From Bloomberg:
Corzine Proposes Record $30.9 Bln New Jersey Budget
New Jersey Governor Jon Corzine proposed a record $30.9 billion state budget that includes an increase in the sales tax and new levies on alcohol and cigarettes.
Spending would rise by 9 percent, or $2.6 billion, over the current fiscal year. The budget reflects “already legislated, mandated, negotiated, and inflated” costs, Corzine said today in his first budget address before the state Legislature.
…
Under Corzine’s proposal, sales tax collections would rise by $1.43 billion, as rates climb to 7 percent from 6 percent and the tax is applied to more consumer services. Only California has a higher rate at 7.25 percent, according to the Federation of Tax Administrators. Cigarette taxes will climb by 35 cents to $2.75 a pack, the highest in the nation.
…
His budget calls for 1,000 job cuts through layoffs and attrition of non-union employees. It reduces support for state universities and colleges by $169 million to less than $2 billion, and keeps unchanged funding to cities and most schools, other than payments for employee pensions and increased aid for building new schools in the state’s poorest districts.
…
Corzine’s plan would raise almost $1.1 billion by boosting the sales tax, and $248 million by applying the tax to services that were exempt. New Jersey would raise $58 million with new taxes on alcohol, luxury cars, realty transfers greater than $1 million and water usage.
From NJ.com:
It is my honor and responsibility to stand before you today and offer my best ideas to meet our state’s recurring structural budget crisis. My administration’s work over the past two months has surely deepened my understanding of the challenge of fixing our broken fiscal policies.
I must say, Gov. Codey was on target when in November he jokingly said, his transition report can be summed up simply, “the state is pretty much broke.” Today more than in November, I realize he was pretty much right.
—-
So what are your thoughts on how this new budget will affect the state economy and local housing?
Caveat Emptor,
Grim
Budget Brief(PDF)
The 10Y Yield is back in the 4.7 range on what I think was a combination of Bernanke’s hawkish speech combined with the Core PPI coming in above estimates at 0.3..
Looks like at least two more quarter point increases from the Fed..
U.S. Two-Year Notes Fall as Bernanke Signals Rates May Rise
Interest-rate futures show traders are betting the Fed will raise rates to 4.75 percent March 28. The chance of a 5 percent rate at the next meeting in May rose to 91 percent from 73 percent at the end of last week.
“The Fed quite easily has another 50 basis points in store,” said David Boberski, head of interest-rate strategy in New York at Bear Stearns Cos., one of the 22 primary dealers of government securities that trade directly with the Fed. “If the market perceives Fed moves are dictated by economic news, the news doesn’t give them an excuse to stop hiking rates.’
grim
NJ: If the smell doesn’t kill you, the taxes will.
Hey, I guess it could be worse. We could be living in New York.
The 1% tax increase does little to me. I tend to purchase online to avoid sales tax. I’d gladly pay $25 shipping on a $1000 tv instead of $70 sales tax.
Just means I’ll be shopping on the internet more.
As for smoking, well, NJ shot itself in the foot by not letting people smoke in bars. That means less people will smoke. Even more will smoke less now that they are raising taxes.
Time to move — Atlas Van Lines reports more people are moving out of NJ than into NJ:
http://www.atlasworldgroup.com/migration/
I’ve been patiently waiting for the Atlas 2005 numbers..
grim
“…..The 10Y Yield is back in the 4.7 range on what I think was a combination of Bernanke’s hawkish speech combined with the Core PPI coming in above estimates at 0.3….”
Grim:
IMHO Bernanke didn’t give a hawkish speech, it that everyone drew their own conclusions as they always do, and it became a feeding frenzy. If what he said last night was clearly directive, the market would have reacted and priced in the information immediately. Instead, all the pundits wrote their reports last night and in the morning, and the buy side had a few beers at lunch, taked it over with their buddies and sold everything in the last 3 hours.
chicago
On a side note, I’m glad to see their axing some state jobs. The government needs to operate differently rather than acting like a “cost center” all the time.
I would also like to see come consolidation at the local county/city levels as well. Every town operates independently of one another, and consolidation of duties can save taxpayers over the long run.
This guy is a democrat?
He is sticking it to the poor and lower income.
this is great. we’re in the midst of the greatest property appreciation in US history and even with all those additional property taxes they’re slashing services and raising taxes. what’s going to happen when we go down the other side of the property bubble mountain?
i think we’re all fools for living in this high taxed state.
if you can commute it move to PA. great tax situation there.
