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Over in New Jersey: How not to sell out when your team is in charge of everything
When I was a campus organizer in Wisconsin, the statewide student association would come out in favor of tuition increases almost every year. It drove me crazy. I'd tell the students I worked with that they needed to rebel against the statewide organization and call for zero tuition increases. That it never, ever made sense for a student group to give the okay to gouge them on the most fundamental expense of their scholarly identity: tuition. No. Never.
Why? Because every time they caved in to arguments of political pragmatism on an issue so fundamental, retaining access and being on the winning team, they made it that much easier to gouge students the next time. And they did. We got a tuition increase every year I was there. On certain points, certain communities can't compromise. Students can't compromise on tuition. You just can't. In Wisconsin, the legislature knows it can count on students to get behind some increase every year now. It's a gimme. The statewide organization isn't the government's opponent. It's the politicians' cover.
In the same way, poor people and the organizations that claim to represent them can't compromise on sales taxes.
Which brings me to New Jersey. I've been hearing about the New Jersey budget fight for a little while, and I tried to make sense of it on-line tonight. The Democrats don't seem to have spelled out their position very clearly for anyone, except Governor Corzine. He wants to hike the New Jersey sales tax a point to 7%. The sales tax, we know, is the most regressive tax of them all.
The New Jersey Republicans have proposed a series of budget cuts. Big surprise. Only, some of them don't sound so awful. When I skimmed for some of the bigger ticket items, I found claims that some of the really large programs could be characterized as political gift baskets used to prop up innefficient municipalities and political allies. I haven't corroborated, but I know enough about Pennsylvania politics to believe it. Why not in Jersey? Maybe it does make sense to cut programs over which the Governor and other political types appear to have an excess of discretion? Maybe it doesn't sound implausible that some of the beneficiaries of these programs have been revealed to have accounting irregularities of various kinds.
Granted, it's from the mouths of Republicans, but it they are even 50% right then maybe it's time for at least 50% cuts.
The Speaker of the Assembly has revealed that he'll produce a budget tomorrow that doesn't have a sales tax increase. Bully for him. Want to bet he cuts programs instead? Want to bet the politically flexible programs will go only after the socially relevant and accountable ones see maximum axeing?
There are even Assembly Democrats proposing cuts in Union contracts into the future. Do I love Unions? Yes. Do I believe they are the rocks of our diminishing middle class? Yes. do I believe that it is possible for the contracts of state employees to be so generous that it costs the state more than their work benefits it? Maybe so. Maybe there does need to be some negotiation there. But Corzine just did a rally with state workers as if that option is off the table. 15% cuts in benefits sounds pretty steep, no question. But what about 5%? What about 3%?
Why, the Republicans say they can save $120 million just by forgoing Cost of Living Increases to state workers bringing home more than $60K per year. That doesn't sound 'draconian.'
Let's get totally candid here: I arrived in Philadelphia in May 2005. Since then, I have crossed into New Jersey precisely three times, and once was a mistake. I have no expertise on the state, but I can't believe that there is not a third way between a pure tax increase or pure program cutting solution! I can't believe there isn't a way to do this without gouging the poor.
For example, the Center for Budget and Policy Priorities has suggested that states increase revenues by expanding the sales tax to services. New Jersey only taxes 17 of the 42 readily taxable services the center lists. Expanding the things taxed over the amount of tax might actually target higher earners more and also raise a lot of money.
This is a really interesting idea, and it didn't take me long to find. Are there other ideas out there that no one is taking seriously? Maybe someone should talk to the think tanks for once?
Before I get to my real point, let me make three smaller points that lead into my larger jeremiad. There are three things I don't believe about the major proposals for a budget in New Jersey:
1) That anyone is willing to take on their political allies to arrive at a viable solution.
2) That the serious work of finding unorthodox revenue streams and efficiencies and the political will to accomplish them has been undertaken.
3) That anyone has considered taxing the rich - that it's even been on the table.
New Jersey has plenty of rich folks. The Governor is one of them. We are living in a class war right now and the right is waging it effectively. The Democrats are not only not fighting back, they won't even admit the class war is underway. They keep accepting the terms of the debate the Republicans are setting up and trying work within them. They don't want anyone to run political adds next year that say they increased taxes.
But they should increase taxes.
On the rich.
Tax the rich.
God, it feels so good to write that. The weird thing is that it feels scary, too. I've never been rich. I've never been close to the rich. Yet it weirds me out to say that publicly. That we just need to get serious about taxing the rich.
