New Jersey’s Diminishing Returns
According to Treasury officials, collections of the Corporate Business Tax fell $150 million to $175 million short of budgeted projections while income tax revenue was down about $300 million to $10.5 billion.Abelow warns that in light of the state’s revenue slump, he could not rule out cutting property tax rebates or reducing Governor Corzine’s proposed $1.3 billion contribution to the public employee pension system.
Abelow said the administration would first focus on finding more spending cuts before considering additional tax increases.Reducing the state’s workforce or eliminating proposed spending increases on new or other programs were not mentioned as targets of possible cuts. Take this as a signal the meager increases Governor Corzine had proposed for property tax rebates are history. Get ready for the income tax surcharge.
Meanwhile, other states are seeing their coffers swell and federal tax revenues continue to soar to new record highs. The nation's strong economic growth is creating this tax revenue boom for most states, with the exception of hurricane ravaged states, and New Jersey.
Why are New Jersey’s income and corporate tax revenues down? Consider the effect the billions in new and increased taxes Trenton has enacted over the past few years and couple that with skyrocketing property taxes and you’ll have the answer. New Jersey has taxed businesses and residents to the point of diminishing returns.
But, the news gets worse. Abelow also announced that a new estimate shows the deficit for the state's public employee pension system is nearly $18 billion as compared to the $12 billion projection the state published just two months ago.
As the stock market climbs to a new 6-year high this news should raise a few eyebrows. Unless the state has done an incredibly poor job investing the state’s employee pension funds, the contribution deficit should be decreasing, not growing. The $18 billion figure may well be a more honest estimate of the shortfall, but consider a 50 percent increase in the estimate as a signal the $1.3 billion pension fund contribution will not be on the chopping block. Not that we believe it should be slashed. This debt must be paid sooner or later. There is no point in kicking the can further down the road.
The real problem we face is that Governor Corzine has been unwilling to address the programs and employment decisions that are driving the 9.2% spending increase in his proposed budget. He is further exacerbating the problem with calling for spending on new and expanded programs. We are all in it together; the question is how will the Governor plan to get us out.