New Jersey demonstrates reality

Jon Corzine Florio July 1, 2006; Page A10 Nearly every state in the nation is celebrating the new fiscal year that begins on Monday with record tax revenues. The big exception is New Jersey, which is headed instead for what could be a government shutdown. The political showdown isn't between Republicans and Democrats, but is between Governor Jon Corzine and his fellow Democrats who control the state legislature. On Wednesday, Democrats cursed each other and, according to our eyewitness sources, came close to blows inside the capitol in Trenton. Mr. Corzine is now threatening a government shutdown if his own party doesn't bend to his proposal for a $1.5 billion tax increase. Remarkably, all of this intra-party feuding isn't over whether to raise taxes, merely over how. Mr. Corzine wants to raise the state sales tax to 7% from an already high 6%. Many Democrats in the legislature believe this is political suicide, especially with the Governor low in the polls. But somehow they've convinced themselves that voters will happily swallow new levies on payroll, tobacco, computer services and car rentals instead. Meanwhile, the one promise that Democrats made to voters in last year's election campaign -- lowering what are some of the highest property taxes in the country -- remains conspicuously unfulfilled. A new Quinnipiac poll finds that 47% of voters identify taxes as the biggest problem in the state -- the highest number for any issue the polling firm has ever found in New Jersey. The Garden State has raised taxes nearly every year since 2000 and nearly twice as much per resident as the next highest tax state. Yet, no surprise, Trenton still has the biggest budget crisis outside of the states ruined by Hurricane Katrina. This taxing binge hasn't balanced the budget because state expenditures have ballooned by $8 billion, or about 45%, in six years. Mr. Corzine is nonetheless sticking to his story that state schools and services are underfunded. The real New Jersey story is that a rising cost of living and taxes have spurred an exodus of businesses, high net worth individuals and working families. U.S. Census Bureau data indicate that, in 2004 alone, 60,000 more people left New Jersey than moved in. This outmigration led to a loss of $1 billion per year in the state's personal income, according to IRS statistics analyzed by the Manhattan Institute. Thus New Jersey finds itself in a spiral down: Taxes are raised, more taxpayers flee so the tax base shrinks, the politicians raise taxes again, and the cycle repeats itself. Political history is also repeating itself here. Sixteen years ago Jim Florio was elected Governor and pushed through the largest tax hike in Jersey history. The economy sputtered, and Mr. Florio was dumped by voters in favor of Republican Christine Todd Whitman and a veto-proof GOP legislature. Undeterred, Mr. Corzine is testing the same tax, spend and don't elect theory. Which is why things are getting ugly among Democrats in Trenton. URL for this article: http://online.wsj.com/article/SB115171330801595955.html Copyright 2006 Dow Jones & Company, Inc. All Rights Reserved