Despite three campaign appearances by President Obama, Governor John Corzine lost his gubernatorial seat in New Jersey to GOP challenger Chris Christie last night. Exit polls showed that the top two concerns for New Jersey voters were the economy and the state’s high property taxes.
How high are those property taxes? For the year 2008, New Jersey holds the distinction of the state with both the highest property taxes per capita and the worst business tax climate in the nation, according to the Tax Foundation (note: report will download as a pdf). New Jersey residents also ranked highest in the nation last year with respect to state and local taxes as a percentage of income. New Jersey taxpayers paid a whopping 11.8% of income in state and local taxes, more than 2% above the national average.
Of course, this is nothing new for New Jersey. Residents have generally put up with higher taxes because of what they thought it bought them: some of the best schools in the country, for example. But in the midst of a bad economy, that has changed. New Jersey residents increasingly believe that higher taxes buy them very little (ask Robert Flach) except possibly more corruption.
Governor (for now) John Corzine became the first New Jersey governor to lose a re-election bid since 1993, when then Governor Jim Florio lost to an up and coming GOP challenger Christie Todd Whitman. Whitman, who made cutting taxes a priority in her campaign, later bit at an offer by President Bush clearly intended to knock her out of the public eye and into obscurity.
So what does that mean for New Jersey residents? Luckily for them, they can only go down from here.
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When New Jersey Governor Corzine and the legislature were scrambling to find ways to fill the holes in their budget, it was clear that they wanted to utilize “sin” or “vice” taxes as much as possible. Unlike income taxes which affect everyone, sin taxes only affect people who engage in certain behaviors. The behaviors considered “sinful” vary from state to state but generally include drinking and smoking. New Jersey, however, added another vice to the list: gambling.
Yes, gambling. But not the Atlantic City quarter slots kind of gambling (yes, I said quarter slots can you tell that I’m not a risk taker?).
A more sinful, sinister kind of gambling: playing the lottery.
Beginning in 2009, New Jersey will begin taxing lottery winnings – something the state has never done before – at a maximum rate of almost 11%. I know what you’re thinking: “taxgirl, beginning in 2009? Aren’t you a little late to the party? It’s July.”
Yes, I know it’s July. The law took effect July 1 but lottery winners are taxed on the winnings retroactively to January 1. That has some lottery winners furious.
But players dollar scratch cards can relax a little: only prizes of more than $10,000 will be affected. Tax rates will begin at 1.4% and increase to 10.8% depending on the amount of winnings. Other tax provisions based on filing status, etc., will apply.
While lottery winners are outraged over the new law, including recent winners of the Mega Millions jackpot, the state is fairly confident that the law will stay “as is.” The reality is that lottery winners make up a small percentage of the state’s voters taxpayers and it’s not a cause that many citizens will rally around. The state is betting (pun completely intended) that a tax increase on the beneficiaries of what’s considered a stroke of luck will not earn much sympathy from taxpayers who are already concerned about their own tax burdens.
What do you think? Fair or no?
When NJ announced its tax amnesty program, it had high hopes. With sinking revenues and a gaping hole in the budget, Governor Corzine hoped that the amnesty program would give the state some much needed relief. His lofty goal? $200 million in just six weeks.
Barely two weeks into the amnesty program, the state met its goal. At the end of the program, the state had brought in an amazing $617 million.
Take a moment and let that sink in. That was three times the goal that many didn’t even expect to meet.
Taxpayers were offered the chance to set things right and they did. No chasing. No collections efforts. No heavy-handed pursuit. Just the chance to pay back taxes, no questions asked, no penalties and reduced interest. And people responded.
I am a big fan of amnesty programs. Many times, taxpayers who get behind are just overwhelmed at the enormity of fixing it. Why make it hard? Why not say just pay us what you owe plus a little interest and let’s move on? NJ did and look what happened.
I’m not saying give cheats a free pass – and neither was NJ. Taxpayers who were under criminal investigation or facing charges for tax evasion were not able to participate.
So what will NJ do with its extra revenue? Offer property tax relief for folks who were paying their taxes: the legislature is now working to put taxpayer rebates that had been previously been cut back into the budget.
Good for NJ (and no, you won’t hear me say that often).
NJ is not exactly known for affordable living – especially when it comes to taxes. It appears that will only get worse in 2009 as lawmakers scramble to close holes in the budget. The state budget currently sits at $28.6 billion, about $4 billion less than last year.
Faced with flat revenues, the legislature has made some reductions in spending. Despite resistance from state unions, cuts will be made for public employees as part of a deal struck earlier this year. Although by cuts, I really mean “delayed pay raise.” Additionally, state aid to local governments will be reduced.
But here’s where the bleeding begins. Since the budget must balance, the drop in revenue has to be made up somehow. And while cuts have been made, it isn’t enough to fill the gap. What does this mean? Taxes are going up.
There’s no doubt that the income tax increases will make an impact. They are not across the board: the current proposal would raise taxes on incomes above $400,000. Worse, it would eliminate the property tax deduction for those making more than $150,000 and eliminate property tax rebate checks for residents other than senior citizens and the disabled. Considering that NJ has one of the highest property tax rates in the nation, that is a significant bite.
NJ will also lose its appeal as a cheap place to buy wine and hard liquor for Pennsylvanians and other neighboring states: excise taxes on wine and hard liquor will go up.
And just when residents of NJ thought they couldn’t possibly pay anymore to buy cigarettes, they find out they’re wrong. Levies on cigarettes will also rise.
Interestingly, this budget looks a lot like the pre-Corzine budget in 2004. I wonder how much it will affect the gubernatorial race this year.
