It costs far more to administer the program than it actually pays out. In fact, nearly half the money for the program is eaten up in costs and doesn't end up in the hands of the taxpayers:
Cutting property tax rebates: The checks — more than $1,000 for most North Jersey homeowners — may be a prime candidate for the budget ax. The rebate program costs about $1.6 billion to administer but only about $700 million is required to be spent on rebate checks, according to a 2007 constitutional dedication of the state sales tax. Corzine could take away rebates from all but seniors and have about $1 billion in savings — or nearly a quarter of what he has to find in reductions. However, a state official who has been briefed on the budget said Sunday that rebates won't be cut for homeowners making less than $50,000 a year. The official, who spoke on condition of anonymity, said rebates will be offered on a graduated scale. Rebates for senior citizens and the disabled also won't be slashed.That's quite a spread between the $1.6 to administer and the $700 required to be spent. Revenue projections in January showed that sales tax revenues were off significantly, but total sales tax revenues were $4 billion. 16% of that figure, or $666 million is dedicated to property tax relief under the sales and use tax law, which was amended a few years back when they hiked the tax from 6% to 7%. Since sales tax revenues are off significantly, the amount dedicated to property tax relief is also off, which means that the state has to either reduce the property tax rebate program, or find other places to cut. Or, raise taxes:
Hiking taxes: Corzine can help plug the budget hole, not just by cutting spending but by raising revenue. Although he has repeatedly said this is not the time to be hiking taxes because of the recession, he could decide to charge people who earn more than $250,000 annually an extra fee to bring in more revenue. Higher taxes on cigarettes, wine and liquor could also increase revenue without drawing the same attention as an increase in sales or property taxes.Never mind that those tax revenues will not match projections, and will actually hurt businesses in the state, including the state's 31 wineries, which employ hundreds across the state. Tax hikes will mean more money spent on tax and not as much on the actual beverage, cutting into sales. That will hurt the bottom lines of those wineries, and means that jobs are put at risk.
Of course, everyone by now should know that the sin taxes and other assorted obscure and one-shot fees are going to rise. Taxes and fees that aren't felt on a regular basis will be increased, because there isn't a constituency to fight against them. That includes the real estate transfer taxes, which are already seeing massive shortfalls in revenue due to the downturn in the economy. Raising those taxes will only make it more expensive to sell homes at a time when homes aren't selling.
Across the board, the state is seeing major revenue shortfalls, and the state's spending must be brought in line with the new reality (which is actually the old reality, which was ignored for years on end as long as revenues could be increased - now that revenues aren't increasing, everyone is scrambling to balance budgets).
The problem, of course, is that the state's structural deficits and spending have been out of whack for years on end, and trying to fix it all in one budget season means that there will be painful cuts. Had the state paid attention for the past decade, they would not be facing this situation, and property tax relief would have been a reality, instead of a ephemeral shell game of using one tax hike to cover for relief on another tax, even though spending remained at unsustainable levels.
That means cutting state jobs. Given that the state payroll has been bloated for years on end, this is long overdue. We'll see if the unions manage to stymie the workforce reductions and benefits adjustments to deal with the reality of reduced revenues.
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