Are tax cut pledges by Gottheimer realistic?
By: Charles Stile
Political Stile
USA today Network
..... This year [2024] the 30th anniversary of Republican Governor Christine Todd Whitman;s successful pus to cut state income taxes by 40%.
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To mark the occasion, we have a new candidate pledging to cut income taxes to mark the start of the 2025 governor's race.
..... And this time, it's coming from a Democrat.
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"As governor, I'll bring down your property and income taxes," Representative Josh Gottheimer, who represents the sprawling 5th Congressional District, said during his campaign launch at a diner in South Hackensack. "Let me say it again, because I'm not sure you've heard it from Democrats in a really long time: I'm going to cut your property and income taxes."
..... In some ways, this is hardly surprising. Clearly, Gottheimer got the memo about the November 5 [2024] election. President-elect Donald Trump's victory over Vice President Kamala Harris was also a triumph of populist messaging. In his blunt, crude way - and often shouted alongside xenophobic and racist dog whistler - Trump delivered clear, easy-to-digest promises to trigger an economic revival. I will cut taxes. I will slash regulations. I will bring back manufacturing jobs form overseas , etc.
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No real specifics were added to the message. Just slogans for rallies and campaign ads. Those blunt themes stood in shark contrast to Harris' muddled message. And they worked.
..... "If last week's [11/05/2024] election taught Democrats anything, it's that people think politicians aren't listening to them," Gottheimer said at his launch ceremony. "as the saying goes and as laid bare in last week's [11/05/2024] election. 'It's the economy, stupid.' and hardworking middle-class families like you deserve some relief."
..... It also comes as no surprise that Gottheimer, a former speechwriter for Bill Clinton, is casting himself as an I-feel-your-pain-in-the-pocketbook Democrat, appealing to voters issues of affordability, with less emphasis on the better-angles-of-our-nature liberals,. even before the election, Gotheimer was trying to tug the party back to the center.
..... Yet this early-stage branding as the tax-cutter will eventually lead to details - one can hope - when the campaign gets going. This was, after all, a roll-out, a diner show filled with enthusiasm and photo ops and nifty "Josh 4 Jersey: merchandise.
..... At some point, the Bergen County congressman will have to explain his way around this conundrum: How can you convincingly promise to cut property taxes if you are also going to cut income taxes, which is the supply of money used solely for the purpose of lowering property taxes?
..... New Jersey's proceeds from its state income taxes are dedicated to the Property Tax Relief Fund, which is used to pay for schools, local governments and those generous ANCHOR rebates that homeowners have been getting over the past two years. the Property tax Relief Fund is $20.7 billion, or 37% of the entire state budget. That fund pays for the entire tab Trenton sends to New Jersey school districts, which are the largest cost driver of local property tax rates. cutting income taxes could put more pressure on towns and counties to raise their local property tax rate.
..... "If you cut property taxes, and you cut income taxes, one question arises, which is "how do towns and counties pay for the services they've been providing with those taxes?' " said Gordon MacInnes, the former Democratic state Senator and co-author of "The Notorious Nine: Key financial Decisions that Sent New Jersey's Financial Helaht Spiraling,: a 2016 report that traced the state's fiscal troubles back to the Whitman tax cuts.
..... It should be noted that the Democratic-controlled Legislature recently raised the income taxes on millionaires in 2021 after a long, contentious, intra-party battle.
..... It's hard to think that the Legislature will be so eager to reverse course, especially when the legislative leaders are pushing forward a new and generous 50% cut to property tax bills for qualified senior citizens. The so-called StayNJ plan is still being formulated, but it could exceed $3 billion a year when it is fully up and running in two years. It's a huge expense. They are going to need every extra dime of revenue form the income taxes to pay for it. cutting those taxes seems implausible.
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There also are other big-ticket costs on the horizon. the Republican-controlled Congress, set to take power in January, [2025] is already clamoring to cut Medicaid, the health insurgence program for the nation's poorest residents and a cornerstone of the Affordable care Acts published reports say. The GOP wants to use the savings to finance Trump's promised tax-cuts. If they carry through with that plan, the states will be under pressure to make up the difference.
..... That could be a tab reaching into the hundreds of millions of dollars for New Jersey.
What can we learn form the Whitman tax cuts?
..... Then there is the legacy of the Whitman tax cuts to consider.
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In 1994, the newly elected Whitman became a national politician star by pushing through the first phase of her 30% cut to the state income tax. Here was a bold, establishment Republican pushing through a conservative agenda in a northeast liberal state and promising economic rebirth.
..... If immediately put her among the ranks of future GOP leaders, alongside George W. Bush of Texas, and, in early 2001, she joined the Bush administration as Environmental Protection Agency administrator.
..... But back in Jersey, test tax cuts stripped $1 billion in revenue from state coffers once they were fully implemented. That set off New Jersey is a spiral of fiscally reckless decision that largely shared one common theme --- find a way to cover th loss form the state income tax cuts without actually raise revenue. Smoke and mirrors is what its usually referred to.
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The pension system became the piggy bank of choice.
..... The same year that Whitman tax cuts were enacted, the state then began the risky practice of skimping on its annual payment to the pension system, a critical supply of funds needed to ensure that the state had enough money to cover the costs of current and future retiree mobilizations.
..... It changed the rules so the state would have 60 years to catch up with its earlier underfunding, rather than 40 years, a over that back-loaded the reckoning to future years -- as in now. Officials forecast optimistic investment returns to the pension portfolio, which justified making smaller annual payments int the fund. The moves freed up hundreds of millions of dollars to spend for other budgetary needs.
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And in 1997, when faced with a $600 million shortfall in the state budget, the administration borrowed a whopping $2.7 billion form Wall Street and dumped the proceeds into the pension system, in the hope that its investment portfolio would rap a hefty bounty and years of stability from a bullish stock market.
..... The gimmick also allowed Whitman officials the short-term benefit of balancing the state budget without raising taxes to cover the shortfall.
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But the promised savings eve came - the stock market's dot-com frenzy cooled. Meanwhile, the state tacked on more generous retirement benefits for workers while successive governors avoided the difficult work of cutting spending or raising taxes by simply refusing to make the annual payment to the pension system. It was easy cash.
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By 2015, New Jersey's pension liabilities ballooned into a disgrace on the path to insolvency: that led to downgrades in the state's credit and weakened the state's ability to meet its basic needs for schools, health care and transit.
..... It was not until recently that Governor Phil Murphy reverse course. Earlier this year, [2024] he made his fourth consecutive payment to the system - $7.2 billion toward a combined $40 billion since 2021. But the state will continue paying the debt on the pension bond until 2029 - the final chapter of the glittering income tax cut form three decades ago.
..... No one is saying Gottheimer plans to hurtle down the same path. he is in the soundbite stage at the start of his campaign. He's making clear his commitment to lowering the costly burden of living in New Jersey. It's a shout form the rooftops without much detail. Detail, we assume, will come later as this six-way free-for-all for the Democratic Party nomination gets underway.
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When then-candidate Whitman held a long-awaited press conference to outline her plan her staff handed out a sheet that enumerated the spending cuts she planned to make to cover the cost of her income tax cuts. But Statehouse reporter Herb Jackson blurted out that the listed cuts didn't cover the promised tax cutting.
..... "It doesn't add up," Jackson said.
..... Team Whitman stood paralyzed without an immediate, convincing answer. The late-in-the-campaign flub added to doubts that Whitman wasn't ready for prime time.
..... Gottheimer, I assume, has enough time to avoid that mistake.