My soon to be 4 year old son is a big fan of Peter Pan. Partially it is because Peter Pan gets to fight against the pirates, and partially it is because his name is Peter as well. It seems like Governor Christie is also a fan of Peter Pan – but because of their shared love of using fairy dust to make magical things happen that have no basis in reality.
As a tax expert who is looking at Christie’s budget priorities and projections from the basis of reality here in New Jersey and on planet Earth, there is only one thing for certain here: it is all rainbows and puppies in the area of wild eyed revenue increases in order to pay for Christie’s highly touted Millionaire Welfare program, which costs $500 million this coming year and $1.3 billion overall. Let’s take a look at some basic information and assumptions:
Revenue from taxes and fees is expected to be up 7.3 percent over the current spending plan. The largest increases would be generated from corporate taxes, and smaller increases from sales taxes and the income tax, which Christie proposes to begin cutting in January 2013.
In the first half of fiscal 2012, revenues only rose 3 percent. But in a briefing with reporters before Christie’s budget address, Treasurer Andrew Sidamon-Eristoff said, “We believe that the economy of the state is, in fact, experiencing a comeback.”
The little problem here is that there is really no basis to believe that a “comeback”, despite the “Mission Accomplished-like” use of slogans – is happening, is imminent or would come anywhere near reaching the highest revenue growth in years (the highest since 2005). “Why?” do you ask? Well, let’s take a look:
As noted above, the lion’s share of the revenue increases come from a few assumptions: more corporate taxes paid as well as more income and sales taxes paid, coupled with the thoroughly debunked zombie lie about “cutting taxes stimulating of the economy”, as they have repeatedly been shown not to add jobs(see the huge drop in jobs after the Bush tax cuts) and revenues (even debunked by Bush’s own economic advisors).
The far-from-liberal Businessweek had the following to say:
Nationwide, combined state tax revenue rose 6.1 percent from July to September, the seventh-straight quarter of growth, and the streak may have extended into the three months ended in December, according to a Jan. 26 report from the Albany, New York-based Nelson A. Rockefeller Institute of Government. Yet the gains appear to be weakening, the group said. New Jersey’s revenue has missed forecasts in the six months through December.
New Jersey’s revenue dropped about 11 percent in fiscal 2009 as the economy slumped. It fell 3.5 percent the next year, before rising 2.9 percent in 2011, and is projected to rise 3.5 percent this fiscal year.
Over the past few years, Christie has allowed the income tax surtax on the State’s wealthiest to expire and also let a 4% surtax on corporations expire. There has not been an increase in the sales tax base or rate, and if you look at this recent BIPARTISAN report on the tax and revenue outlook from the NJ Legislature, you will find this little nugget:
FY 2009 New Jersey budget revenues dropped by 11.2% and FY 2010 revenues fell by 3.3%, the two worst years in the last four decades.
Of particular relevance for New Jersey, the [Pew] Study identified a growing dependence on income tax revenues as a primary source of greater revenue estimating errors. As the income tax has become more dependent on income other than wages, it has become more erratic. Also of consequence was the volatility resulting from a very small number of large taxpayers accounting for the bulk of corporate tax collections.
The problem here is that there hasn’t been any real material job growth here in the state over the past few years, and much of the jobs that would create higher tax collections are those in NYC which aren’t even New Jersey revenues.
It was less than two weeks ago that Republican Assemblyman Declan O’Scanlon, who is the Senior Republican on the budget committee indicated that revenues have been sluggish, and as our own Bill Orr said yesterday:
tax collections in the Garden State are already off $325 million through the first six months of the current year, so “the governor is in no position to arbitrarily call for a self-inflicted wound through deliberately reducing the State’s income stream.”
And wasn’t it just one year ago that this same Governor ripped into Democrats for exactly what he is doing – except this time it is on a much larger scale. I guess in the land of make believe, the past is irrelevant if it doesn’t meet the current fantasy land, where Millionaires need a welfare program and the Mad Hatter runs around with Tweedle Dum and Tweedle Dee.