Income-tax hike may be easy way out

PACKET EDITORIAL, Feb. 11

By: Packet Editorial
   While Gov. James E. McGreevey is sticking to his ill-advised campaign promise not to raise taxes (later amended to apply specifically to income and sales taxes) to balance the state budget, there’s a growing movement in the Legislature to raise income tax rates for individual New Jerseyans earning more than $500,000 and couples earning more than $1 million a year.
   Spearheaded by Assembly Speaker Albio Sires, the drive to hike tax rates for those at the highest income levels would raise an estimated $600 million in revenue for the state’s cash-starved treasury. In a proposed $23.7 billion budget for fiscal year 2004 — a budget that inflicts real pain on everyone from senior citizens who need prescription drugs to arts organizations that will go belly-up without state support — $600 million is a substantial chunk of change. The Star-Ledger/Eagleton Poll reports that three out of every four New Jersey residents support the idea of raising taxes on the incomes of the state’s highest wage earners to help ease this pain.
   Several prominent Democrats, and even a few Republicans, are hinting broadly that they would rather face the backlash of a few wealthy voters in next November’s legislative elections than incur the wrath of many more middle-class residents whose sacred cows are being led to slaughter in this budget. If taxing those making more than $500,000 will help restore rebate checks for those earning between $100,000 and $200,000 (a casualty of the governor’s proposed budget), that’s a no-brainer for legislators representing all but the wealthiest districts. If it will help restore health insurance for 63,000 poor adults, prescription-drug benefits for seniors, funding for arts and historical groups, job-creation grants, money for anti-smoking programs and science and technology programs in schools — all cut from the governor’s proposed budget, to the extreme annoyance of vocal, powerful and organized constituencies — how many lawmakers will be able to resist the easy solution of soaking the rich?
   Indeed, there is a Machiavellian rumor circulating in the State House that this is precisely what Gov. McGreevey wants: a legislative initiative to raise the top levels of the income tax, which the governor would be dragged, kicking and screaming, to sign into law. This way he gets what he needs — $600 million in revenue to help balance the state budget — without suffering the political consequences of willfully breaking his promise to taxpayers. For two years, he could tell voters he didn’t really want to raise the income tax; the Legislature made him do it. (Old Trenton hands are reminding Gov. McGreevey and legislators that this is exactly what Gov. Tom Kean did, very successfully, 20 years ago — in contrast to the more proactive approach that proved disastrous to Gov. Jim Florio eight years later.)
   We have no problem supporting Speaker Sires’ initiative. Applying a marginally higher tax rate to New Jersey’s wealthiest income earners strikes us as a much fairer way to balance the budget than borrowing against tobacco settlement funds, delaying pension payments, raising the cigarette tax and cutting not only fat but meat and bone out of needed programs and services. There is, however, one major hitch: Under the state constitution, all revenue raised from the income tax is dedicated to property-tax relief. It cannot be used to fund arts groups or senior citizens’ prescription-drug plans or health insurance for the poor or anti-smoking programs. It must go directly to property taxpayers, or to counties, municipalities and school districts, to be passed along to property owners in the form of local tax relief.
   Given the creative budget-making in which Trenton has been known to engage over the years, there is surely a quick and easy shell game that can be played to overcome this constitutional irritant. But one of these days, the underlying inequities of New Jersey’s tax system need to be addressed — preferably in an atmosphere other than a crisis.