Corzine's
prescription is best cure for now
EDITORIAL, Home News
Tribune Online (thnt.com) July 6, 2006
The shutdown of state government that
began this week is a crisis born of two factors, the first one immediate — that
New Jersey's annual budget be balanced on revenues equal to or exceeding its
forecasted spending, as required by law — and the second one long-term — that
New Jersey must repair the structural deficiencies that plague the way it
collects and spends taxpayer money from one year to the next. Gov. Jon S.
Corzine recognizes as much, and has fashioned a model for recovery — as
distasteful as it might be — to satisfy both needs. Assembly Democrats,
still married to the budget gimmicks of the past and unwilling to concede the
necessity of Corzine's plan, have not.
It is simple. Corzine's call for a 1 percent increase in the state sales
tax from 6 percent to 7 percent would square New Jersey's financial obligations
for the coming 12 months, while lawmakers use that time to explore solutions
capable of ending this annual scramble to square the books.
No one is saying a sales tax increase is a good thing, because it certainly is
not; state residents would be tempted to purchase their goods across state lines
and big-ticket retailers would feel the pinch. But the alternatives
proposed by the Assembly leadership are much worse, for both the present and
future of New Jersey.
It is ill-advised, for one, to rely on yet another round of hidden tax-and-fee
gimmicks with at best sketchy revenue potential. In the past, the
Legislature has raised the ante on such items as the realty transfer fee, the
purchase of new tires, and the up-front payment of four years of automobile
registrations on the purchase of new cars. This year Assembly Democrats
have talked about expanding the sales tax on items such as computer services,
temporary services and satellite television. Add-on taxes and fees tend,
of course, to dampen consumer enthusiasm for a particular product or service,
meaning state projections for revenue streams such as these often fall short of
expectations. Therefore, they are unreliable.
Nor would it be of benefit to expand on former Gov. James E. McGreevey's
"millionaire's tax," as Assembly negotiators have suggested as well. In
2004, Trenton imposed an income tax increase on state residents who earn
$500,000 or more. The Assembly proposal would lower the threshold to wage
earners of $200,000 or more. New Jersey's marginal tax rate of 8.97
percent already is sixth-highest in the nation and is a big reason why
high-income taxpayers are filing elsewhere or leaving the state altogether — a
trend that bodes ill and would be accelerated by the Assembly plan.
Instead, the governor has the right mind-set.
Speaking yesterday morning to the members of the Legislature, Corzine summarized
perfectly the competing strategies involved:
"This debate is about whether we will have a budget with predictable, reliable
and recurring revenue streams. Or, if we will have a budget with a
patchwork quilt of unknown, untested and unvetted ideas that we hope will once
again simply get us to the finish line. . . .
"I can't agree to a budget that is balanced with an unknown list of several
dozen proposals, many of which have never been vetted, several of which have
never been tried, and most of which are highly speculative or known to be
economically depressive."
Yes, a sales-tax increase would be a bitter pill to swallow. But there
isn't a medicine available at this late stage of New Jersey's condition that can
go down easily.
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