Don’t be a Girlie Man, Governor. Raise the Gas Tax…Cut the Sales Tax

Murray Sabrin

New Jersey is on the wrong road…the road to bankruptcy and a weak—very weak-- economy because the Republicrats have been taxing, spending, borrowing and regulating businesses (unnecessarily) for decades. Apparently, Governor Corzine wants to continue at least a couple of these polices with his proposal to refinance a portion of the Transportation Trust Fund (TTF) and borrow more money to avoid increasing the gas tax. This may be good politics for the Governor but a lousy deal for taxpayers and motorists

(We will have to wait until March 21st to get the details of the 2007 budget and learn who Corzine will stick it to to balance the budget.)

The tax burden on the people is what government spends and borrows. Taxes paid today and in the future reflect the government’s current and future expenditures, its liabilities. Unless people make gifts totaling in the hundreds of millions of dollars to the state Treasury over the next 30 years, any new debts the state incurs will have to be paid by the people in the form of higher taxes—gasoline or other taxes to pay off the 30 year bonds Corzine wants to issue to replenish the TTF. Or, spending could be cut to free up money to pay for increased debt payments. Don’t count on it.

To insure that the roads are improved, the Governor should raise the gas tax 20 cents per gallon, which would cost the average motorist about $2-$4 extra per week. These funds should only be used for highways, roads and bridges. No more debt, period.

The TTF was created on a pay-as-you-go basis. Projects would be funded each year by the gas tax. Unfortunately, the TTF has also been used for mass transit projects and general operating expenses. In short, it was raided. Have the raiders been caught and punished? Of course not. This is New Jersey. No bad fiscal deed gets punished.

Mass transit should be funded on a pay-as-you go basis, and long–term debt should be used for capital expenditures. Motorists and taxpayers should not fund mass transit. The fare box and tight management controls should put revenues and expenses, including interest costs, in balance.

There is no free lunch. There is no tooth fairy or Easter Bunny. Taxpayers pay for government. Politicians have been trying their best to convince the public that government debt is not really a liability of taxpayers. And even some politicians think debt is costless. One member of the Legislature did not realize that bonds issued to pay for the school construction boondoggle had to be paid back. (This was told to me by Star- Ledger columnist Paul Mulshine who repeated it at the Business and Financial Outlook Roundtable last December. With dimwits like this in the Legislature it is no wonder the state’s finances are in such sad shape.)

Governor Corzine is a self-proclaimed “progressive,” which means he thinks more with his heart than his head. He wants to make New Jersey a much better best place to do business. To achieve this goal, he needs to begin the transformation of New Jersey’s welfare state.

The State of New Jersey should begin weaning nonprofits and other nongovernmental agencies off taxpayers’ teats. By cutting the sales tax at least one cent in fiscal 2007, hundreds of millions of dollars would remain with taxpayers who would then have the opportunity to fund the nonprofits they prefer. This approach would get resources to nonprofits directly and be more cost effective than relying on government grants and bureaucracies shuffling monies around the state. If people argue this is unrealistic because the people won’t donate to local social service agencies, colleges, hospitals and other organizations that currently get some of their revenue form the state, I ask them to stop and think what they are saying. Supposedly the people of New Jersey, a blue state, place a high priority in helping their fellow human being and the institutions that service the needs of people less fortunate than they are. If people don’t support the nonprofits, then the people will have spoken: the hell with everyone else.

Why voluntarism is considered “unrealistic” and, for some, repugnant, while the welfare state, which is based on coercion-- the massive use of force--is considered humanitarian? In our Orwellian world, coercion is good and voluntary giving is tacky. This is perverse. Our culture is now based on the principles of plunder. When governments tax—i.e., plunder---and spends the booty on “worthy” programs, politicians, academics, and the pundit class think that is good.

We have traveled far down the road of velvet fascism. We can get off and take the free enterprise- limited government highway instead. In the meantime, every government program is considered untouchable because it has a worthy goal, i.e., Social Security, Medicare, Medicaid, and public education, among others. The Big Three federal government programs are financially unsustainable. That’s just a fact of life. Public educations costs in New Jersey are increasing faster than the ability of taxpayers to fund the system. Something has to give.

Will Governor Corzine listen to his heart and maintain the status quo? Or, will he let his head do the thinking about what needs to be done--downsizing the budget, reducing taxes, and abolishing unnecessary regulations-- to put the state’s economy on the right track?

(Monday, March 27, 12:30pm-1:30pm. The Coming Collapse of the Welfare-Warfare State, Spring Distinguished Lecture. Bergen Community College, Student Life, 400 Paramus Road, Paramus, Room TEC-128. 201-447-7215.)

Murray Sabrin, Ph.D., is professor of finance in the School of Business, Ramapo College of New Jersey, where he is also executive director of the Center for Business and Public Policy, www.ramapo.edu/cbpp.