“…Just means I’ll be shopping on the internet more.”
A perfect example of the Laffer curve in action. New Jersey is already on the right-hand side of the curve. These tax hikes, especially the hike in the corporate business tax, will further disincentivize investment in NJ. High cigarette taxes have already led to a huge black market. Also, property taxes will likely go up this year as municipalities will not receive any budget increases
I love when a millionaire sticks it to the working class. No doubt towns will follow suit and raise property taxes. Last one out of NJ turn off the lights.
the sin tax is always popular. whatever they’re expecting from the cigarette tax take about 20% of that cause that’s what other states have seen recently from similar projections. people will either go outside the state to get them or quit altogether. this means they’ll have to raise revenue some other place. know where? property taxes baby!
know where? property taxes baby!
Yup. I saw 2 different clips on plans to raise property taxes on News 12 tonight. West Milford is looking to pass abudget that would raise taxes and Lacey Townsip wants to raise taxes 14%
its amazing how much NJ residents pay in property taxes. I do not own, and one of the reasons is the taxes. Even a townhouse in a decent town is going to run you 4500+. Thats about 400 per month, which when i take it off my rent, brings me down to 850 per month for the same size place as a condo or townhouse.
i have no idea how anyone lives in essex county. taxes on a 2 bedroom condo in south orange are almost $8500 a year! most pay around $11k. go over to montclair and the average tax bill for anything built after 1990 is about $14k. insane.
Raising taxes never works but I think this is a fair decision for NJ since people of NJ voted for this guy.
“1,000 job cuts through layoffs and attrition of non-union employees.”
Remove the “non” and NJ has a future. As long as unions/mob control NJ it makes no sense to live there.
I wonder how the real-estate market is going to take this news. My guess is many people are going to pack up and head out west or south.
It’s true that this all sucks for NJ, but it’s an interesting question as to how much it’ll force people to move. It’s not an easy thing to move from your home. And if people are moving out, it’s probably zero-sum among homeowners, as that would usually entail someone moving into a home and someone moving out – I would think that very few people (absent foreclosure) are going to abandon their homes or their home equity. Is it just renters we’re talking about?
-P
Raising taxes never works
Ya betcha. Think of Clinton, raising taxes in 1993, kicking off a 7 year national nightmare of prosperity and wealth.
but I think this is a fair decision for NJ since people of NJ voted for this guy.
It is indeed a fair decision for NJ, not because they voted for Corzine but because they voted for previous governors (Whitman and McGreevey) who borrowed heavily and used gimmicks to defer the day of reckoning, which has now arrived ..
I’m going to skip the political commentary as that’s not really my forte. We’re among friends, and we all know you never discuss politics or religion with friends. At least with those friends you wish to keep.
It just became a little bit more expensive to live in New Jersey. And it’s likely to get worse as municipalities increase property taxes to compensate for new found budget shortfalls.
The net is that more people will leave the state. The affordability of housing due to the bubble is already showing itself in migration trends. While it may not seem intuitive that a few hundred dollars might make someone pick up and leave their home, the probability exists. Multiply that probability by the population of NJ and you’ll quickly see that even very low probabilities result in real numbers. Don’t forget in-migration as well. Will it be as likely for someone to move to the state in the future? Or will they seek more affordable alternatives?
jb
Another open ended question is how the dollars from the realty transfer fee were estimated for 2006/2007.
If both residential and commercial sales keep on their current pace (10-15% below last year) or even fall further, the estimated revenues will simply not be realized.
Bloomberg acknowledged this months ago, I hope Corzine did as well.
grim
I’m leaving Jersey for the South. Cost of real estate, health & car insurance, long commutes, congestion, and high taxes have done it for me. We’re paying ridiculous money to live in a sate where you are never more then 7 miles from a superfund site and the ghettos are probably even closer to you then that.
“Think of Clinton, raising taxes in 1993, kicking off a 7 year national nightmare of prosperity and wealth.””
Yes, that DotCom bubble was awesome!
Yes, unable to refut excellent employment (10 million jobs created), an actual surplus, a booming economy and stock market, you fall back on feeble claims.
And we do have a bubble now too and whats happened to the deficit and national debt ?
