Thursday, May 21, 2009

This Will Not End Well

New Jersey thinks that soaking the rich will help close the budget gap.

It wont.

The rich - the top 1% of income earners, provides nearly 50% of the gross income tax revenue. If they move out of the state, much like Tom Golisano did for neighboring New York, the revenues are going to take a serious hit regardless of the tax rate that New Jersey settles on.
In 2006, the most recent year complete tax data was compiled by the state Department of Treasury, just over 1 percent of income tax filers earned more than $500,000 — the top of New Jersey’s tax bracket. But that group paid almost half — $3.85 billion — of the total $9.08 billion raised by income taxes that year.

Now, Corzine is seeking to raise the rate on incomes over $500,000 from 8.97 percent to 10.25 percent. He is also creating a true millionaire’s tax bracket for incomes over $1 million with a levy of 10.75 percent

Corzine is seeking to carve out another new tax bracket and raise the rate for earnings between $400,000 and $500,000 to 8 percent from 6.37 percent. That 6.37 percent rate had been the state’s top rate before former Gov. Jim McGreevey instituted a “millionaires’ tax” of 8.97 percent on incomes over $500,000 in 2004.

If enacted, Corzine’s top-end tax rate would be one of the highest-in-the-nation; Hawaii earlier this year instituted an 11 percent tax rate on higher incomes to solve its own budget woes.

Corzine’s tax policy proposals drew praise from a coalition of liberal organizations that believes generating more tax revenue from the rich is a better choice than cutting additional programs and services out of the budget.
Right now, the state thinks that increasing the tax on those making over $400,000 will be the panacea for the outlandish state spending. It figures that the liberal groups are applauding the deal because they get the spending on their pet projects to continue unabated, regardless of the state's fiscal situation.

No one can afford this spending, including these groups. Those who are getting hit up with the tax hikes are in a position best able to avoid further taxation by moving out of the state. It's a pattern the state has seen for years on end, and which is why the tax burden on those who remain continues rising.

Spending must come under control and there's no one in Trenton who has the tenacity and the guts to stand up to the unions and the entrenched interests. Gov. Corzine clearly isn't the one to fix the state's problems as he's busy exacerbating the pension problems by repeatedly calling for the state and municipalities to shirk their pension payment obligations and by shifting current year expenses into next year's budget, despite the fact that the state can't balance this year's or next year's budget.

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