Wednesday, July 05, 2006

Corzine’s Budget Crisis

Here’s a novel thought for New Jersey Governor John Corzine amidst New Jersey’s fiscal floundering:

Why not cut spending instead of raising taxes?

Corzine can’t even get a tax hike through his own Democratic legislature. At the rate he’s going, Mr. Corzine is destined to become the new Jim Florio of New Jersey.

The Governor ought to pay close attention to today’s Wall Street Journal editorial (“Democrats for Tax Cuts”) which details how a number of state legislatures across the nation are discovering the proven benefits of pro-growth tax reform. Just look at what’s going on in Rhode Island.

“…Only last week, the very blue state of Rhode Island adopted one of the most sweeping pro-growth tax reforms in any state in recent years. Democrats, who control 70% of the state legislature, teamed up with Republican Governor Donald L. Carcieri to enact a plan that allows residents the choice of a flat tax that cuts the top tax rate on high income earners to 5.5% from 9.9% if they voluntarily give up deductions. In an instant, Rhode Island has gone from the state with the third highest income tax rate in the nation to the 27th, according to the Tax Foundation.

For good measure, the state also cut property taxes, passed a tax credit of up to $1 million for businesses to help fund private school tuition, and reformed the health insurance market by allowing small businesses to buy "stripped down" health insurance free of many costly mandates. The latter could save employers 25% while expanding the number of insured workers.

Just as impressive is the economic logic that Rhode Island Democrats used to justify the tax cuts. "Our high tax rates make us uncompetitive," says Democratic House Speaker William Murphy. "Business leaders with incomes of more than $250,000 look at Massachusetts and see a 5.3% income tax, Connecticut with a 5% tax, and Rhode Island with a 9.9% tax. They make a choice on where to move and create jobs, and that difference in tax rates is a big factor in where they go." Art Laffer couldn't have said it better….”

This is the solution to New Jersey’s problem. It’s also the solution for New York State.

In fact, New York’s GOP gubernatorial candidate John Faso should adopt the Kudlow tax reform commission's 5-percent solution proposal that would massively overhaul New York State taxes. Drop the top corporate and personal tax rates to 5 percent and abolish capital gains, dividends and estate taxes.

New Mexico’s Democratic Governor Bill Richardson hit the nail on the head when asked by the WSJ how he thought Democrats could regain its competitiveness with the GOP.

His answer?

"We have to be the party of growth and the American dream, not the party of redistribution."