Remember Governor Corzine, Taxes Matter
Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same.Those words apply to all taxes whether they are levied on personal income, property, sales transactions or businesses. New Jersey has been on a march to treat taxpayers differently with ever higher taxes and more progressive rates under the guise of fairness and the need to plug budget gaps. The gaps in New Jersey’s budget keep getting larger while other states are deciding how to handle budget surpluses.
Trenton is undermining the state’s one time competitive advantage – low taxes in comparison to other states. As New Jersey struggles with a huge debt load, a budget deficit and out of control state spending, political leaders would be wise to heed those words. Spendthrift politicians are taxing away the geese that lay the golden eggs and we all paying the price.
Between January 2005 and January 2006, the U.S. unemployment rate dropped to 4.7 percent from 5.2 percent, while unemployment in New Jersey rose to 4.6 percent from 3.9 percent.Taxes matter - Taxes affect business decisions, job creation and retention, business and plant location, competitiveness, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment.
States do not enact tax changes (increases or cuts) in a vacuum - Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high tax states.
The politicians in Trenton are spending and taxing productive people and businesses out of the state, further burdening those taxpayers yet to make the move. Governor Corzine has a pivotal role to play in whether New Jersey continues it slide to the bottom or reverses course and again becomes a great state to live, work and do business. Corzine’s state budget unveiling on March 21will make his preference clear.
Update: NJ Fiscal Folly has more - It's Not Just Property Taxes
Update II: Dynamobuzz and Smadanek provide further discussion and analysis.