Back in March, a still- new-to-the
job Gov. Jon Corzine offered a sensible proposed budget built on
spending cuts combined with modest tax increases. Undoubtedly, given
his Wall Street background, he figured the Legislature would be
relieved that he had found a way to balance the budget without resort
ing to the one-shot gimmicks and shady fiscal maneuvers that past
governors and budgeteering lawmakers so loved.
His radical idea that lawmakers are
now denouncing? Finding $1 billion in new revenue for the anemic
state budget by hiking the sales tax one penny.
What Corzine didn't take into consideration
is that the only future politicians care about is the day that they
get re-elected. In Trenton, immediate gratification is all that
mat ters. So a campaign was launched to paint the penny- on-a-dollar
sales tax increase as something that would force New Jerseyans to
flee the state in despair.
Accordingly, last week Assembly leaders
told the governor that his plan for an increase in the sales tax
was dead. What victory they're celebrating is unclear to us. Surely
the cru sade to whack state employee benefits -- part of the anti-sales
tax campaign -- hasn't been won yet and is unlikely to yield results
until contracts are rene gotiated long after this budget is enacted.
What's likely now is what's been
done in the past: inflating revenue estimates, shorting pension
contributions, grab bing the existing surplus and finding more programs
to cut. It's a fiscally and morally irresponsible patchwork that
has been a staple of the budget- making process for years.
No one likes a tax increase, but
for years politicians have pretended the state can provide Tiffany
programs at Wal- Mart prices. That's why New Jersey is in such a
fiscal jam.
Corzine's budget proposal inches
the state away from such reckless policies. The sales tax increase
and the $1 billion it would generate, for example, would just about
cover approximately 70 percent of the annual contribution to the
state employee pension fund required to keep it actuarially sound.
For the past 15 years, the budget has been balanced, in part, by
not fully funding that obliga tion.
By zeroing in on a sales tax increase,
Corzine opted for the least objectionable path. Unlike other major
state revenues -- the income and corporate business levies -- the
sales tax is based on consumption. Buy less and pay less. Necessities
like food and clothes aren't taxed. And if a new washer or dryer
or refrigerator or some other big-ticket item is re quired, stores
in urban enterprise zones charge half the cur rent 6 percent sales
tax.
The sales tax makes sense for another
reason: The burden is shared. Payments by businesses account for
about 30 percent of sales tax revenue while out-of-staters pay another
10 percent or so.
For a household with $75,000 in income,
the penny hike would come to an extra $3.52 a week, or $183 a year.
Currently that household pays around $1,100 a year in sales tax.
For a $50,000 household, the penny increase would mean $122 more
a year, or $2.35 a week. That household's annual sales tax total
would be $835.
That seems like a relatively small
cost for putting New Jersey back on the path to financial stability.
Corzine's other suggestions -- a hospital tax, an alcohol tax and
water tax -- are also on the critical list and not likely to be
revived.
But unless there's some magic out
there that has yet to be pulled out of the Legislature's hat, a
modest hike in the sales tax is not the worst thing that could happen.
In fact, why not up it 2 cents, haul in $2 billion and pass some
of the revenue on to the state colleges?