>Thursday, May 08, 2008
It’s like watching a car wreck in slow motion.
What the Democrats are doing to the state’s economy, I mean. Pieces are flying off in all directions. In terms of taxes and regulation, New Jersey was once a relative haven, a cheap place to do business. But for most of this century, we’ve been slowly losing high-income residents and high-income jobs. James Hughes and Joe Seneca of the Bloustein School of Planning and Public Policy at Rutgers have been documenting this in a series of depressing reports about the state’s economy.
“When business decisions for expansion are made, they’re just not being made in New Jersey,” said Seneca when I spoke to him yesterday.
The primary source of job growth in recent years has been in government, not private industry. And that represents a death spiral. Public employment creates higher taxes, which in turn discourage private employers from locating or expanding in New Jersey.
Don’t worry, though. The Corzine administration’s doing something about the business climate: It’s making it worse. That Family Leave Act the governor signed recently will raise payroll taxes and will also force employers to grant leave to workers for up to six weeks at a time.
And then the other day the Department of Community Affairs adopted new affordable-housing guidelines that put a burden on businesses not seen in any other state. If you want to construct a store or office complex in New Jersey, you can be required to construct or finance housing nearby. Democrats are even pushing for a statewide 2.5 percent tax on all commercial construction to fund that home building scheme.
This anti-business environment began with the first major action Jim McGreevey took in 2002. He raised the corporate income tax. The small increase in revenue doesn’t make up for the jobs that will go to lower-tax states.
“All we’re looking for here is a billion more,” said Assemblyman Joe Cryan at that time. Cryan has since risen to state Democratic chairman thanks to the attitude embodied in that quote.
To get that billion, McGreevey had to tax corporations through an “alternative minimum assessment” even in years when they had no profits.
By 2004, a CFO Magazine survey of corporate tax officials showed New Jersey to have “the least fair and predictable” tax system in America. But McGreevey was just getting started. He proposed a so-called “millionaire’s tax.” The Democrats got it through the Legislature with the false claim that it would cost the typical taxpayer in the over-$500,000 bracket a mere $846 annually. The actual average cost was $29,000 a year.
Rich people can do math even if Democrats can’t, and that tax chased some high-income retirees to Florida and wealthy Wall Streeters to Connecticut.
Just in case any of those rich guys had any thought of moving to the beautiful northwestern section of New Jersey, McGreevey also pushed through the Highlands Act. Theoretically, the bill was supposed to protect the unspoiled wilderness. But shortly after it was adopted, I visited a guy who owns a strip of land fronting on the highway in a commercial district of Mount Olive. He wanted to build an office park there but was prohibited by the new law. Other states dream of attracting such businesses because of their clean, high-paying jobs and their role in reducing property taxes for homeowners. Not Jersey.
When Wall Street whiz Jon Corzine took office in 2006, he had a chance to change the anti-business climate created by his predecessor. And he had a promising start, by which I mean he kept promising to do so.
As for keeping those promises, no dice. His pledge to “call a special legislative session to deal with property taxes” led to a systematic process of rejecting any ideas that would cut the cost of government. A low point in that effort came when Corzine appeared at a rally of public employees outside the Statehouse and pledged to protect the workers against seniority and pension reforms that might be part of any property tax reform proposal.
To his credit, Corzine did eliminate McGreevey’s alternative minimum tax. Other than that, his administration has been as anti-business as McGreevey’s, though he at least has toned down the rhetoric.
As for his latest moves in the area of family leave and affordable housing, that stuff might sound nice, but it makes New Jersey even less competitive, says Hughes.
“Pennsylvania will make the argument that New Jersey is not business-friendly,” Hughes told me. “It’s a business climate effect other states will use against us.”
And it’s a business climate that never would have developed if not for a deliberate policy of the past two Democratic administrations.
As I said, this has been like watching a car wreck. But there’s one difference: This is no accident.
Paul Mulshine may be reached at pmulshine@starledger.com. To comment on his column, go to NJVoices.com.