The future for New Jersey? Ever-higher taxes

As more of the state budget is dedicated to paying for pensions and other mandated programs, less goes to schools and roads, says Frayda Levin.

 The Mercatus Center, a think tank based at Virginia’s George Mason University, recently analyzed the government finances of all 50 states. New Jersey came in dead last.

Why does it matter that our state is in the absolute worst fiscal condition of any state in the union?

First, it portends ever higher taxes. New Jersey is already one of the highest-taxed states in the country, and the temptation will be great to increase the burden.

Higher taxes cause outward migration. Thus, the incentive to leave will only increase. That shrinks our tax base — placing an even greater tax burden on those who remain. It is a vicious cycle that, if continued, could turn New Jersey into Detroit  — pocked with abandoned homes and businesses.

Second, being the worst also means not just state budget challenges, but also a kind of civic poverty that adversely affects every area of our lives. Our homes lose value as more people move out. Businesses leave to avoid high taxes, taking jobs with them. Our children choose to start their lives and families elsewhere — meaning fewer grandchildren nearby to play with. Life becomes sad and dreary.

Third, government cannot function properly. Over time, a greater percentage of the state budget is dedicated to paying for pensions and other mandated programs such as Medicaid and unemployment. Less goes to our schools, roads, or even to ensuring that our water system is safe.

This happens slowly at first. Tax increases begin by targeting “only” the rich. Studies show that increasing the “millionaires’ tax” — on those earning more than $500,000 — would initially raise about $615 million a year. But that does not even begin to cover the $5 billion New Jersey needs to pay each year to fully fund our pension promises. And millionaires are mobile. They won’t stay in New Jersey to see their income and assets taken — particularly if no reform is in sight.

So with a millionaire tax falling short by more than $4 billion a year, who do you think will make up the difference? The Fund for New Jersey just released a report detailing some of what we could expect. It recommends $1.4 billion in higher sales taxes, $1.4 billion in higher income taxes, and an additional $1.3 billion from reversing tax cuts approved just last year.

Every New Jerseyan will thus face ever-higher taxes, which will result in a lower standard of living for our children. That will be combined with increasingly stressed government services such as schools and roads. New Jersey won’t be able to meet its pension obligations.

That’s why we must demand that our elected officials — especially those running for governor and the legislature this year — tell us their plans for reining in pension debt and government spending. If reform is not soon implemented, Greece might become the model for the Garden State. As one analyst put it about the troubled European nation: “The country’s overworked and exhausted workers (not to mention the 23 percent of the population that is unemployed) could be surprised by how things can get even worse if they keep electing irresponsible politicians.”

New Jersey taxpayers should expect more from our lawmakers. We have already tried solving our problems by making our citizens among the most heavily taxed in the country. It hasn’t worked. Now it’s time to try cutting spending to spare us from being worst in the nation.

Frayda Levin, a founder of the New Jersey chapter of Americans for Prosperity, lives in Morris County. FraydaLevy@gmail.com