Anyway, the main claim that “raising taxes” never works has already been refuted.
And I was talking about economics rather than FP, but since you insist. (and theres no need to point to Wikipedia, some of us know what happened).
And the 1993 World Trade Center bombing:
All the perpetrators of which are in jail. Wheres Osama now ?
http://en.wikipedia.org/wiki/World_Trade_Center_bombing
And the USS Cole attack:
That happened 2 months before George Bush came to power. Why didn’t he do something about it till 911?
And the US troops withdrawn from Somalia after getting a bloody nose:
1) Most Republicans were urging this withdrawal at that time.
2)
US troops were sent to Somalia in the first place by Bush Senior.
3) Number of US casualties and costs in Iraq– 2 orders of magnitude greater than Somalia, with no end in sight.
“Think of Clinton, raising taxes in 1993, kicking off a 7 year national nightmare of prosperity and wealth.””
Yes, that DotCom bubble was awesome!
Yes, unable to refut excellent employment (10 million jobs created), an actual surplus, a booming economy and stock market, you fall back on feeble claims.
And we do have a bubble now too and whats happened to the deficit and national debt ?
Anyway, the main claim that “raising taxes” never works has already been refuted.
And I was talking about economics rather than FP, but since you insist. (and theres no need to point to Wikipedia, some of us know what happened).
And the 1993 World Trade Center bombing:
All the perpetrators of which are in jail. Wheres Osama now ?
http://en.wikipedia.org/wiki/World_Trade_Center_bombing
And the USS Cole attack:
That happened 2 months before George Bush came to power. Why didn’t he do something about it till 911?
And the US troops withdrawn from Somalia after getting a bloody nose:
1) Most Republicans were urging this withdrawal at that time.
2)
US troops were sent to Somalia in the first place by Bush Senior.
3) Number of US casualties and costs in Iraq– 2 orders of magnitude greater than Somalia, with no end in sight.
“Anyway, the main claim that “raising taxes” never works has already been refuted.”
Hardly. Just because there was an expansion after a tax increase does not imply it was BECAUSE of the tax increase. On the contrary, the expansion would have likely been even larger w/o the added tax drag.
Almost every credible text on economics denotes taxes as “dead weight loss”. This is not a coincidence.
“That happened 2 months before George Bush came to power. Why didn’t he do something about it till 911?”
LOL, why did the next president fail to address attacks against the United States during the previous president’s watch?
This is not a political blog, so I’ll leave your mountain of flawed logic to stand for all to see, but this comment really takes the cake…
Almost every credible text on economics denotes taxes as “dead weight loss”. This is not a coincidence.
Maybe some liberatarion crank textbooks. Who is going to finance basic science R&D if not the government? Who is going to build roads? Who is going to pay for national defense? Who is going to pay for police and courts? Get rid of the government and what do you have? You have what they have in places like Somalia, since we are on that topic. Gangs of hoodlums committing crimes with impunity, no one thinking more than a couple of weeks into the future, and the poverty that inevitably results from such chaos. BUT, at least the people of Somalia don’t have to worry about taxes.
I know I’m also getting off topic here but this is one of my pet peeves: why do we think that we shouldn’t have to pay taxes??? We have the lowest taxes of any Western Democracy and still we complain. It’s a nice fantasy to think that we can have good roads and infrastructure, good progressive schools, strong police and fire departments, nice parks, clean safe streets, etc. etc. and cut our taxes in half. A good friend once said to me: Democrats tax and spend; Republicans just spend! And there is numerous evidence all around that this is a true observation. George Read My Lips Bush at least was honest when he raised taxes during his Presidency because the previous administration left the government in serious debt. Finally I must point out that it was a [tax and spend] Democrat who ultimately balanced the budget and oversaw one of the greatest periods of economic prosperity this country has ever seen. I’m stepping down off my soapbox now.
“Finally I must point out that it was a [tax and spend] Democrat who ultimately balanced the budget and oversaw one of the greatest periods of economic prosperity this country has ever seen.”
Firstly, Clinton was a Democrat, but not a tax and spend one.
Second, be careful of your cause and effect. The budget was balanced because of the booming economy, not the other way around.
Third, if you believe Clinton was responsible for the boom, please cite all of the policy implemetations that he enacted that led to this. (You’ll be searching for a while…)
“Finally I must point out that it was a [tax and spend] Democrat who ultimately balanced the budget and oversaw one of the greatest periods of economic prosperity this country has ever seen.”
