NJ Shutdown: Day 5

And on the fifth day, the casino floors shut down. Such is the political calculations of Gov. Corzine and legislative Democrats who are bickering over just what taxes to increase to cover the 9% increase in state spending that they've arranged for New Jersey taxpayers.

New Jersey taxpayers will pay an even higher tax burden based on the simple fact that Trenton is doing absolutely nothing to control state spending. In fact, Corzine's budget actually accelerates state spending and ratchets up costs going forward. Businesses will react to the additional tax burden by shifting their business elsewhere. Consumers and property owners will also seek more favorable tax climates, leaving those who are left with an even higher bill to pay.

So what does the state shutdown actually mean:

That means schools for the disabled will be closed. Motorists seeking registration and license renewals will be turned away. State parks, beaches and historic sites will be closed. Lottery tickets will not be sold. More than 45,000 state workers will remain out of work. State courts will remain closed.

Thousands of gamblers flocking to Atlantic City's 12 casinos will find all gaming halls closed for the first time in history because of a lack of state inspectors. A last-ditch effort by the casino industry to seek a court order to avert the shutdown was unsuccessful.

Despite that pressure -- and a personal plea from Corzine -- the Assembly refused to budge on the governor's demand for tax increases.

"We cannot make it any clearer today, the sales tax increase is dead in the General Assembly," Speaker Joseph Roberts, D-Camden, said Tuesday after a four-hour meeting with ruling Democrats. Fifteen of the 49 Democrats in the Assembly said they would vote for the tax increase, Roberts said.

That has Assembly Democrats looking for ways to replace the $1.1 billion expected to be collected by raising the sales tax from 6 percent to 7 percent. Some of those plans include adding the sales tax to exempt goods and services, such as computer consulting and furs. Raising the income tax on wealthy residents also is being discussed. One plan would have people earning $200,000 to $500,000 a year pay 1 percent more in state income tax, which would give the state an estimated $356 million.

UPDATE:
Still no change in the state's shutdown status. Casinos are estimating that their losses will be $20 million per day for the duration of the state's budget fiasco. That's $20 million in real money that real businesses would otherwise be making and it will affect the bottom line of many publicly traded companies as well.

Corzine is calling on the legislature to present an acceptable state budget, but any such budget has to include his tax hikes and his state spending hikes. Where's fiscal responsibility?

The Star Ledger thinks that the sales tax hike is fiscally responsible.

Corzine was elected, at least in part, to change that. His Wall Street résumé lent credibility to his promise to dismantle the state's rotting fiscal infrastructure and replace it with a solid foundation. His proposal for a one-cent increase in the sales tax that will provide the state with a reliable, recurring revenue source is a step in the right direction. Combined with spending cuts, it could help restore financial stability.

The problem is that the Ledger ignores a basic fact about this budget. It calls for numerous tax hikes, including for the sales tax, and no across the board spending cuts that will result in structural changes to the budget. In other words, the state will be on the hook for more state spending in years to come and the sales tax will not cover those expenses. This isn't fiscal prudence, but irresponsibility of the highest order.

Don Surber would like New Jersey to know that West Virginia ended the year with a sizeable surplus, but I'd suggest that they put that money in a lockbox. Quickly. The Sopranos isn't set in New Jersey without good reason. And the NJ legislature isn't much better than Tony and the crew.

UPDATE:
Ed Driscoll calls the situation in Trenton the Mob That Whacked New Jersey. True. Very true.

Scared Monkeys also notes what is going on in New Jersey. It's curious that Corzine says that the shutdown is deplorable and yet takes no responsibility for having the ability to avoid this trumped up crisis in the first place. The Legislature could have agreed to carry over the FY 2005-2006 budget until the new budget was in place. That way spending and revenue programs would be able to continue functioning until the new budget was in place. That possibility was never considered.

Technorati: corzine, new jersey, budget crisis, fiscal folly.