Veteran Policy Maker Traces State’s Fiscal Woes

Veteran Policy Maker Traces State’s Fiscal Woes

The constant focus on tax cuts for citizens and corporations alike has badly weakened New Jersey’s fiscal health, longtime state policymaker Gordon MacInnes said during a visit to Haddonfield Friends Meeting on April 30.

State officials who have offered more than $2 billion in subsidies to keep businesses – and jobs – from leaving the state in the last three years are poised to promise fresh tax cuts for state taxpayers, said MacInnes, a former state lawmaker and current president of New Jersey Policy Perspectives.

“Tax incentives and tax rate cuts are at the center of New Jersey’s response to the great recession,” MacInnes said.  “The trouble is, it’s not working.”

The magnitude of corporate subsidies has ballooned, yet the state has the sixth or seventh highest unemployment rate in the nation, MacInnes said.

Reforms moving through the state Legislature may put needed emphasis on attracting new jobs instead of rewarding businesses that threaten to leave, he said.

Currently, MacInnes said, businesses that merely threaten to leave the state can garner tax incentives to stay, even when there is little evidence that they have any incentive to go.

Although subsidies to corporations have spiraled since Gov. Chris Christie took office, he said, Democrats and Republicans both bear responsibility for the fiscal mess that has taken New Jersey from its AAA bond rating in the 1990s to the nation’s third-lowest credit rating.

The decision by the former Democratic Gov. McGreevey to borrow against the state’s $2 billion share in tobacco-settlement money in 2002 closed a budget gap briefly but now diverts state treasure to bond holders.

That poor decision pales in comparison to an “egregious” choice by former GOP Gov. Christie Whitman to cut income tax rates by 30 percent in 1993 while failing to reduce expenses, MacInnes said. The state had to borrow $2.6 billion in tax-exempt bonds that carried a high interest rate.  When the stock bubble burst, MacInnes explained, the state was forced to pay dearly and make up for the loss of $300 million.

The downward slide began in 1990, he said, when former Gov. Tom Kean adopted the first state budget ever that violated New Jersey’s constitutional prohibition against spending more than the treasury takes in.

MacInnes identified three strategies for a New Jersey rebound:

  • Invest in higher education, including the Tuition Aid Grant program that enables lower income and middle class students to attend college without a crushing burden of debt
  • Invest in infrastructure improvements, such as modernized roads and bridges
  • Forge a partnership with the federal government so that the state can reap benefits from the Affordable Care Act, thereby reducing charity care costs that drain the health care system.

Predicting that the coming gubernatorial race will feature endless pledges for tax cuts, MacInnes said that is not the responsible route.

“New Jersey has gotten into a bad habit,” he said. “Capitalism argues that it’s essential to forego today’s pleasures and put some earnings aside.”

Sponsored by HMM’s Peace and Social Concerns Committee, the event capped a study series of discussions on corporate subsidies in the state.

Submitted by Sarah Greenblatt

© Copyright Haddonfield Friends Meeting | 47 Friends Avenue, Haddonfield, NJ 08033 | 856.428.6242