New Jersey has a public pension funding crisis. No surprise there. It’s also no surprise that many people imagine a quick fix; for example, taxing the rich.
The New Jersey Star-Ledger, also not surprisingly, advocates higher taxes on the rich. To its credit, though, it realizes that soaking the rich is not nearly enough.
In an editorial earlier this year, Soak the rich? Sure. But it's not enough to fix N.J.'s budget crisis, the Star-Ledger wrote:
By a landslide, voters in New Jersey want to raise taxes on incomes over $1 million to help solve the pension crisis, according to the latest Quinnipiac poll.
That's reasonable. Asking the richest among us to pay more is not class warfare; it's common sense.
But it is an illusion to think that New Jersey can solve its fiscal crisis by soaking the rich. The hole is simply too deep.
The Star-Ledger notes than a so-called “millionaires tax” would raise about $600 million a year, a pittance compared to the $8 billion a year to needed to cover the promised pension and health benefits of public employees. (Full disclosure: My wife is a retired public school secretary now receiving benefits from these funds.)
That Quinnipiac poll showed a two-to-one margin in favor of higher taxes on million dollar plus incomes, who already pay among the highest state income tax rates in the nation—8.97%. This got me thinking, so I left these comments:
If “Soak the Rich” isn’t class warfare, I don’t know what is.
But as to that Quinnipiac poll, hypocrisy might be a bigger factor than bigotry against the rich. After all, it’s not hard to say, “I’m for raising taxes, but only on the other guy.” So, I’d love to see a polling experiment. How about including this question in the next poll:
“In order to fund the pension deficit, should NJ institute a temporary, across-the-board 10% income tax surcharge similar to President Lyndon Johnson’s 1968 levy, but without the exemption for lower income taxpayers, to remain in effect every year until the pension shortfall is erased?”
The surcharge would be based on each individual’s tax bill. If you owe $100 in state income tax, you pay an extra $10; $1000, an extra $100, and so on. It would still soak the rich, because the rich pay a higher tax bill already. But everyone who pays income taxes would “contribute,” to use the Left’s jargon. What could be fairer and more reasonable? After all, it wasn’t only the rich who voted for politicians who bought votes by over-promising benefits.
How many people think the results for a broad-based tax increase would match Quinnipiac’s 64 - 33 percent margin in favor of raising taxes only on millionaires?
[PS--I’m not advocating higher taxes, at least not without radical pension reform that takes control of public retirement savings out of the hands of politicians, such as turning the public pensions over to the unions to self-fund and self-manage benefits, or converting to a 401k type setup.]
One can see the dilemma. Promised benefits should be honored for public employees who planned their futures based on those promises. How do you honor the promises that politicians gave out without any means to pay for it? In my view, it starts with getting politicians out of the equation, and re-establishing individual personal responsibility for our own futures—including taking responsibility for budget problems created by politicians we elect rather than dumping the responsibility onto others' shoulders. Ultimately, we get the government our voting majority, and our dominant values, asks for.
Taxes in New Jersey: Americans for Prosperity vs. New Jersey Policy Perspective