New Jersey Millionaire's Tax

June 21, 2010

Some New Jersey legislators continue to push for more temporary millionaire's taxes: 

The clash in the state legislature is part of a wider battle over how to erase a $10.7 billion budget deficit and is emblematic of the decisions facing states across America whose budget deficits have soared during the recession.

Democrats want to re-impose a one-year tax on millionaires that has been vetoed by Republican Governor Chris Christie. The 10.75 percent tax on income above $1 million would hit 16,000 people, some of them likely to work as financial professionals just across the Hudson River in New York.

The tax would raise $637 million that the state would use to fund rebate checks of up to $1,295 for some 600,000 senior citizens who would otherwise face steep increases in their property taxes during fiscal 2011.

..."Governor Christie's heartless vetoes denied property tax relief to senior citizens struggling to make ends meet," Assembly Majority Leader Joseph Cryan said in a statement.

Of course those would be the only choices:  Tax the rich or starve the elderly.  But before morally condemning Christie and supporters, note the elderly are apparently having trouble "making ends meat" because of high property taxes.  How are the hearts of those in support of high property taxes?  New Jersey had the second highest property taxes on owner-occupied housing as percentage of median home value in 2008.

One argument used against millionaire's taxes is that it makes the state unattractive for the wealthy and having wealthy people in a state is good.  But having a temporary tax on high-earners complicates this argument, as some might decide to put up with an ephemeral top bracket—weather the high-tax storm.  Same goes for the revenue volatility of highly progressive tax structures.  If the state does not rely on a high-bracket tax for long this argument holds less weight.  Although to believe a millionaire's tax is temporary is to have some confidence in New Jersey's economic outlook.  I would not be willing to stake a good chunk of my paycheck on that.

Gov. Christie already vetoed the proposal earlier, making good on statements about not raising taxes.  Fleecing the rich will not put New Jersey in solid fiscal shape.  At most it will give the government a short-term solution to a long-term problem.  To be sure, in order for the state to become fiscally sound, and minding political reality, it will be more complicated than simply "cut spending" or "make the rich pay their fair share" rhetoric suggests.  But the state should not jump to their old reliance on the wealthy (a mere 16,000 people) to fix the state's mismanagement.  It distracts from other reform and Christie seems to get this.

Update:

Democrats in the New Jersey Assembly have failed to override the Republican governor's veto of a tax surcharge on millionaires.

Monday's vote was strictly along party lines. All 47 Assembly Democrats voted for the override and all 33 Republicans voted against it. The measure needed seven GOP votes to advance.

More on New Jersey here.

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