"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Thursday, February 09, 2006

The Boom, Bust and Tax Cycle

New Jersey’s unemployment insurance (UI) fund is now "dangerously close to insolvency” because lawmakers have diverted the money to reimburse hospitals for treating the uninsured.

The state has taken $4.67 billion from the UI fund since 1993, leaving it with a projected balance of about $1 billion on March 31, an amount barely above a mandated trigger that would automatically increase unemployment taxes on employers by as much as $400 million.

If that trigger isn't reached this year, Corzine's group predicted it will almost certainly occur in 2007 when unemployment taxes on employers might have to increase as much as $700 million.

Corzine's advisers suggested unemployment tax increases for employers and employees are inevitable.
Gas taxes were diverted from the state’s transportation fund, the fund is now broke and there’s no money for future road construction and maintenance. Unemployment insurance taxes paid by workers and employers were used by politicians in to pay medical bills for the uninsured and now the UI fund is near insolvency.

This is what happens when government takes in surplus taxes in ‘good years” - politicians spend the money on new programs, pet projects or the usual special interest groups. When the ‘bad years’ come and tax revenue is down, the knee-jerk reaction by politicians is to raise taxes. This cycle is repeated over and over again and not just with the unemployment and transportation trust funds.

The state’s income tax revenue is solely dedicated to New Jersey’s Property Tax Relief Trust Fund. The ‘good years’ came and the Abbott School Districts were lavished with money to the point were schools in these districts spend 35 percent or more per student than their non-Abbott counter parts. The ‘bad years’ came and the property tax relief (state aid) to the Abbott schools continued at the same generous levels, while property tax relief (state aid) to the others districts declined and rebate checks were cut. Now the cry is to raise taxes, again.

Before passing laws to raise taxes, lawmakers should pass laws mandating transportation and unemployment trust fund tax revenue be used solely for the purpose the taxes were enacted – transportation infrastructure and unemployment compensation. Revenue from the state’s income tax must be distributed equitably and in surplus years, placed in a ‘rainy day fund’ for property tax relief in down years or returned to the people who actually paid the surplus taxes.

The lawmakers in Trenton have spent every tax dime they could get there hands on and then some. Surpluses were spent and built into all future state budgets, with never a thought given to the inevitable downturn in the business cycle. Taxes are then raised, more revenue is taken in than needed and then that money is spent. On and on the boom, bust and then tax cycle goes.

This has got to stop now. This year’s state budget must be based upon existing revenue streams period - no increased or new taxes. The state should live within its means, that is what responsible taxpayers must do, so should the state.

Update: A Blog For All has more on this subject. And NJ Conservative reminds us the NJ Schools Construction Corp. is another bankrupt, bottomless money pit for tax receivers.


At 1:30 PM, Anonymous Anonymous said...

The taxes are coming! It the old Democratic playbook being used by Corzine. They know that the mindless who got them elected will fall for the same old trick. The fact that Corzine's committee leaked that initial document about raising taxes and where they could save money was by design. They will hit you with all the worst case scenarios raising taxes everywhere and then they will implement only a few and everyone will be so grateful that they didn't raise all the taxes proposed. The bearded clown will continue the corrupt Democratic cycle.

At 4:26 PM, Anonymous njcons said...

I agree with the above and it doesn't seem to matter to the population what their government does.

Thanks for the link.

At 3:57 PM, Blogger njgalaxie73 said...

New Jersey right now is a large scale example of what Jersey City was in the 80's and early 90's. Voter apathy ran rampant in Jersey City for decades as corrupt bureaucrats were allowed to tax and spend to the point where homeowners were declaring default on their taxes and abandoning their properties.

Finally, when the people woke up and decided enough was enough, they elected Bret Schundler Mayor of Jersey City. Mayor Schundler made the reforms not only so the City could survive, but flourish. Mayor Schundler in a lot of ways did for Jersey City what Mayor Giuliani did for New York.

After the tragic events of 9/11, many businesses that were housed in the WTC were able to survive thanks to Jersey City office space created by Schundler which in my opinion played a big role in our economic recovery. Even before 9/11, seventy-five percent of the nasdaq was and still is traded in Jersey City.

Conservative Republicans have a long track record of cleaning up the messes that Democrats leave behind. I just hope that New Jersey dosen't have to end up in as bad of shape as Jersey City was before people finally came to their senses!

At 1:34 AM, Blogger work social said...

Shared Workspace, coworking and executive suites in Jersey City, NJ. Entrepreneurs everywhere are joing a movement of happiness at WorkSocial

At 5:00 AM, Blogger work social said...

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