New Jersey Gubernatorial Candidates Talk Taxes

TRENTON, N.J. - The three gubernatorial candidates in New Jersey addressed budget deficits, tax hikes, and ways to replenish the state’s Transportation Trust Fund, which will run out of funding in fiscal 2012, during their first debate Thursday evening in Trenton.

New Jersey’s fiscal challenges and the state’s high tax rates dominated the 90-minute discussion. Overall, Democratic Gov. Jon Corzine pointed to his record of passing budgets and providing needed services even as the state’s revenues have dropped off while Republican candidate Chris Christie stressed that he would cut expenditures to allow for reductions in personal income and corporate income tax rates. Independent candidate Chris Daggett’s fiscal strategy includes expanding New Jersey’s sales tax in order to cut property and business taxes by 25%.

Whoever wins the general election on Nov. 4 will enter fiscal 2011 with an estimated budget deficit of $8 billion. The $8 billion shortfall projection takes into account near-term and future costs for retirement plans and non-recurring federal stimulus funds.

Christie, who said he would not raises taxes, believes finding government inefficiencies and wasteful spending will help pare the structural deficit. He did not specify which programs he would cut.

“We will get down to Trenton and we will get into that budget and we will work collaboratively with the legislature and we’ll make sure that we bring the budget down and we cut it back significantly,” Christie said during the debate.

To balance this year’s budget, the governor temporarily raised the income tax rate by 0.75% on those earning $400,000 or higher and cut the budget by $4.5 billion. Corzine said that any future tax hikes would be “a last resort” and both he and Daggett criticized Christie for not having a more detailed strategy of how to match spending with revenue.

“We’ve cut the budget this year for the second year in a row,” the governor said. “This is the first time in 60 years the budget has been cut over 12%. Making tough decisions in a tough environment is what being a governor is about. No plan is not what being a governor is about.”

Principal and interest payments on the state’s roughly $32 billion of outstanding debt now accounts for 10% of the fiscal budget, an issue that was not discussed during the debate.

New Jersey’s Transportation Trust Fund, which is supported by gas tax revenues and motor vehicle fees, will run out of revenues to support ongoing road and bridge upgrades in fiscal 2012. All of those dedicated funds will be needed to meet debt service costs. In addition, the program’s capacity in fiscal 2011 depends upon borrowing costs the state incurs this year.

Only Daggett raised the possibility of increasing the gas tax or tolls to help support the state’s road and bridge program.

“The only way were going to be able to [fund the program] realistically is probably deal with it through additional gas taxes or possibly putting additional tolls on our roads or increasing our tolls because with an $8 billion [fiscal 2011] budget gap it’s going to be very difficult to [fund] that,” Daggett said. “And we’re going have to step up and be honest about the issues that face us and be willing to make the tough decisions that make the state operational again.”

While he didn’t specifically point to a gas tax, Corzine acknowledge that funding the TTFA may result in an unpopular solution.

“We will have to sit with the legislature and decide among very unattractive alternatives on how we get this Transportation Trust Fund back in order,” the governor said.

Christie proposed supporting road and bridge capital projects through allocations in the general fund as New Jersey residents already pay high property taxes.

“The people of New Jersey are suffering,” the GOP candidate said. “They are suffocating under these taxes. We can’t do it. We should go pay as you go on the Transportation Trust Fund from current budget funds.”

New Jersey has a $23 billion pension liability and a $55.9 billion other post employment benefit liability. Daggett and Christie said they favor placing new state employees in a defined contribution retirement plan similar to a 401k. Corzine did not say he would end the traditional pension benefit plan for new workers. During his term as governor, the state has boosted its pension contributions, raised the retirement age to 62 and required new workers to pay for more of their benefits.

“We can make it work if we manage it well and we actually reform at an appropriate level,” Corzine said.

The candidates were polite throughout the debate, although the issue of mandates for health insurance companies did cause some heated words. Corzine claims Christie’s health insurance strategy would put women at risk of losing coverage for mammograms. The GOP candidate denied that claim and called for the governor to stop suggesting it in campaign advertisements.

Daggett offered a few chuckles during the night and stressed that New Jersey’s policy issues trump distractions such as Christie’s driving record and loans that both the governor and the GOP candidate have made to friends and co-workers.

“I don’t care about driving records,” Daggett said dryly. “I don’t care about loans to subordinates and girlfriends, and neighbors and relatives. I don’t care about any of that stuff. What I care about are the issues that are facing this state [which] we ought to step up and talk about seriously through the rest of this campaign.”

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