Corzine’s sales tax increase rings up trouble for Dems

by Stephen D. Landfield
This column appears twice a month in NJ Jewish News.

It may be early summer, with school out and vacation season about to start, but as warm as it is, no place is hotter than Trenton. The annual dance known as “the passing of the budget” is under way and scheduled to come to an abrupt end on July 1, at least constitutionally, whether the politicians are still dancing or not.

The difference is that this year they are dancing to a different tune, thanks to a new governor. Unlike his predecessors, Gov. Jon Corzine insists that he won’t approve a budget that contains the usual sleight-of-hand tricks and one-time gimmicks. Even worse for Democratic lawmakers, who control both the state Senate and the Assembly, he’s talking tax increases, which they view as the fast track to electoral defeat.

For what it’s worth, they have reason to be scared. They face a proposed budget of $31 billion, which is $3 billion higher than last year; state spending can be funded only a few different ways. True, you can achieve some savings by cutting spending, as the Republicans now contend (although they didn’t do it either when they were in power), but the reality is that the state can fund a budget only by taxes — income, corporate, or sales.

Corzine, as part of his efforts to plug a $4.5 billion budget hole, has proposed an increase in the state sales tax rate from 6 to 7 percent, a move designed to generate an additional $1.1 billion in revenues. Assembly Democrats bitterly oppose the increase, but they may have no choice but to go along, as Corzine has been formulating plans to begin shutting down nonessential state services if there is no budget. Included in the initial list would be a closure of state parks and of casinos. They have until midnight Friday, June 30, to agree on a spending plan, although the state has gone beyond the July 1 date three times since 2002 without any dire consequences.

Corzine labels Assembly Democrats’ opposition to his proposed tax increase as fiscally irresponsible. And so it is, if it leads to the traditional ways the legislature has dealt with budget shortfalls: inflating revenue estimates, under-funding state pension contributions, or grabbing what are supposedly “dedicated” state funds — such as the tobacco settlement proceeds — for general revenue.

And yet Democrats have reason to fear Corzine’s insistence on a tax increase. Their very political skins are at risk. No one likes a tax increase. New Jersey has the dubious distinction of having the third-highest state and local tax burden in the country. While other states, such as Rhode Island and Arizona, have cut income and property taxes, we are in quite another situation. The state simply cannot continue to spend on programs it cannot afford.

Despite this, the public has very little support for Corzine’s solution. A June 16 Quinnipiac University poll found that 60 percent of those asked opposed the sales tax increase and only 34 percent approved of it.

Democratic representatives recall the revolt 16 years ago to Gov. Jim Florio’s tax increases. A year after Florio proposed a sales tax increase to 7 percent, the Democrats lost control of both houses of the legislature, and Republicans controlled state government for the next decade. Florio was defeated for reelection in 1993. The sales tax increase was repealed. The moral: Doing the right thing comes at a prohibitively high political cost.

We could argue that of all tax increases, one of the sales tax is the fairest. After all, it is based upon consumption. Those with more money to spend pay the greater share of the tax. We don’t tax necessities like food and clothing. And as The Star-Ledger has pointed out, if you want to purchase a large-ticket item and avoid the high taxes, buy it in an urban enterprise zone and you only pay half the rate. Plus, the state benefits from out-of-staters who make purchases in New Jersey.

And yet this state’s voters have little tolerance for elected representatives who raise our taxes. No matter how necessary the increase may be, we are unforgiving. It’s not an envious year to be a Democrat.