would be wise to take Corzine’s own advice from 2005 — even if he won’t — and avoid worsening the state’s “high-rate tax structure.”
– Sam Batkins is a policy analyst and deputy press secretary for the National Taxpayers Union. He recently conducted the study, “New Jersey’s Tax Hikes: Sowing Disaster in the Garden State.”