The Star-Ledger

Raise Taxes

The Star-Ledger — Sunday, March 30, 2003

EDITORIAL

A few days ago, a coalition of groups that form the base of the Democratic Party asked the governor to support a $1 billion increase in the income tax. It would fall on the most affluent 2 percent, those with incomes over $400,000.

But the governor remains adamantly opposed. He was an ambitious young mayor when Jim Florio lost his re-election bid in 1993, and the lesson he drew is that raising taxes is political suicide.

"I've talked to him about this until I'm blue in the face," says Speaker Albio Sires. "He says we should remember what happened to Florio."

That is the box that New Jersey is stuck in right now. James E. McGreevey has presented a budget that is harsher than it needs to be because he is terrified about the political fallout -- real or imagined -- of a carefully targeted increase in the income tax.

He began with a $4 billion gap, and there is no way to close that without imposing real pain. This budget would revoke important health benefits for the working poor. It would cut aid to needy schools that are finally showing signs of improvement. It would devastate the arts community with unprecedented cuts. It would make modest improvements in child protection, when ambitious change is so obviously needed. And it would drive up property taxes and college tuitions by choking aid to education.

The governor, who has condemned Christie Whitman so vehemently for relying on accounting gimmicks, is now playing the same game. He would underfund pension programs. He would delay school payments by a few weeks so the costs are pushed into the next fiscal year. And he banks on federal aid that is purely fictional. Expect another crisis next year.

Facing this crisis, the governor should be doing all he can to soften the blow. But he is sticking to his plan, protecting his political flank at a time when the state needs principled leadership with some backbone.

Across the aisle, Republicans are content to jeer from the cheap seats. After spending a decade digging the state into a fiscal hole, they are not even trying to help McGreevey dig out of it. Where is their alternative plan?

It is a sad state of affairs. Measured against McGreevey, former governors of this state seem like giants. Tom Kean and Brendan Byrne faced budget crises, and both increased income taxes during their first terms as part of tough austerity plans. Both won re-election by explaining why such a drastic move was required.

As for Florio's defeat, the role taxes played has taken on a mythic quality. He lost by less than 1 percentage point, and the gun lobby had something to do with that. And his tax increase fell on the middle class, while this year's proposals are targeted precisely at the wealthiest earners.

Sires wants to focus the increase on families earning more than $1 million a year. It would raise $425 million during the first year, enough to soften the blow of the worst budget cuts in McGreevey's plan. It would be enough to restore the cuts aimed at the working poor, the arts community and higher education, while leaving a few hundred million dollars for public schools.

Sires believes the Assembly would support that if McGreevey signaled support. Senate passage would be more difficult. But it is a fight that McGreevey cannot win if he sits on the sidelines.

Sen. Joseph Kyrillos, the Republican chairman, argues that increasing the income tax will drive millionaires to move their official residences to states like Florida, where there is no income tax. Yes, some may move. But federal tax data shows there was no significant movement out of New Jersey when Florio increased taxes. Most wealthy earners have jobs that root them to the area, and a marginal increase in state taxes is not significant enough to disrupt that. Retirees with two homes are smart enough to make Florida the official residence even without an increase.

In the end, this is a question about New Jersey's priorities. The state is in a real crisis. It is not class warfare to seek aid from those in the best position to help, especially when the increase would take back only a portion of the windfall they are receiving in federal tax cuts. When all state and local taxes are considered, poor New Jerseyans now pay a higher portion of income in taxes than the wealthy do.

Last year, McGreevey fought hard to increase business taxes by about $1 billion. It did not solve the problem, and painful cuts were part of the package. But it was easier to accept those cuts when one could see the governor was doing all he could to spread the pain. He challenged critics to suggest something better, and he carried the day.

Things are different this year. The coalition seeking a tax increase includes churches, school boards, unions and a range of citizen lobby groups. They have called the governor's bluff by putting their own plan on the table. Now they and the rest of us wait for him to show his cards.

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