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July 22, 2006

Tax detoxification

A pretty hilarious editorial from New Jersey.

Tax detoxification
Sunday, July 16, 2006

The subject matter of taxes is no stranger to The Record.

TAXES ARE the crack of New Jersey lawmakers. Pure and simple. The more they get, the more they want. The more they want, the more they need to get the same results.

Once they get a hit, it feels good. But an hour later, they need another hit, and now they need a little more. Pretty soon, it gets pricey for a fix.

Taxpayers get angry because they have to fund the fix. They vote out the last addict. A new one comes in and swears on a stack of holy documents that taxes are not an option. OK, maybe not a viable option. OK, what he really meant was they are the last option.

Really, what he meant was that there is no other way.

Pass the pipe, please.

Via The Agitator.

Posted by joke du jour at July 22, 2006 08:02 AM

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Ya know, I gotta comment on this one, even though I'm not a NJ resident. I actually admired Corzine for shutting down the government until the legislature raised the sales tax. Why? Because it balanced the budget. The legislature had shown no willingness to cut spending to live within their means - although in fairness to them, much state spending nowadays is mandated by Federal law (how's that happen, eh?). The only options for a balanced budget were to sell state assets (the approach our Republican guv here in Hoosierdom took) or raise taxes.

The problem with selling off state assets to balance the budget is the same problem you get with consumers taking out home equity loans to pay off credit cards - it's a temporary band-aid at best, and leads to bankruptcy at worst. We got a little over $3B for leasing our toll road to a private concern for 75 years, and legislated the ability for them to raise tolls at a fixed rate. If the state had kept ownership and raised tolls at that rate over the lifetime of the lease, the "take" would've been something on the order of $25B.

But there's no legislative intestinal fortitude to raise tolls, as it's perceived as a tax increase - so they let a private company do it and say "See, it wasn't us! It's that bad foreign corporation!"... they get the gold mine, we get the shaft, and we're happy about it!

And after balancing the budget this year, our wonderful legislators have voted to spend the rest of the windfall on new pork construction projects! "Major Moves", they call it - it's a major bowel movement in reality.

We're also selling off timber rights in state forests at ridiculous low prices - it swells the state coffers in the short term (i.e. we haven't had a tax increase), but it's practically put the private timber companies out of business in the process, and again, there's been no reduction in state spending.

At least some politician somewhere (in NJ) had the guts to stand up and say, "Lookit! You want these services? We gotta pay for them - so taxes are going up. You don't like it? Tell the legislature to cut spending!"

As we've learned here in Indiana, the only thing worse than a "tax and spend" liberal Democrat is a "cut taxes and spend anyway" conservative Republican....

Be well,
Dave H.

Posted by: Dave H at July 22, 2006 10:17 AM

You make some good points, Dave. Certainly, I'd have to agree with you that neither of the major political parties has shown it has any inkling about fiscal discipline. We can both join the millions of others who are upset about that.

But I'm suprised you mentioned only two ways out of New Jersey's budget crisis:
The only options for a balanced budget were to sell state assets (the approach our Republican guv here in Hoosierdom took) or raise taxes.

There is a 3rd option: reducing spending. I know... everyone assumes that option's such a non-starter that it's not even worth mentioning. I never have understood why it couldn't happen (in principle).

I get the point that the politicians think it can't be done. But isn't their political calculating what got NJ into this situation to begin with?

New Jersey is not a poor state; in 2004, the Census Bureau ranked it 3rd in per captia income. The NJ income tax rates range from 1.4% to 8.97%. (For contrast, Indiana's is a flat 3.4% and Missouri's top rate is 6.0%.)

I have a friend who lives in NJ and he tells me property values are sky high: so it's safe guess property tax receipts are sky high too. Now I know that property taxes aren't revenues to the state government, but nonetheless they're presumably being used to provide government services at some level.

So it seems safe to say, given their high income tax rate on one of the highest per capita incomes in the country, that the fiscal managment of NJ is completely FUBAR.

They're just spending too much. They're "doing a California." They really do need detox.

Thanks for the comments -

Posted by: JdJ at July 22, 2006 03:16 PM

Hiya James:
You missed it! In the first paragraph I remarked that the legislature, which is the body in NJ and every other state that is responsible for spending, has shown no stomach to reduce it. Why not?

Because they haven't had to - everybody's been willing to live with the tax situation to date.

Nobody's called them to account, and they, like the same body in nearly every other state, have spent their way to a deficit. The solution proposed by the legislature to the recent crisis was essentially business as usual - no tax increase, run a few more bond issues, defer some retirement plans and cook the books to get by a bit longer.

I see the governor's action there as calling in the chips: OK, boys, we can spend as much as you want but we're going to make the citizenry pay for it!

That's the surest way I know of to get spending reduced - make the people actually pay the bills as they come due, and not defer the pain to the future. If this were done on a nationwide basis, I guarantee you'd see sweeping spending reductions after the next election cycle, and corresponding tax cuts. We're trying desperately to have our cake and eat it too, and in the long haul, it's going to lead to a fiscal catastrophe.

I'd go so far as to support a constitutional amendment barring *any* government borrowing except in time of declared war (to keep the Johnsons, Nixons and Bushs of this world from fudging). The pain this would cause would be immediate and enormous: and that's the only kind of pain that'll ever get us off this fiscal crack.

Corzine may have committed political suicide by taking this unpopular action, but in the long run he understands that there ain't no such thing as a free lunch. And for that, if nothing else, I commend him.

Be well,
Dave H.

Posted by: Dave H at July 23, 2006 11:09 PM

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