Governor Chris Christie's New Jersey State Budget Bill passed both houses on June 25, 2015. But why the legislature's continuing millionaire's tax obsession?
TRENTON, New Jersey, June 26, 2015 − The New Jersey Legislature met Friday for a joint session of both houses, just days before the looming constitutionally established July 1 deadline. The joint session considered the annual budget bill, S-2016, which appropriates $35,347,174,000 in state funds and $17,323,048,000 in federal funds for the state’s fiscal operations budget for fiscal year 2015-2016.
The bill passed both houses on June 25, 2015. The senate (24-16) and assembly (47-31-0). (Democrats currently have a majority in both houses.)
Simultaneously, legislators also considered a number of revenue and spending bills − a good budget package usually consists of about 11 ancillary bills − with one actually dedicating taxpayer funding for Planned Parenthood, the primary avenue for on-demand abortions, to the tune of approximately $7.5 million.
There was a lot of healthy, vigorous debate from both sides of the aisle, especially on the millionaire’s tax, one of the temporary stop-gap funding measures designed to offset this state’s potential fiscal pension crisis. The monies from the millionaire’s tax would purportedly produce additional funding to the tune of over $300 million to back-fill the shortfall in estimated pension obligations for the 2016 fiscal year. The bill, A-4602, according to OLS projections, should generate as much as $700 million.
As in-depth as the debate was, the question never arose as to whether any analysis was done on the cost variance between the loss associated with investigating an additional $300 million and the market going sour, or the difference between not spending that additional $300 million and the market doing better or as expected. The concern is that the additional $300 million will do little in the way of providing a more stable footing for the pension system once the capital markets correct themselves, as they have historically proven to do.
The dilemma is this: when a state institutes a tax rate on such a high proportion of income as New Jersey does, the only way to reasonably safeguard private investment is to offer tax credits, which often causes economic erosion.
A more level playing field would more adequately provide for a healthy economic investment engine throughout the state. Tax credits are arbitrary and subject to administrative approval, which leads directly to a slew of needless pay to play issues. Some of these may seem benign, but others can result in the sort of bribery scandals that the public is genuinely worried about.
Unfortunately in the current political climate, the argument for creating a level playing field with more modest rates to incur development in every region of the state adequately is not likely to be a success.
I question the validity of a millionaire’s tax on the grounds that such a tax was already put on the books in the recent past by the very same Democrats who now claim that the revenue generated by that tax increase falls short of funding the state’s current and projected fiscal needs and wants. Was the calculator defective then? If so, is it not likely that that calculator is still defective now?
Sooner or later Democrats are going to have to learn that tax rates are a percentage, and if you continually increase that rate on any group, you will eventually get to 100 percent, a number that simply is not economically feasible.
Turning the state’s fiscal policy agenda into a more lasting conservative agenda would provide rewards for both public and private sector workers.
Even public sector retirees can clearly see that the benefit of an income tax cut right now. It increases their disposable income. As fundamentally Reaganesque as it would sound, returning over $80 billion to the state’s unionized workers gives one a whole lot of institutional gravitas, all of which could and should be shared with the private sector workers in the form of lower individual tax burdens for all.Click here for reuse options!
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