There it is, though. Solution: tax the rich.
I became interested in this issue when I learned of a prominent poor peoples' organization stumping for Corzine's sales tax increase. This whole essay has been my effort at sorting out a third way. To at least find evidence that there must be a third way. Even if no one wants to hear it. Even if it doesn't have a chance. Even if, heaven forfend, it gets hard to explain.
Did the organization stump for the effort because it wants a place at the table in the Corzine club? Because then poor folks will have a "voice in the administration"? Did it do it because some of the programs on Republican chopping block benefit them and, therefore, ostensibly, the communities they speak for? I don't know.
But I do know that a day comes for every organization when pragmatism breaks down. When retaining access becomes selling your people out. Student organizations should never say yes to a tuition increase. It's a sell out, no matter how convincingly the case gets made. On certain issues you can't say "Yes." You can't even say, "a little." You just have to say "no."
If "no" means some hard policy work to come up with an alternative that everyone laughs at, fine. Let them laugh. Be at the table by protesting outside and saying you know there is a third way, but the decisionmakers just aren't willing to talk about it because you don't like the answer.
There must be a lot of ways that New Jersey could come up with an alchemy of cuts and tax increases that could get it out of hock without resorting to the accounting trickery and borrowing that Governor Corzine rightly derides. A piece of that puzzle will include, must include, should include an increased tax on New Jersey's rich.
Corzine is clearly looking to pull the risky move early so he can play the wise man in the next election, like Bloomberg did in New York. Well good for him. Let him make the gamble on the fat wallets and not on the skinny ones.
And let the organizations with the skinnily walleted at their backs tell the Governor no to a sales tax increase. It may not charm anyone. It may not win. It may not even win any friends, but it's a long way from surrender.


Luxury
I have been to Jersey more than three times, usually on purpose. One thing I do not know: Does the sales tax apply to grocery purchases? This drastically levels the regressivity argument, though admittedly not entirely, or even enough to assuage fears of tax gouging.
One thing I would like to know, given the stance against a sales tax, and your affinity toward taxing the rich is your stance on a luxury tax. By taxing all the mooks in North Jersey on all their big ticket items, their plasma screens, their sub zero fridges, and their flashy cars, the state could likely close the gap significantly. The state could either set a basement with exceptions for certain items, or simply pick and choose the items it wishes to tax.
In a rant of my own, the right is extremely effective at marketing the American Dream to the middle class. As an economist in training, it fascinates me to watch the overwhelming debate over the Estate Tax, a tax which only affects about 1% of estates. The richest 1% of Americans have the middle convinced that the "Death Tax" is the most egregious stab at financial liberty since the Stamp Act.
The rich are effective at protecting their riches, hence their wealth. Selfishness and avarice aside, this is seen from the municipal level to the federal level, on every tax issue in existence. At the risk of rambling, I'll finish with words of the greatest President...ever: "The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government."
Mea Culpa
I was wrong. The Assembly Speaker appears to have found a more fair plan. It's complicated, but it's a complicated problem.
The New Jersey Democrats do have a better plan. I don't think you can see the breakout on-line, though.
I'm all for luxury taxes, too. Go team. New Jersey's sales tax does not hit groceries. It looks like the Dems are planning to expand the sales tax into some new services. Go, them.
I can't help but think their plan sounds better, except for the diminished contribution to worker pensions. That is bad. Otherwise, though, it's impressive.
It would be very, very hard for anyone advocating for the poor to push Gov. Corzine's sales tax now, unless they were very foolish.
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BradyDale OnLine
Corzine is awful
So now New Jersey has shut down. The Democrats and the Republicans both have proposals to balance the budget that don't involve any crazy accounting gimmicks. On the Dems side, they actually levy new taxes on the rich.
But Corzine is still sticking to his guns. Why? I can't read his mind, but it looks like machismo to me. It's hard to think that a Governor driven by macho is going to be a good one, especially if it's defensive macho.
Maybe that's sort of the difference between Corzine and Rendell. Rendell knows he's tough and just does his thing. Corzine tries to prove he's tough.
It looks like the deal he's going to hammer out will include a bunch of targeted sales tax increases, which, of course, is better. It still seems like nonsense, though. It sounds like Corzine has to have sales tax appear to be a major part of the deal he negotiates just so he can say he got it the way he wanted at the start.
I have more patience for right-wingers and for corruption than I have for pridefulness.
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BradyDale OnLine