New Jersey Governor Jon Corzine, in a recent article in the New Jersey Star-Ledger, declared that there is “no easy way out of the [state’s] deficit.” This may be true, but it was sure easy getting there.
1966 was the year I started work after graduating High School. 1966 was also the year our sales tax went into effect. Ten years later, in 1976, a “minimal” income tax took effect.
Since then, both taxes have risen more or less steadily, while the state’s fiscal condition has been on a generally deteriorating trajectory. Today, the New Jersey State government is in its worst financial condition ever, even as the state’s income (top rate 9.0%) and sales (at 7%) taxes are at all-time highs.
Clearly, increasing revenues have not brought fiscal sanity. Quite to the contrary, this rising revenue stream has resulted in the opening of the spending floodgates. The sales tax was enacted as a means to “reduce the inequalities of New Jersey’s localism”, according to Thomas J. Fleming (New Jersey: a History). Income redistribution, in other words. This made Trenton a magnet for every “activist” and special interest group seeking to impose its version of a “good cause” or “charity” on others through some state program or other, or simply to feather its own financial nest at the expense of taxpayers.
The income tax, of course, was enacted in response to the ultimatum issued by the judicial tyrants of the New Jersey Supreme Court, who threatened to shut down the public schools if an alternative to the property tax wasn’t found to fund the schools. This opened the door to the now very familiar method of “improving” education by throwing money at the problem. We all know where that got us.
Now, incredibly, the Governor wants to raise taxes again (disguised as toll hikes). Meanwhile, in what he termed a “cold turkey” budget, Governor Corzine today released his 2008-2009 New Jersey State spending plan. Total spending will be cut $500 million. That’s it. For context, consider that the NJ State budget increased from $24.1B in 2003-04 to $33.5B in 2007-08. That’s $9.4 billion, or 39% in just four years! The cut, again, will be just $500 million. And that is before the legislature gets its hands on it.
Ronald Reagan once said “the closest thing you will ever see to eternal life on earth is a government program”. Well, the governor is looking to prove him right. In his budget, Mr. Corzine proposes to cut or freeze spending pretty much across the board. But this is a euphemism for doing nothing, because catch-up spending can always be added later. Cutting a budget item is like cutting out only part of a malignant tumor. A truly long-term solution requires that the engine of spending growth be removed. The only way to reduce spending long term is to eliminate programs.
In addition to the obvious necessity to cut waste, unnecessary jobs, etc., what should be done is to end or privatize existing “sacred cow” state programs. For example, the property tax relief and aid to municipalities programs amounts to taking money from taxpayers, cycling it through state bureaucracies, then returning it right back to the taxpayers (though not the same taxpayers). The drug of “free” taxpayer money to towns, schools, hospitals, etc., is a disincentive to efficiency, an incentive to exaggerate “need” (i.e., inflate costs) to justify more state “aid”, a source of corruption (ex., the Coniglio case), and an expansion of control over the recipients by the state and special interests. Eliminate those schemes and institute corresponding cuts to the income and sales taxes.
State-run charitable programs are not the proper role of government. They should be gradually phased out, leaving enough time for private, voluntary charitable efforts to gear up to take over. Charity is a worthwhile undertaking, but no one has a right to wave the banner of charity while forcing others to pay for it. If a majority of the state’s residents support these state efforts, then there should be no trouble replacing them with private donations. If not, then what is the justification for continuing them? An individual, and only an individual, has the right to determine when, to whom, and in what amount he will donate to charity based on his own values and affordability. Tax-funded charity, like tax-funded religion, is a violation of individual rights and should be ended. Of course, additional sales and income tax cuts should accompany these phase-outs.
Governor Corzine says:
"It is not enough to just reject the toll proposal. If you don't like that alternative, give me another viable approach to significantly reduce debt and fund important, vital transportation improvements."
The problem here is that once the debt is paid down, we will be stuck permanently with the higher taxes…excuse me, tolls. He asks for suggestions. Here’s one.
The state’s debt, which I believe is in the neighborhood of $35 billion or about $4000 per capita, can be attacked with a dedicated, separate tax, which would automatically disappear, when the debt is paid off. One viable option, I believe, may be a yearly percentage wealth tax on existing personal assets, after a reasonable exclusion at the lower end. It is true that the politicians got us into this debt mess, and suggesting a tax makes me gag. But it must be remembered who elected them. Since people tend to accumulate personal assets as they age, a wealth tax would fall less heavily on the young who, as newer voters, are the least responsible for the debt. I think also that this type of tax is less damaging than an income tax, because income represents the production of new wealth, while existing assets represents old wealth, and thus it would not be as much of a discouragement to productive work.
The temptation to make it permanent must be eliminated through some kind of ironclad “contract” with the state’s residents. But this new debt-repayment levy may fly because people would realize that it is temporary, intended for a specific purpose, and will not fall into the hands of the Trenton establishment. This idea of a dedicated debt-repayment levy must be accompanied by a moratorium on new state borrowing, and an actual shrinkage of state government and income and sales taxes (I prefer that these taxes be eliminated, but that would be too much to hope for.). It would also free up the existing gas tax, which is currently bogged down in debt service, for road improvements. This should head off the need for an increase in that tax.
I don’t like the idea of a wealth tax. This idea is presented only as a demonstration, to make a point. I don’t like the idea of any new tax, to tell you the truth. "The Power to Tax Is the Power to Destroy". As an Objectivist, advocating any kind of coercive government levy is objectionable. But the debt is real, and the debt-holders deserve to be repaid. Some have suggested bankruptcy, but I think repudiating the debt would be unconscionable. Much as I abhor taxes, especially new ones, the people of New Jersey have a moral obligation to repay the debt. Given this, an automatically expiring repayment plan is something worth considering as part of an overall effort aimed at unwinding the welfare state.
I’m sure these suggestions will ruffle many feathers, to put it mildly. And I certainly don’t think any wholesale wipeout of state programs is in the offing. But thinking “outside the box”, questioning the unquestionable, mentioning the unmentionable, challenging the status quo and the given is the only way to arrest the deteriorating condition we find ourselves in. What the Governor’s plan amounts to is a con game… a continuation of the same old pattern. Mr. Corzine desperately wants to keep the tax-and-spend game going so he can advance his aggressive welfare state agenda. Waiting in the wings is a state takeover of the pre-schools, day care centers, health care, etc., all under the heading of “universal” this or that. And there is the new payroll tax to fund the proposed “paid family leave insurance” scheme.
I have only scratched the surface. There are issues not discussed here that tie into Trenton’s fiscal problems, such as the need for radical reform in education (tax credits) and health care (massive deregulation). Many issues affecting the state must be addressed, at least in part, at the national level. For example, the reason that hospitals need “charitable assistance” (a current state program) is because of the federal law called EMTALA, which requires them to treat everyone regardless of ability to pay. And there is the question of the unfunded public employee benefits.
But the 30 to 40 year pattern of rising taxes accompanied by an even faster rise in spending must not only stop, but be reversed. Steadily expanding government is fiscal insanity and a growing threat to our individual liberty. A radical new direction is the only viable long-term option.