Tuesday, March 01, 2005

NJ Budget

Enlighten - New Jersey does a great job putting together highlights of the acting Governor's budget. Only problem is, I hate long lists. To try and simplify things, I took their list and condensed it a bit. The new spending items are broken down into construction, personnel, direct transfers, and other (meaning I don't have a clue what the governor is doing with the money).

New Spending:









Back in this post, we saw that New Jersey has about 647,000 public sector employees, so the $589 million number works out to about $900 apiece. I can probably live with that, but the details will probably show that there are hidden increases in personnel cost on top of those highlighted in Enlighten's post.

The wealth transfers are a much bigger problem in my mind. According to the Census bureau, 8.5% of New Jersey residents are below the poverty line, compared with 12.4% nationally. This works out to about 750,000 people, so the additional $437 million in spending equates to about another $600 per "poor" person. Given that New Jersey's performance already far surpasses the national average, there is no justification for spending so much more money on a very small marginal improvement.

The new taxes were easier to break down -- property, sales, income, and wealth taxes.

New Taxes:









According to the Census, there are approximately three million households in New Jersey, with a home ownership rate of about 67%, so roughly 2 million households would have been eligible for the rebates. The elimination of the Homestead and NJ Saver rebates equates to an average $600 property tax increase for each of those households. In a state where fixed-income homeowners complain about an increase of less than $100 per year, this is a problem of epic proportions. If this tax increase survives the legislature, I predict that there will be wholesale removal of incumbents from their previously safe seats.

$350 million in new sales taxes? This is a direct drain on the economy of the state, and regressive as hell. The 2% gross receipts tax on cable companies (on top of all the other taxes their customers are forced to pay) is probably the most egregious. An annual Federal Communications Commission report on cable rates (see Table below, from page 8) shows that the cost of this service has been growing astronomically -- 7.4% annually for basic and expanded basic; to pile on with an additional $50 million in taxes is just plain wrong. It is a fallacy to call this a tax on the cable companies, as the money they handle comes from their subscribers. Cost to the average cable subscriber: about a dollar a month, more with premium channels.

Table 1
Monthly Cable Rates and Price Per Channel


Annual Percent Change

Service Elements

Jan. 1, 2004

Jan. 1, 2003

Jan. 1, 2004

Jan. 1, 2003

5-Year Average

Basic Service






Expanded basic service






Basic and expanded basic






Converter & remote control






Programming & equipment






Number of channels






Average rate per channel






New income taxes are targeted at those making $200k or more. According to this 1999 report, of 3 million households in NJ, only about 133,000 break that threshold; each of those households will see an income tax increase of about $1000. Over half of the "rich" households are found in Bergen, Morris, Essex, and Monmouth counties. Is it really fair to impose an additional $65 million in income taxes on just four counties?

Overall, I give the acting Governor's budget a big fat F. Had he balanced the budget without a $1.2 billion property tax increase, I probably could have given it a D-minus.