A theme developing, a tax-and-spend Sunday here at Shopfloor.org. Or as The Wall Street Journal’s weekend editorial on New Jersey puts it, “Toll and Spend.”
The slow economy is hurting state tax revenues around the country. But look on the bright side: You could live in New Jersey, where decades of tax and spend politics is reaching its logical conclusion.
“We have a serious structural financial problem,” the state’s liberal Democratic Governor Jon Corzine told us on a recent visit. “You better address these problems or you will put yourself in a 1970s-style New York City situation, where you get a control board telling you what to do.” Mr. Corzine is promoting his own solution, but he’s also tacitly admitting that the state’s politicians have been sucking the place dry for decades. If you want to know where a state dominated by public-employee unions ends up, Trenton is it.
The Journal is sympathetic to Corzine’s plight, as he’s a realistic politician who certainly understands where the state has gone down the wrong road. But one “solution” he proposes involves leasing out the New Jersey Turnpike and Garden State Parkway, to pay off old debt — risky refinancing in any circumstances. It’s also a far cry from the tollway leasing being undertaken in more fiscally prudent states like Indiana, where the revenues are allocated to infrastructure.
The real problem is tax and spend governance, by both political parties. State revenues have grown at an average annual rate of 3% over 20 years, while spending has increased by an average of 7%. And that’s despite a tax burden that is already nearly the country’s highest (see nearby table). Mr. Corzine’s predecessor, James McGreevey, jacked up the top income tax rate to 8.97% from 6.37% in 2004, giving more hedge fund managers a reason to move to Connecticut.
Mr. Corzine’s toll-hike plan is well meaning but unlikely to work and is already encountering bipartisan opposition. If it fails, he ought to consider the only real solution, which would be a state constitutional tax and spend limitation. He’d be a hero to taxpayers, and it might even save the state from bankruptcy.
P.S. Unfortunately, Corzine’s tax-related comments on Fox News Sunday today were made only in the context of the presidential campaigns. Just where the questioning took it.
P.P.S. Indiana Governor Mitch Daniels is speaking Monday afternoon at the American Enterprise Institute, remarks entitled, “Economic Lessons from Indiana.” We hope to make it.
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