'You can’t tax your way to prosperity,' writes GSI in The Wall Street Journal

'You can’t tax your way to prosperity,' writes GSI in The Wall Street Journal

No matter what this year’s gubernatorial candidates may say, painless solutions to New Jersey’s fiscal challenges don’t exist. The state’s budget may be balanced on a “cash” basis, but a massive structural deficit lurks beneath. New Jersey’s property taxes, already the highest in the nation, are being driven up further by the state’s pension burden and escalating health-care costs for government workers.

A useful comparison is Connecticut, which has tried to tax its way out of a similar set of problems. The two states have much in common: a relatively low poverty rate, high levels of personal income, a dependence on New York City, and unsustainable pension costs. The Pew Charitable Trusts ranks New Jersey and Connecticut as having among the worst-funded pensions in the nation.

Connecticut’s Fiscal Crisis Is a Cautionary Tale for New Jersey - A New Report by GSI

Connecticut’s Fiscal Crisis Is a Cautionary Tale for New Jersey - A New Report by GSI

Connecticut provides a cautionary tale for the next governor of New Jersey, according to a report from the newly launched Garden State Initiative. With its “severe pension underfunding, a high tax burden and politically powerful government unions,” New Jersey is facing challenges that have already placed it near the bottom of national rankings of fiscal health, according to the author of the report, Stephen D. Eide of the Manhattan Institute. One of the only states to fare worse in recent years has been Connecticut, which mirrors New Jersey in many ways.  

Tax policy is one of the major themes of the campaign for governor of New Jersey. Since the Great Recession, the Garden State has cut some taxes and avoided raising income taxes, which has helped its recovery. Connecticut, however, boosted already-high taxes, counted on economic growth that didn’t materialize and now faces the repercussions, according to the 16-page report, “Connecticut’s Fiscal Crisis is a Cautionary Tale for New Jersey.”

Click here to download the PDF of the full report.

A Fiscal Crisis in New Jersey

A Fiscal Crisis in New Jersey

New Jersey has a serious fiscal crisis on its hands, a crisis with two interrelated culprits: 1) painfully high taxes driven by 2) unsustainable public spending which includes out of control pensions reflected in unfunded liabilities. Our collective inaction is driving both residents and businesses to flee elsewhere. Even while the tax burden grows, essential services are increasingly being crowded out due to rising costs associated with the state’s public workforce.

The costs to New Jersey’s citizens and businesses are increasing by the year. They feel frustrated, marginalized, and powerless. With New Jersey’s tax climate for business ranked 49th by the Tax Foundation, and a ranking of 48th by Forbes magazine when examining the best and worst state tax burdens, it is no wonder that according to recent Gallup and Monmouth polls nearly 50 percent of New Jersey’s residents want to leave the state.