Governor Chris Christie told Bloomberg News today that he intends to lower New Jersey’s income-tax rates within two years, to make the State more competitive with its nearest neighbors.
In an interview with Bloomberg Surveillance host Tom Keene, according to this report, Christie pointed out that New Jersey’s highest income-tax rate, at 9 percent, is three times that of Pennsylvania.
You can’t be competitive when your top marginal rate is three times your neighbor.
To accomplish this, Christie pledged to makie further reductions in State spending, and acknowledged that he would have to cut many programs that might be called “worthwhile” in order to achieve this goal. He also discussed his current pension-reform proposals, though technically that would not affect the State’s operating budget because pensions are currently paid out of a dedicated fund (to which Christie declined to pay anything this past fiscal year).
Separately the State treasury reported that revenue collections have thus far fallen 2.5 percent below expectations. If that trend continues, and nothing rectifies it, it will contribute about $0.7 billion to a year-end deficit.
New Jersey established its income tax in 1976, after the Supreme Court of New Jersey, on a “motion in aid of plaintiff’s rights” in the wake of Robinson v. Cahill, effectively shut the schools down until the legislature would invent a “more equitable” method of funding public schools. (This prompted then-Justice Worrell Mountain to observe that the Supreme Court was now, for the first time, telling the legislature what to tax and how to tax it, in violation of separation-of-powers.)
Technically, the income tax exists for one purpose only: to fund property-tax rebates. But governors have always used the income tax to fund general spending in the State.
Governor Christine Todd Whitman gained great popularity by cutting New Jersey’s income-tax rates in a year when President Bill Clinton raised them (and obtained that authority only after his Vice President cast a tie-breaking vote in the Senate, and when one Representative, Marjorie Margolies-Mezvinsky of Pennsylvania, provided the deciding vote in the House. That congresswoman lost her seat in the memorable Election of 1994.) But Whitman also floated a bond issue to make an annual pension-fund payment, instead of making that payment out of current funds.
Christie’s old primary opponent, Steve Lonegan, last spring proposed an alternative budget that would have funded the pension, increased school aid instead of cutting it, and still have come in at about $4 billion less than the budget passed this summer.
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