Sorry, but the when Republicans took control of Congress in 1994, they dragged Clinton kicking and screaming to balance the budget.
http://en.wikipedia.org/wiki/Balanced_Budget_Amendment#Clinton_and_a_budget_surplus
And a dot-com bubble is hardly “the greatest period of economic prosperity this country has ever seen.”
Lastly, as others have illustrated in this thread, simply pretending everything was fine and dandy as threats grew from inside and outside our borders, and our enemies became increasingly emboldened, was pure folly.
Please folks, stop all this whining.
Don’t forget the Census report, where NJ was considered the wealthiest state in the NJ on a per capita basis.
The fact is, there are people who live here who do, in fact, have enormous amounts of money. Being densely populated has it’s advantages – its great for local businesses, mom and pop shop types, etc. who make loads of cash. Trust me, that Korean owned laundromat around the corner is truly raking it in in ways you can’t even imagine, and so are are the New-Deli type places, etc. Compared to other states in this country, NJ is more like a city than a state.
We can easily absorb an increase in the sales tax. We still don’t even pay sales tax on clothing!
The cig. tax and smoking ban may cause people to smoke less – but if that’s the case, there are health benefits to take into consideration – less people falling sick or dying of heart disease, cancer, which means more people employable and less of a burden on the states health care system.
Yes property taxes are high, esp. on newly constructed properties, but that won’t cause everyone to get up and leave. Many continue to live in older homes and pay a rate that was assessed God only knows when. Active living communities are coming up for seniors, to give them an affordable place to live with lower taxes. What is needed is better run local governments, esp in the cities (Newark, Camden) – this has been our greatest failure and affects all surrounding townships.
Immigrants continue to move to this state in hordes. It offers ethnic diversity that you don’t find much elsewhere. And yes, many of those Chinese, Indians, etc. you see moving here are loaded – thanks to enormous growths in their own economies.
Then, of course, there’s no state income tax for those earning less than 25K.
So stop whining. We recently ranked the 5th best state to live in, and a few of ours towns were recently ranked the best to live in in the country (including the #1 spot).
Enjoy it!
I knew this would happen the minute I got “political”.
Anon 11am. I also would not describe clinton as a “tax & spend” liberal or democrat; I was referring to the way democrats are frequently described by republicans, as “tax and spend liberals/democrats”. Also, I think balancing a budget doesn’t necessarily depend on a booming economy. It has more to do with managing revenue and spending, regardless of what the economy is doing. Interestingly, the economy continued to boom even after Clinton’s big tax increase. Finally, social policy doesn’t necessarily affect the economy. Many other non-economic factors such as the psychology of John Q Public affect what happens in the economy. The current housing bubble (and the prior stock market bubble) are cases in point: housing values currently bear no relationship to market fundamentals.
Anon 11:07am:
I don’t agree that Clinton had to be dragged “kicking and screaming” to balance the budget. He was willing, after all to call Newt Gingrich’s bluff over the budget in 1995 and 1996, brining the gov’t to a temporary standstill because he didn’t agree with the budget put forth. Clinton actually stated that he wanted to reform our current welfare system during his 1992 campaign and welfare reform had a great deal to do with his ability to balance the budget. He wouldn’t have been able to make the draconian changes he made in the welfare system with a democratic congress so it didn’t surprise me that he did so with a republican controlled congress who was more willing to make sweeping changes to the welfare system.
As for the dot.com bubble, that took place in the very late 90s and the bubble burst in early 2000. The economic prosperity I referred to took place throughout most of the 1990s. Also, as we know from the current housing bubble, the tech stock bubble had little to do with economic policy; it had more to do with buyer psychology and attitudes at the time. The fundamentals at that time also made no sense. People bought stock in companies many of which had no plan of how they would turn a profit. It was based on “irrational exuberance” of the new internet revolution and that this new market was the wave of the future. People thought you couldn’t lose money there either. They were wrong.
While indeed I agree with you that outside threats to our country were building during the 1990s, this is not related to the economic prosperity of the 1990s that I was referring to. Also, hindsight is 20/20. It’s easy to go back after the fact and see what went wrong.
I feel like I’ve taken this thread off topic here so I’ll not respond with any more politics.