Budget and New Taxes Pass the Legislature

The Democratically controlled State Legislature raised taxes by $1.2 billion, $2.8 billion if you include reduced property tax rebates and reduced income tax deductions for property taxes, yesterday.

From the Asbury Park Press:

— Income tax rates will rise from 6.37 percent to 8 percent on household income between $400,000 and $500,000; from 8.97 percent to 10.25 percent for income between $500,000 and $1 million, as first proposed in March; and from 8.97 percent to 10.75 percent on income over $1 million.

— Cigarette taxes are going up 12.5 cents per pack to $2.70, beginning July 1.

— Taxes are going up by 3.5 cents on a typical 0.75 liter bottle of wine and 22 cents on a 0.75 liter bottle of liquor, beginning Aug. 1.

— Businesses will continue to pay a 4 percent surcharge on their corporate taxes that has been charged for three years but was supposed to expire.

— Taxes on group accident and health insurance premiums will go up for one year. Taxes on high-risk insurance policies, such as those for catastrophe-prone beachfront homes, will jump permanently from 3 percent to 5 percent.

Each of these taxes have the potential to reduce revenue.

It doesn't take all that much for high earners to move their incomes to other states.

Cigarettes are already about half the price in Delaware they are in New Jersey. There are several stores on Rt 13, just over the Delaware Memorial Bridge that thrive on selling cigarettes to NJ residents. The Democrats just made that trip for cost effective. Hopefully the increased tax will help more nicotine addicts kick the habit.

The wine and liquor tax will prompt consumers to drink less or drink less expensive products.

The business 4 percent surcharge has cost jobs and will cost more jobs. This tax is not on profits, it is on revenue. Even businesses that report losses have to pay a surcharge. Continuing this tax will push some small business over the edge to closure and their employees onto the unemployment insurance rolls.

Insurance is already too expensive. These taxes on insurance will push business and consumers to elect less coverage. As property values continue to decline, there will be less coverage need for property insurance.

These taxes will prove to be counter productive.

Several Republicans protested that this budget sets the next one up to have a deficit of $8 to $10 billion. I think it is worse than that. I don't think that tax revenues will come in to cover the expenses budgeted this year. We'll know in a few weeks.

I predict that revenues for the quarter that ends next week will come in much lower that Corzine is expecting, and revenues will be even worse in the quarter that ends in September. Corzine and the Assembly Democrats are going to have to interrupt their campaigns to go back to Trenton for emergency budget sessions.

Of course, the Democrats blame the crisis on Bush. Voters won't buy it.