Politics & Government

By the Numbers: Analyzing New Jersey's Tax and Budget Growth

Property taxes dwarf state's major taxes; combined state-federal spending hits record $49 billion.

For the past three months, Republican Governor Chris Christie and Democratic legislative leaders have been trading charges over their rival plans to cut income and property taxes, over the governor’s claim that he has cut billions in state spending, and over the Christie administration’s projections that revenues will come in 7.5 percent higher next year despite $345 million in planned corporate and income tax cuts.    

Publicly, the biggest debate has been over whether to cut property taxes or income taxes, with polls consistently showing that New Jerseyans would prefer a property tax cut. It’s not surprising: The $26 billion that New Jerseyans will pay in property taxes next year is more than the total of state income taxes, sales taxes, corporate income taxes, inheritance taxes, gas taxes, motor vehicle fees, cigarette taxes, and liquor taxes combined. Since 1999, property taxes have grown 50 percent faster than income and sales taxes. 

But just as important is the question of revenue projections. Last year, Christie and state Treasurer Andrew Sidamon-Eristoff were conservative in their revenue estimates, rejecting a Democratic budget bill that anticipated an additional $500 million in revenue to fund increased school aid and other programs. Christie and Sidamon-Eristoff were proved right, as revenues this year lag about $100 million below administration forecasts -- and $600 million below what the Democrats wanted to send.

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This year, however, Christie and the Democrats are equally bullish on revenue growth: Christie anticipates using $180 million in revenue growth this year and $1.4 billion by Fiscal Year 2016 to pay for his promised 10 percent income tax cut. Democratic Senate President Stephen Sweeney (D-Gloucester) and Assembly Majority Leader Lou Greenwald (D-Camden) are planning to divert the same $1.4 billion toward their 10 percent and 20 percent property tax credits on the income tax.

A bipartisan team of high-ranking former state government officials warns in its Facing Our Futurereport that New Jersey cannot afford any of the proposed tax cut plans because of future spending needs. Meanwhile, to the chagrin of Democrats, Christie has been campaigning across the country, claiming that he cut billions of dollars in state spending

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What is the truth? This package of charts, dating back 14 years, provide perspective on some of the major spending and revenue issues in the budget.

When governors and legislators talk about the state budget, they are referring to the $28 billion to $33 billion raised each year through state taxes. But the budget they approve by June 30 each year also includes $8 billion to $13 billion in federal aid -- New Jersey’s share of various programs approved by Congress -- and $4.5 billion to $6.5 billion in “other state revenue.” This “other state revenue” is mainly Transportation Trust Fund money for highway and mass transit projects that comes out of the gas tax and toll revenues, plus the hundreds of fines and fees paid by citizens and businesses that are supposed to be dedicated to specific purposes, but that are often diverted to balance the budget as needed. With federal aid and “other state revenue” added in, New Jersey’s annual state spending is actually in the $44 billion to $49 billion range.

So how does total state spending under Christie compare with past years? The total spending Christie has proposed for Fiscal Year 2013 is actually $49.185 billion -- the highest combined state-federal budget in history of New Jersey and a whopping $1.6 billion more than the previous record of $47.556 billion set under his liberal Democratic predecessor, Jon Corzine, in Fiscal Year 2008, as the state was lurching into the Great Recession.

What is Christie’s overall record on cutting total state spending? In Christie’s first budget year (FY2011), total state spending was $45.941 billion -- a $620 million reduction over the previous year, when both Corzine and Christie had made cuts to balance the budget in the face of declining state revenues. State tax revenue actually grew by more than $350 million that year, but Christie had to make up for a $1.2 billion reduction in federal stimulus aid provided by the Obama administration that went primarily to school aid. Christie balanced his budget by cutting school aid by $850 million that year.

In Christie’s second budget, total state spending this year (FY2012) is projected to rise almost $850 million to $46.790 billion -- the third-highest total in state history after Corzine’s FY2008 budget.

Christie isn’t the first governor to ignore total state spending figures when discussing his fiscal record. When Corzine said during his losing reelection campaign that he cut the state budget from $33.6 billion in his second year to $30.8 billion in his third year to $29.8 billion in his fourth year, he did not mention that federal aid -- particularly Obama’s federal stimulus money – was increasing by almost $3 billion at the same time. Thus, the actual cut in combined state-federal spending was actually just under $1 billion – just over 2 percent of the total budget.

From the end of the administration of Republican Gov. Christine Todd Whitman through the second year of the Democratic Corzine administration, state tax revenue grew every year from less than $20 billion in FY2000 to more than $33.6 billion in FY2008, when the Great Recession hit.

This eight-year revenue increase represented not only economic growth, but also a major corporate tax increase and a hike in the top income tax rate from 6.4 percent to 8.97 percent for “half-millionaires” by Democratic Gov. Jim McGreevey, followed by an increase in the sales tax from 6 percent to 7 percent by Gov. Corzine. When the recession hit, Corzine imposed the 8.97 percent rate on those making $400,000, increased the rate to 10.25 percent for those making $500,000, and added a top bracket of 10.75 percent for those making $1 million or more. Nevertheless, state revenue plummeted from $33.6 billion in FY2008 to $30.8 billion in FY2009 to a low of $28.9 billion in FY2010, Corzine’s last year.

Under Christie, state revenue has increased each year to $29.283 billion in FY2011, to $29.691 billion this year, and to an anticipated $31.858 billion next year -- despite two years of corporate tax cuts totaling $370 million in lost revenue and the anticipated $180 million loss in income tax revenue under what Christie hopes will be the first stage of his planned 10 percent income tax cut.

Read the full story in NJ Spotlight by clicking here.

NJ Spotlight is an online news service providing insight and information on issues critical to New Jersey.


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