Editorial: A call for higher taxes could be a simpler answer
It’s time for Gov. James E. McGreevey to think about raising the state’s income tax.
Faced with a cash-starved treasurythe legacy of Gov. Christie Whitman and a faltering national economy the state is in desperate need of revenues.
But rather than look to an income tax hike, the governor has placed on the table a budget that cuts aid to the state’s colleges (which school officials have said will mean higher tuitions), a continued freeze in state aid to schools and towns (which could mean diminished local services) and a host of other cutbacks and freezes likely to affect average New Jerseyans.
A better solution may be in store, however. There is a growing movement in the state Legislature to raise income tax rates for individuals 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, $600 million is a substantial chunk of change. The Star-Ledger/Eagleton Poll reports that three out of every four state residents support raising taxes for the state’s highest wage earners.
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 and other programs cut from the governor’s proposed budget, how many lawmakers will be able to resist the easy solution of soaking the rich?
Politics aside, Speaker Sires’ initiative is good policy. Applying a marginally higher tax rate to New Jersey’s wealthiest income earners is 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.

