Christie and Greenwald are both right about taxes

27 Mar

Assemblyman Lou Greenwald, chairman of the Budget Committee, wants to give municipalities the power to impose taxes to make up for the reduction in state aid next year.  Governor Christie rejected Greenwald’s proposal.  The governor does not want more taxes levied on the people of New Jersey, claiming they are overtaxed and that spending must be reduced instead to close next year’s $11 billion budget gap.

Christie and Greenwald are both right.  New Jerseyans are overtaxed and should not have to pay any more taxes.  Both state and local governments must reduce their spending to balance expenses with revenues.  However, Greenwald’s proposal is consistent with a key conservative principle—decentralization.  Local institutions should be supported by local resources—a proposal I have been advocating for several decades.  In fact, Greenwald’s initiative should be embraced unequivocally by fiscal conservatives—with a major caveat.

Governor Christie should embrace Assemblyman’s proposal in exchange for the abolition of the state income tax and a reduction in the sales tax.   The State of New Jersey would then use the revenue it raises from the lower sales tax (a 4% rate) and other fees and to pay for its annual expenses.  The transition from the status quo to an income tax free New Jersey with a lower state sales tax could be accomplished over the next four to six years.  New Jersey then would become one of the best places in the country to do business and work.

Municipalities would then have to raise the revenue from whatever sources,–e.g., payroll tax, sales tax, fees, etc.–they decide to pay for their schools, police, fire and other services.  In short, municipalities would then have to be managed super efficiently because there would be no dollars flowing from the state to help pay for their expenses.

If wealthy communities like Ridgewood, Rumson, Short Hills, Bedminster and others want to spend more on local services, they should be allowed to under our democracy.  If residents become upset with the level of local taxes, they would then be able to “storm” city hall and demand tax relief and less spending.  From a practical point of view, it is easier complaining to local officials than it is going to Trenton to lobby the legislature.

As far as the low income urban centers are concerned, Newark, Paterson, Camden, etc., it is time they become financially independent.  That’s why the transition to financial autonomy in New Jersey’s cities may take a couple of years longer.  But unless the commitment is made, the cities will be the wards of the state and a burden on all suburban taxpayers in perpetuity.

It is time to end the redistribution of income in New Jersey and become a model for the nation.

Assemblyman Greenwald presumably wants to retain the state income tax and the 7% sales tax and allow more taxes to be levied on New Jerseyans. That is unacceptable.   Big government types like Greenwald and others in the legislature want to keep on spending by using state taxes and now more local taxes to perpetuate the status quo.

The failure of the welfare state is all around us.  Now is the time for Christie and Greenwald to get together and enact the freedom agenda for New Jersey—no state income tax and a lower state sales tax.

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