Refinancing and Raising Taxes No Panacea

New Jersey, facing a huge cash crunch on everything from pension programs to the transportation trust fund, needs to figure a way out of its fiscal mess.

Gov. Corzine is reluctant to raise the gas tax, figuring that he's got to expend political capital elsewhere. So, he's going to turn to refinancing transportation debt. That's a short term trick that will only saddle taxpayers with far more debt over the life of those notes.

While each individual payment may be lower than the unrefinanced amount, you're going to have more payments over time - stretching out the payments. It might seem like a reasonable bargain now, but the time for gimmicks has long since passed. Raising the gas tax is the best way to fix the problem - along with retiring old debt - which in turn reduces interest payments, and reduces the costs to taxpayers over the long term.

Gimmickry got New Jersey into this mess, and it certainly wont get New Jersey out of the mess. New Jersey will simply face the same structural problems next year, and there will be one less way of dealing with the mess.

In other words, New Jersey's politicians play "Pay It Forward" on making the tough decisions hoping that someone else will bite the bullet and raise taxes or cut programs or any combination of actions that result in a balanced budget from a fiscal and structural point of view.

Then, you've got a bunch of enterprising New Jersey politicans who want to start taxing water.

The Senate Environment Committee released legislation that would create a new tax on anyone using public water, a proposal Gov. Jon S. Corzine said is worth considering.

The plan was praised by environmentalists and conservationists, who view the proposed tax as a way to preserve clean water and allow the state to better handle droughts.

The current plan doesn't even earmark the revenues for environmental conservation, but rather goes directly to the general fund. The politicians think that this will have only limited impact on taxpayers - the average taxpayer will only get hit with a $3.20 tax or as Robert G. Smith, D-Piscataway puts it, "It's a very tiny tax."

Lots of things start out as tiny taxes, but they grow and multiply. Politicians are creative when they need to obtain revenues, never caring to pare down the size of government, let alone control costs. And these taxes have a way of sticking around well past their intended usage - just look at the federal excise tax that on telephone service that was first introduced in 1898 to fund the Spanish American War. We're still paying it today - 3% of every phone bill.