The New Jersey Assembly voted on Tuesday (28 June) for a 23 cent per gallon gas tax increase, coupled with a one percent reduction in the state sales tax. Â This deal between the Democrat-controlled Assembly and Republican Governor Chris Christie would reduce the overall tax burden on New Jersey residents. Â The state has among the highest taxes in the nation.
Net decrease in taxation
The deal would increase motor fuel taxes on 31 June, just in time to avert a collapse of the stateâ€™s Transportation Trust Fund. Â For the remainder of 2016, it would raise almost $500 million from the stateâ€™s drivers. Â In 2017, the sales tax would be decreased by one half percent. Â In 2017, residents would pay $700 million less in sales tax, offset by $900 million in gasoline cost increases. Â In the short term, New Jerseyans pay more tax.Â In 2018, the situation reverses. Â Sales tax will be $1.25 billion less than today, but the gas tax will $.9 billion more, a net saving for New Jerseyans overall.
Lower income New Jerseyans benefit
A gasoline tax is regressive. Â It burdens those with less income, who spend a larger proportion of their income on gasoline. Â At the ends of the economic spectrum, the poorest donâ€™t drive.Â The richest spend a smaller proportion of their income on fuel.
Sales tax is also regressive. Â As we move up the economic scale, spending changes from goods to services with proportionally less going to sales tax. Â If both the sales tax and sales tax plans go into effect, lower income New Jerseyans will benefit most. Â There are some other provisions for retirement income and estate tax that would make Florida less attractive for older New Jerseyans, but that consideration is relatively minor in the overall scheme.
Depends on the Republican in the Senate
The gas and sales tax plan is not yet a done deal. Â The state Senate needs to approve it.Â For various reasons, Republicans oppose the deal even though it is a net tax reduction in the state. Â Political posturing aside, it may be that they believe that the gas tax increase is permanent, but the sales tax decrease is not.
If the New Jersey legislature cannot make a deal, any deal, it may be time for New Jerseyans to think about changing the whole crew. Â Chris Christie will be gone in 2018.Â Not since 1990 has a NJ governor has served a full second term.
We need to pay for what weâ€™ve got
There is general agreement that New Jerseyâ€™s roads need repair. Â Whether a billion a year is sufficient or too little is a matter of argument. Â New Jerseyans also agree that the overall tax burden in NJ is high. Â Whether the state budget can withstand a decrease in revenue overall is also up for debate. Â Christieâ€™s efforts to contain costs with the stateâ€™s unions has resulted in much rancor.
New Jerseyâ€™s position as a high tax state would be worth it, if it bought us services and infrastructure that caused large employers to want to be here. Â With them would come high paying jobs, for which New Jerseyans would gladly pay higher taxes. Â Look across the river in Manhattan: high taxes, but even higher wages. Â New Jersey was the center of the telecommunications industry for a hundred years. Â Verizon and AT&T moved out. Â Similarly, the state was the center of the pharmaceutical industry. Â The list of companies that either moved out, or were no longer financially strong enough to resist acquisition is too long to count. Â Looking further back, the industrial hub that was New Jersey has declined to almost zero. Â No more automobile or airplane production. Â NJTransit, the nationâ€™s largest statewide commuter rail system was unable to use its clout to get a railcar factory built here.
The problem is not the taxes.Â Itâ€™s how they are spent. Â If New Jersey spent it tax revenue on things that made the state a more attractive place to live and do business, that would be satisfactory.Â That requires a plan.Â A plan requires an objective.Â We seem to be lacking a goal.Â There are many noble goals, each with benefits and costs.
New Jersey could position itself as the best bedroom community for New York and Philadelphia.Â That would require spending on better roads, commuter rail (including parking), and lower income tax rates than our neighbors.Â This approach benefits Northern New Jersey most and leaves out South Jersey almost altogether.Â That is a problem that would need to be settled.
New Jersey, home to Thomas Edison and the Bell System, was once the technology center of the United States.Â It could be again.Â The weather is not as nice as California, but better than Boston.Â What it lacks is a university and research infrastructure to support it.Â San Francisco has Stanford and Berkeley.Â Boston has MIT and Harvard.Â New Jersey has Princeton and not much else.Â A commitment to technology would take a large commitment to education.Â Texas has done it.Â UT Austin, a relatively young land-grant university, is now a leader in academics and research.
We bulldozed many plants as business moved south toward lower labor rates.Â The sites were designated brownfield sites.Â Now they are untouchable for environmental reasons.Â If we were to change out liability laws, allow these sites to be paved over and let bygones be bygones, we would have factory sites close to residential areas ready for work.
An aggressive approach to the stateâ€™s gross receipts tax would do much to lure corporate headquarters back to New Jersey.Â We could then compete with relatively regulation-free states like Nevada, or offshore tax havens like Ireland.Â That requires an even-handed approach, giving tax breaks to companies already here, not just offering deals to companies that move.
Or no plan at all
We can continue down the road weâ€™re on, making more regulation on the business already here and taxing our residents. Â Each of these choices seems good at the time, but the long term aggregated effect will eventually leave us with lots of expensive infrastructure and no one to pay for it. Â We need to pick a path and march down it briskly.