Seems New Jersey Governor Chris Christie will do or say just about anything to deliver on his reckless promise to cut personal income taxes. His latest strategy is grandstanding in a very public spotlight (he’s enjoying all sorts of media appearances this week and more speculation of a VP nod) in an effort to get his way, and get it now, at the expense of the poorest New Jerseyans.
Here’s a sketch of how the New Jersey tax cut debate drama has played out in recent months:
Despite early and legitimate criticism from some lawmakers that Christie’s budget depends on overly optimistic revenue projections, and despite legitimate concerns that the state cannot afford any tax cut this year, the Assembly and Senate both got on board with the tax-cutting governor. Specifically, each chamber offered up plans to cut property taxes for households with incomes under $250,000, and the Assembly included a millionaire’s tax to help fund their more generous property tax credit program.
At first, Governor Christie dismissed these alternative proposals (particularly the common sense and highly popular millionaire’s tax component, saying he’d rather “rearrange his sock drawer” than talk about it). But eventually he embraced the Senate version (which at this point had become his best chance to claim some victory on tax cuts) and struck a tentative compromise in May to deliver property tax cuts to households with incomes below $400,000.
Once again, though, revenue reality got in Christie’s way. Days later, the nonpartisan New Jersey Office of Legislative Services (OLS) estimated that New Jersey revenues would come in $1.3 billion behind the governor’s projections. This revelation gave Senate and Assembly Democrats pause and left many unsure, again, about supporting any tax cuts. Stories in the New York Times and Wall Street Journal explain Democrats’ concerns: Christie is banking on revenues to increase by 7.3 percent next year, yet average state revenue growth nationwide is only 4.1 percent, and, the Garden State’s current year revenues continue to lag.
Due to these concerns, the Senate and Assembly went around the Senate leader’s deal with the Governor and sent Christie a budget with a $183 million earmark for a tax cut, contingent on the state meeting revenue projections later in the year. The budget also includes restoring the state Earned Income Tax Credit (EITC), a tax break (PDF) for low- and moderate-income working families, from 20 back to 25 percent of the federal credit.
Governor Christie bristled at this (very sensible) plan. He vetoed the EITC increase and called lawmakers back to Trenton the week of July 4 and presented his so-called compromise – give him his expensive tax cut and he’ll give back a modest tax credit for the working poor.
In a smart and comprehensive editorial on Christie’s latest demands, the Newark Star-Ledger wrote:
He is holding the working poor families of this state hostage by refusing to restore the tax credit he took away from them two years ago unless Democrats yield.
The credit is worth about $50 million a year, a pittance in a budget of nearly $32 billion. But for a single mom with a few kids and a job working as a cashier, the state credit is worth about $500 a year. Combined with a federal credit five times that large, it makes a meaningful difference…
He will restore the credit, he says, only if Democrats agree to take the blind leap and commit to his larger tax cut now, before the revenue numbers come in. Be reckless, he says, or he will shoot the hostages.
His predictions for revenue growth are the most optimistic in the nation, despite the fact the state economy is lagging behind other states. No one but his own obedient Department of Treasury believes this nonsense, including the nonpartisan Office of Legislative Services and the Wall Street bond rating agencies.
So why not wait and see? If the tax cut isn’t scheduled to take effect until 2013 anyway, what does that simple prudence cost?
Just one thing: It would deny Christie a political win in advance of the party convention in August…. Christie scores a few political points. And the working poor absorbed one more of his blows.
The experts at New Jersey Policy Perspective also endorse patience and explain that the state is already moving money around and deficit-spending to make the already frayed ends meet. They conclude that when the numbers are finally in, lawmakers should have a serious debate on the crucial question of whether any tax cuts should be enacted or whether the state should “invest the $1.5 billion to put New Jersey back on the path to good jobs, long-term economic growth, and middle-class tax relief.”
This is the kind of grown-up thinking New Jersey needs. But until and unless Chris Christie gets over his ideological commitment to slashing taxes and his personal commitment to climbing the political ladder, his constituents are in for a lot more theater and a lot less fiscal sanity.