Heading into today’s special session, Governor Christie conditionally vetoed a Democrat tax plan that would have instituted a millionaire tax on earners grossing over $1M per year.
The Democrat plan would’ve raised the state income tax rate on millionaires from 8.97% to 10.75%. In exchange, the Democrats would’ve applied $800 million in projected revenue from their millionaire tax increase to proposed property tax credits. Christie simultaneously signaled that he would consider a compromise plan, including some species of tax credit, if the Democrats agree to a tax cut that doesn’t include hikes elsewhere in the proposal.
Granted, I’m not a fan of the Governor’s tax approach this time around since it seeks to pay for a tax cut when we’re still borrowing money. That’s stimulus-esque and counterproductive in the long-haul, Save Jerseyans; our tax burden will never diminish when we’re still accumulating debt. Yet the Democrat plan is still immeasurably worse for three specific reasons.
Regular readers know them by heart but it never hurts to review.
First of all, we know that raising taxes on wealth-generators invariably results in outward migration to states with lower tax rates. The causal relationship is well-documented. Just between 2004 and 2008, over $70B in wealth left New Jersey in response to punishing tax rates. How we’re supposed to find more golden eggs to pay for Trenton’s excesses by killing the golden geese that lay them is beyond me.
Secondly, the catalyst for that aforementioned millionaire exodus wasn’t just property taxes. New Jersey already had a millionaire’s tax on the books when Jon Corzine first entered office. Why no longer? It was never repealed! The Dems simply included a “sunset” provision in the initial legislation. Corzine repeatedly promised to sign another one into law if passed by the all-Democrat legislature. So why didn’t they do it? Politics is the only plausible explanation, just like their current class warfare tact stinks of an attempt to gain partisan advantage.
Finally, given what we know about the causal relationship between higher taxes and outward migration, why should we trust the Democrats’ $800M number, Save Jerseyans? It’s doubly ironic since the Dems have complained over and over again about the Governor’s budget revenue projections. The Democrats’ projection for this tax credit/hike offset scheme implies that New Jersey’s millionaires will simply stay put and take it on the chin. Past experience tells us they won’t. It’s the stuff of pure fantasy, folks!
To recap: (1) it’s counterproductive, (2) it’s transparently political, and (3) the numbers don’t add up.
Points to keep in mind as the legislature convenes today. Personally, I won’t be happy unless either plan is accompanied by $2B (or more) in spending cuts. But since when is any of this about making taxpayers happy?
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