PHOTO: New Jersey residents are the nations most heavily taxed. They are near the top in income, property, sales and corporate taxes. Gov. Chris Christie (R-NJ) is attempting to change that.
One of the most important legislative battles in the nation is now occurring in New Jersey. This is the height of the state budget season and a balanced budget must be produced by June 30th. Gov. Chris Christie (R-NJ) is attempting to slash spending and stop the growth of public employee salaries and benefits.
He also wants to limit annual property tax increases to 2.5 percent. Last year Christie defeated incumbent Gov. Jon Corzine (D) who spent over $30 million on his re-election campaign and President Obama made four trips to the state on behalf of the Democrat.
The Governor needs 21 votes in the Senate and 41 votes in the Assembly to pass his reforms. This will be difficult because Democrats are the majority party in both Houses. In the Senate there are 23 Democrats and 17 Republicans. There are 47 Democrats and 33 Republicans serving in the General Assembly.
Voters would also have to approve a property tax cap. To assist his effort in passing the reforms, Christie is attempting to hold town hall meetings in every county. He is telling citizens that state pensions and medical benefits are going to be a huge structural liability for many decades. He is also describing his plan to fire 7000 state workers (the exact number hired by his predecessor), and he may have to cut staff salaries by 20%. The real problem is not salaries, but the generous pension benefits.
The Governor is one of the few politicians who has the courage to take an unpopular stand against public employee unions. He promised to do this during last year’s campaign, and has begun a meaningful discussion on what the state can not afford.
He has offered specific proposals on how to cut government spending, and plans to ease New Jersey’s tax crush. The Christie plan includes pension reforms, requirements for public employees to contribute more toward their benefits, and a two-thirds legislative supermajority for all future tax increases. Decades ago New Jersey was ranked the number one state in the nation for economic growth, but those days are long over.
Spending ballooned after passage of a state income tax. Corzine was elected in 2005 with a pledge to cut property taxes by 40%, but they ended up being increased by 20%. He left office with an almost $10 billion deficit, and Christie said New Jersey is a prime example of what happens when liberals have complete control of a state government. To his credit, Corzine now admits there was “reckless borrowing,” and says “Let’s call it like it is: Everyone’s property taxes are too damn high.”
Now that he is in the Governor’s office, Christie has signed an unprecedented executive orders to freeze and cut spending. He has revoked funds from local school districts, hospitals and NJ Transit and declared a “state of fiscal emergency.”
The Governor wants to force more than 500 school districts to spend their surpluses in place of state aid. He repeatedly tells town hall meetings that the state is on “the edge of bankruptcy. We must come to terms with the fact that we cannot spend money on everything we want. The days of Alice in Wonderland budgeting in Trenton end.”
A recent Rutgers University study demonstrated that many upper income people have left the state since 2004. The Wall Street Journal explained this, “So what happened in 2004? The study doesn’t purport to explain what caused the wealth movements. But the state’s most notable economic policy event that year was an increase in its top income tax rate to 8.97% from 6.37%, on incomes starting at $500,000. That’s a 40% increase.”
Jim Hughes, a dean at Rutgers University, says “The tax the rich solution that we often hear has only resulted in a significant decline in the state’s wealth. We’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.”
Christie’s message is that the state needs lower taxes to lower unemployment, and he wants to provide hope for the over 500,000 NJ residents who are unemployed. He says “Private-sector jobs are going to be created by giving our entrepreneurs more of their own money back. The tax cut I propose is one that provides more money to small business.”
Can He Accomplish Anything With a Democratic Legislature?
In most states there are significant limits on what a GOP Governor could accomplish if they were confronted with a hostile state legislature. In California, the Republican Governor and the legislature are at a standstill. Republicans claim all they can hope for is the death of bad bills an government expansion. There is a big difference between California and New Jersey. The Garden State has one of the most powerful chief executives in the nation. Christie is able to rewrite legislation and cut spending with the stroke of his pen. Gov. Arnold Schwarzenegger wishes he had that ability.