"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Wednesday, July 05, 2006

Democrats Talk As New Jersey’s Budget Crisis Threatens The State’s Economy

New Jersey state government remains shut down, well sort of shut down. Perhaps someone could explain why Community Affairs, the Public Broadcasting Authority and the Higher Education Student Assistance Authority are considered essential state services? Nice maybe, but essential?

But never fear, in an effort to solve the budget impasse, Governor Jon Corzine gave a speech to a joint session of the Legislature this morning. “The perfect should not be an enemy of the good”, Corzine said. A listener retorted, “And taxpayers should not be treated as ATM machines at the mercy of crooks with fraudulent credit cards.” The Governor’s brief remarks continued:

"Today is the fifth day since our constitutional deadline for passing a balanced budget has failed to be met," Mr. Corzine said. "I'll be brief. The time for speeches, posturing, political hardball have long since expired — as has fiscal '06's budget and the authority for the state to spend money. The issues are the same today as they were yesterday.”
Yes, indeed those issues are the same. New Jersey state government spends too much, taxes are too high and the people are sick of it. The Democrats’ answers to those pesky issues - raise state spending by 9.2 percent and then fight amongst themselves about which taxes to raise and by how much.

But now the real problem begins – how can they blame Republicans for the disaster? Democrats have refused to consider Republican plans to cut spending and won’t let Republicans lawmakers attend budget negotiation meetings. The media is ready and willing to bash Republicans, but haven’t quite figured out the angle.
But Corzine may be the first executive in American political history to engineer a government shutdown in a fight with a legislature controlled by his own party. That was the off-the-cuff opinion of Rider University professor David Rebovich as we chatted in the halls yesterday following the speech. Rebovich told me that he's been fielding a lot of inquiries about the shutdown from out-of-state journalists. Most assume Corzine must be fighting the opposition party, said Rebovich. They're surprised to learn that this is a Democrat-vs.- Democrat debacle.
Oh well, when all else fails Democrats and the media can always fall back on their old stand by, they can blame President Bush.


At 2:41 PM, Anonymous Anonymous said...

Goes-in-tahs and goes-out-tahs?

This is a relatively simply problem - we simply have higher costs than we do revenues. Only so much of this revenue delta can continued to be passed along to the residential property tax payers.

To appropriately simplify, progressive taxes are better and more fair than regressive taxes, because: if you make more money - you have more money - and therefore you pay more money. With regressive taxation, such as property taxes, everyone pays more as expenses go up. You may have just retired, or changed employment, or had a child, and therefore have less money - but your taxes go up anyway. You may need to sell your home and move out of state because your expenses go up while you income does not. There is no correlation between means and expectations. Simple, and why I say progressive taxation is qualitatively better and more fair to working people than regressive taxation.

While I understand fiscal conservative ideology is intended at its core to be...well.... fiscally responsible, it too often prefers regressive taxes such as property taxes to progressive taxes like income and sales tax.
Hmm. Makes we wonder: Is this conservative fiscal philosophy really simply intended to ensure the delta in means betweens the have's and have not's continually widens?

I think if we all had a common focus of true fiscal responsibility and fairness, we could certainly work together - without casting stones - to solve this problem.

Patrick Thompson
Hightstown NJ

At 3:27 PM, Blogger Scott Kirwin said...

Sales taxes are not progressive: they are regressive. Lower wage earners spend a larger percentage of their income than higher wage earners.

The problem will be solved once the costs borne by one side outweighs the benefits. Currently - from the perspective of one outside of your state - Corzine is taking the hit for this.

At 6:50 PM, Blogger Ken Adams said...


Fiscal responsibility isn't about what means are used to collect the taxes, whether progressive or regressive. It's about living within our means. Our budget process is completely backwards -- the governor figures out what he wants to spend, then proceeds to demand that level of funding from the taxpayers. This is wrong, and really nothing more than legalized extortion.
To build a fiscally responsible budget, the government should determine what its projected revenues will be for the coming year under the prevailing tax law, then allocate those funds based on a publicly debated set of priorities. Unfortunately, the special interests in the state will never let this happen.

At 8:54 PM, Anonymous patrick thompson said...

I appreciate the comments (Ken Adams)and clearly the cost side of this equation needs much work.


It is unrealistic for us to not fully understand that there will be increases every year in everything. This needs to be expected. In the corporate world it's called "expense-creep". This is the simple law that costs - unless acted upon by a significant force - will increase every year. Payrolls increase to start with, we all want and need our 3.5% or 5.5% raises, right? Our health insurance costs, never seen them go down have you? Materials costs, fuel costs, rent, ect - NEVER go down.

So unless the number of employees is reduced - the action of a significant force - cost will inevitably creep upward. This is why revenue growth is so important in Corporate America. If revenue growth is not out-pacing costs increases (expense creep), cost come down. Hear much about out-sourcing, down-sizing, right-sizing, off-shoring, and re-aligning? That's the sound of costs coming down to maintain profit margins. Sometimes it works for a while. But often the cost cuts inhibit the abilty for business to grow, and the revenue decline accelerates. But I digress.

This is just as true in government, and it is just as true in your home.

So to a large degree, although we should never blindly ACCEPT what our elected officials pass off as a "lean budget" (as an elected official I know this first hand), it is important that we all begin to EXPECT that taxes will go up every year.

So then only one questions remains: which taxes are best to raise? Progressive taxes of course. You make more money - you have more money - you pay more money. That's a subtle way of saying INCOME TAX. Not property taxes.

And I do put sales tax in a more similar bucket to income tax (scott kirwin). In NJ essential items like food and clothing are not subject to a sales tax. So this becomes more like a consumption tax. The more you make - the more you spend on non-essential items - the more tax you pay. Seems progressive to me. Seems right, too.

Now why do I say this as someone who will is in a situation and a tax bracket where I will personally pay more in taxes under the methods I descibe? Because it is right.

....just don't tell my wife, ok?

Patrick Thompson
Hightstown, NJ

At 4:13 AM, Anonymous Anonymous said...

I lived in NJ from 1980 until 2005. Move to nj right out of college in order to take a job. Married, raised a family, started multiple businesses. Got tired of being told that because I was productive that i was somehow the problem. ie, I had to giveback to those less unfortunate. if only. i finally got fed up as the definition of the unfortunate began to expand wildly. Now it has been extended not just to a large group of n'er do wells but also the annointed 80,00 our so who work in nj civil service. my how i would love to have had a full time paycheck for 35 hours worked and a guaranteed pension after 25, 20, do i hear 15 years of "work". I decided enough - sold the house (love that exit tax) and moved to a place where taxes are fairer and the government is a little more appreciative (for now). This exodus will continue - both of businesses and individuals. Capital is truly mobile. You would think a former executive of one of the best investment banks would understand this. But what do you expect form a former municipal bond salesman. Good Luck.


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