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If death and taxes are certain, what about the political death that comes from voting for taxes?
The fear of losing one’s job because of voter backlash runs deep among New Jersey politicians. Just say “1991†and they freak. The battle of the budget this season is colored by legislators acting as though supporting Governor Corzine’s proposed sales tax increase was like jumping into a pit of poisonous snakes.
But, if you look at election results over the 40 years that New Jersey has been imposing broad-based state taxes, the heebie-jeebies are unwarranted. Yes, 1991 was a disastrous year for Democrats who did the right thing and voted for the Florio tax increases that—had they not been repealed—would have left this state in far better shape than it is today. The income tax cuts of 1994-96 alone cost New Jersey over $15 billion in lost revenue.
But 1991 turns out to be closer to the exception to the rule than the rule itself.
New Jersey’s sales tax came to be in 1966, under Gov. Richard J. Hughes, a Democrat. Actually it was the Republicans’ idea. Hughes wanted an income tax, couldn’t get it and settled for what was then a 3% sales tax. In the legislative elections the following year it wasn’t even an issue.
New Jersey finally got an income tax in 1976. People thought that would be the end of Gov. Brendan Byrne, another Democrat. They started to refer to him as OTB, for “one-term Byrne.†But the guy got reelected in a landslide the next year.
In 1981, Tom Kean gets elected Governor, echoing the Republican supply-side mantra that helped Ronald Reagan become president the year before. Kean promised to cut the income and sales taxes. Instead he raised both, with a lot of help from Democratic legislators. Kean was reelected with an ungodly 70% of the vote. The late Alan Karcher, who was Assembly Speaker and did a lot of heavy lifting for the tax hikes, loved to tell about how Kean was begging behind closed doors to get enough Dem votes to pass the tax hikes, only to go before the press and say he’s holding his nose while signing them. Smart.
Then there was the millionaires’ tax of 2004. When we at New Jersey Policy Perspective first called for an upper-bracket tax increase to help balance the state budget and recapture some of the windfall from federal tax mostly for the rich, conventional wisdom said no way. Legislators felt they couldn’t vote for a tax increase and survive. A year and a half later, with groups like ACORN, Citizen Action and the NJEA mobilized in the Fairness Alliance and canvassing like crazy, the equation was reversed. They couldn’t vote against this tax increase and survive.
In last fall’s Assembly elections, not only did no one lose their seat because of voting for the income tax hike, no one even got attacked by an opponent for doing so.
So, here we are, staring down another budget crisis. We’re paying the price for a decade or so of bad decisions that almost always were made because the people we elected—from both parties—thought we couldn’t handle the truth. They forgot how to pay the bills; thought the party could last forever.
There are ways out of this. And they don’t have to involve hurtful spending cuts or meanspirited attacks on state workers’ benefits. We can raise the money this state needs. Take the sales tax, for example, which Corzine wants to raise. NJPP put out a report the other day showing how the tax—which turns 40 on July 1—needs a giant overhaul. It taxes the transactions of a generation ago, but today people spend more on services than goods, and many of those services didn’t exist 40 years ago. And it is riddled with inconsistencies, many of which hurt lower income people. Laundry detergent is taxed but taking clothes to the cleaners isn’t. Renting a car is taxed but hiring a limo and chauffer isn’t—that sort of thing.
Facing those problems would bring in billions of dollars a year in new revenue, and we wouldn’t even have to raise the rate above the current 6%. You could use some of that new money to raise the state income tax threshold, expand the Earned Income Tax Credit and do other things so low-income people would still come out ahead—and the state would be on the road to fiscal health.
All it would take is a little courage. And a better reading of history than what we get from people who think 1991 is the whole story.
Jon Shure is president of the liberal think tank New Jersey Policy Perspective. |
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