Op-Ed: Tax Cuts: The Wrong Prescription for What Ails New Jersey’s Economy
This op-ed appeared in the February 4, 2014 edition of the Bergen Record.
Despite making other topics the centerpiece of the State of the State and the Inaugural address, the governor is doubling-down on his efforts to cut taxes based on a misguided belief that New Jersey’s taxes are getting in the way of economic growth.
There are several problems with this approach.
First, the state literally can’t afford another tax cut right now, as many lawmakers have noted. Without a healthier economy that produces more jobs, there simply isn’t enough revenue to make tax cuts without jeopardizing critical investments in our schools and communities.
More importantly, there’s just no proof that cutting taxes would boost the economy – much like there’s no proof that high tax rates are the cause of any state’s economic woes. But failing to nurture and invest in the state’s schools, transportation network and other services – a task made much more difficult when taxes are cut – does indeed do real, lasting damage to a state’s economy. In fact, we don’t even need to look beyond our own borders to see how that plays out because in our state:
• Unemployment remains stubbornly high and job growth trails our neighboring states and the nation. We’ve recovered just 44 percent of the jobs lost during the recession (compared to 156 percent in New York and 87 percent nationwide).
• The ranks of the long-term jobless have swollen as the economy has sputtered. New Jersey’s workforce includes a greater share of people out of work for at least six months than all other states.
• More and more out-of-work New Jerseyans are giving up looking for a job and dropping out of the labor force, which has shrunk by 134,300 in the last year alone.
• Only Florida has a higher rate of homeowners facing foreclosure.
• Our overall fiscal health is poor. New Jersey was recently ranked dead last for fiscal condition by the conservative Mercatus Center, it has the third-lowest credit rating of the states and recent budgets have been “balanced” in name only since they’ve relied heavily on accounting gimmicks and dedicated-fund raids to plug holes.
The governor acknowledged the gravity of our financial situation in his State of the State address, when he recklessly suggested that the state might not pay its pension bill next year.
The sensible conclusion to draw from the governor’s pension surprise is simple: If New Jersey cannot afford to keep its promises to retirees, it surely cannot afford to even consider – let alone enact – another tax cut.
Corporate tax cuts and subsidies have been the governor’s only efforts to spur job creation and economic recovery for the past four years, but where has this gotten us? Not very far.
Billions of dollars have gone out the door as the state has aggressively pursued tax credits in the name of job retention or creation and businesses have also enjoyed about $1 billion in tax cuts over three years. Yet once again, the promises of tax cuts rejuvenating the economy, creating good jobs and increasing tax collections have been found to be false. To continue going down this path would be both foolish and harmful.
Instead, policymakers should pursue what the governor in his State of the State deemed “exciting opportunities for investment in our state,” including making public schools strong, modernizing our infrastructure, lowering the cost of higher education and ensuring more New Jerseyans have access to quality, affordable health care.
Few could argue about the wisdom of making those investments that, in the governor’s words, “could make New Jersey an even greater place.” Yet those are precisely the investments that cannot be made if the governor and legislature instead focus on depleting the state’s capacity to invest by enacting a tax cut.
The governor has laid out the choice: a tax cut or a greater New Jersey. We vote for a greater New Jersey.
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