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 unsuccessfully to tax its way out of a similar set of problems.
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.