the north face etip glove As NJ prepares to face fiscal reality
There is always hope that elected leaders will act responsibly and not spend too much more than the revenue they have, and not tax so much that it hobbles the economy.
But hope and voter support for financial responsibility sometimes aren’t enough. Even then we don’t despair, because we know reality will ultimately insist on a degree of budgetary balance.
Eventually it became clear that elected city officials would never act responsibly. At that point reality intervened, offering the hard choice of municipal bankruptcy or state takeover.
Now it’s New Jersey’s turn. Fortunately the state isn’t already at the point of crisis, but it’s obvious that is where it is headed if strong corrective measures aren’t taken.
The new administration of Gov. Phil Murphy, who promised major spending initiatives during his campaign, was counting on revenue increases from restoring the income tax surcharge on millionaires and legalizing and taxing marijuana.
If the marijuana windfall comes, it will be much too late for this year’s state budget. And the scheme to heap another tax on the most affluent New Jersey residents has been put into doubt by federal tax reform’s cap on the deduction for state and local taxes.
That cap will increase federal income taxes most for well off residents of high tax states such as New Jersey. The addition of a new state surcharge might encourage more rich people to flee. So high tax states are trying to find a way around the change in the federal tax code, considering such dubious schemes as pretending the payment of state taxes is a charitable donation.
This effort by the state’s Democrats is almost amusing, considering that the party’s No. 1 talking point on tax reform has been that it’s a giveaway to the wealthy. But the progressive New Jersey Policy Perspective isn’t laughing. It said this week,
“Policy changes to avoid the new $10,000 cap on state and local tax deductions would mostly benefit New Jersey’s wealthiest families.”
The New Jersey leader who is sounding the most responsible these days is Senate President Steve Sweeney. public television’s “On the Record.”
“We don’t have a tax problem in New Jersey. New Jersey collects plenty in taxes. We have a government problem in New Jersey, and it’s called too much of it,” he told host Michael Aron.
Sweeney said he’s got a panel of fellow senators and tax experts “looking at everything,” including the deduction issue. And he’s seriously considering shifting to countywide school districts where possible to reduce costs.
“There is a lot of money to be saved when you do things differently,” he said, adding that it’s not going to be popular, but “taxpayers will be my allies.”
Sweeney also spoke briefly about efforts to restore Atlantic City’s finances.
The city is “doing great,” he said, but talk about ending the takeover is unrealistic. “We can adjust certain things there” and Murphy will select someone new to be in charge. But end it? “Absolutely not and it’s legislated for five years.”
He said the state has made great progress and “the takeover is actually what caused a reduction in the taxes.”
Sweeney has shown an ability to work with Republicans and the parties should do so on tax and spending reforms. The path to New Jersey’s fiscal challenges was certainly bipartisan and overcoming them will probably have to be the same.