The 8% Solution: A Plan to Share the Burden of Balancing the Next State Budget

By Jon Shure

“Trenton, We Have a Problem”

The process of fashioning the New Jersey state budget this year was nothing short of traumatic. As revenues plunged far below expectations, policy makers found themselves searching for ways to put the budget into balance. Major actions taken included increasing the tax on cigarettes, closing loopholes in the Corporate Business Tax, borrowing against a portion of the state’s anticipated tobacco settlement funds, freezing local and school aid and-last but certainly not least-cutting spending for many programs and freezing spending on others.

With planning now underway for the next budget-Fiscal Year 2004-there is every indication that things will be just as tight as they were this year. According to press reports, the state could have a shortfall of more than $4 billion. And plugging that gap could well be even more difficult because so many of the fixes used in the current budget were one-shot in nature and won’t be available next year.

This situation is not in the best interests of the men, women and children for whom state programs are an important part of the social safety net. And that means it is not in the best interests of the state as a whole. We are only as strong as our weakest citizens.

With a backlog of policy measures that were still waiting to be undertaken when the state budget was flush, New Jersey can ill afford another round of deep cuts. There is a need to find alternatives to budget actions that threaten to diminish the quality of education, health care, housing assistance, environmental protection and other important services. With that in mind, New Jersey Policy Perspective has been researching the potential impact of a temporary, targeted increase in the state income tax for the highest income households in the state.

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