Op-Ed: Tax Cuts: Wasting New Jersey’s Recovery

by Gordon MacInnes  |  Published in Editorials & Op-Eds, NJPP Blog: As a Matter of Fact ...
This op-ed appeared in the June 19, 2012 edition of the Bergen Record

Tax cuts are all the rage. Governor Christie and Senate President Sweeney are seeking to reduce taxes by10 percent for households earning $400,000 or less. They would add to New Jersey’s high debt level by borrowing the money to finance the cuts.

Assembly Majority Leader Louis Greenwald, D-Camden, is pushing a similar but larger plan, which would reduce taxes by 20 percent and be partially paid for with a higher rate on high-income taxpayers.

Only Warren Buffet thinks his taxes are too low. The rest of us would delight in having more money stay in our pockets. Unless, that is, the tax cuts would kill New Jersey’s ability to regain its competitive edge.

The governor asserts that the state’s finances are in such good order that he can find $1.35 billion that the state won’t need by 2016. Actually, the evidence is overwhelming that New Jersey is still spiraling downward: Unemployment (5th highest rate naitonally), economic growth (4th lowest) and credit rating (3rd lowest).

We are one of only six states to suffer a decline in economic activity in 2011 — New Jersey is still in a recession.

For the sake of argument, let’s assume that the governor is right: New Jersey has a cushion of $200 million this year, $650 million to $700 million in FY2014, $1 billion in the following year and $1.35 billion by 2016.

Does it make sense to distribute these funds in barely noticeable amounts to millions of households, or would we be better off investing in regaining our competitive edge to attract well-paying jobs and providing concrete opportunities to struggling families?

Not so many years ago, New Jersey was a hotbed of research and development. Bell Labs attracted thousands of scientists, engineers and researchers (including Nobel Prize winners).

New Jersey’s boom years

This was the “World’s Pill Box,” in part because it was the center of the pharmaceutical industry with headquarters, manufacturing and, yes, research and development laboratories. With two world-class research universities at Princeton and Rutgers, the state enjoyed boom years with high wealth and income.

Gov. Tom Kean understood that New Jersey could maintain its place by only investing in new technologies and research. Build the laboratories and computer centers and they — the world’s best educated scientists, engineers and researchers — will come. In his tenure, New Jersey voters approved two bond issues that would be worth almost one billion in today’s dollars to create new centers of exploration on the campuses of Rutgers, Princeton, the New Jersey Institute of Technology and the University of Medicine and Dentistry of New Jersey.

Kean’s raising the visibility of higher education with bond issues and operating-budget support, paired with the construction of state-of-the-art research facilities, produced what is still called “the golden age” of higher education in New Jersey.

In recent years, New Jersey has lost its competitive advantages. States like North Carolina, Virginia, Maryland, California and Massachusetts have been eating our lunch.

Instead of dribbling out modest tax cuts to everyone, New Jersey should concentrate any “cushion” on building on the science, research and technology foundation that brought us prosperity in the first place.

The amount required for the Christie-Sweeney tax cut, which would total $1.35 billion by 2016, could have a major impact on New Jersey’s restoration.

Starting with $200 million in the first year to assist higher education institutions with planning costs, a noticeable boost could be given to graduate, undergraduate and postdoctoral scholarships in specified fields like mathematics, computer science, genetics and nanotechnology.

By the second year, the investments would represent a 35 percent increase or so in state support for higher education, reversing decades of disinvestment.

To put the decline in context, matching the $231 million appropriation for Rutgers operating support in Governor Kean’s last budget in 1990 would require an appropriation of $408 million in FY2013. Instead, the governor’s recommendation is $241 million.

Tuition assistance

The other investment Governor Christie could include is to adjust the Tuition Aid Grants and Education Opportunity Fund scholarships to reflect the steep rise in tuition. A step in this direction would send a message to New Jersey’s striving students that the state wants to hold onto them by helping with rising tuitions and avoiding even higher student loan debt.

The choice is simple: invest in New Jersey’s future or play for short-term political points.

The state is stumbling at the bottom of the recovery from the Great Recession. Our leaders should drop “Comeback” and replace it with “investment” and “opportunity.”