If you need more evidence that Republicans are no longer the party of fiscal prudence and that the Democrats are no longer out-of-control spendthrifts, take a look at two recent tax plans from the governors of New Jersey and Maryland. In an overture that primarily benefits the richest residents of New Jersey, Republican Governor Chris Christie has proposed cutting his state’s income taxes by 10 percent across the board, even though his state desperately needs revenue. At the other end of the spectrum, Maryland’s Democratic governor, Martin O’Malley, has proposed fading out deductions and exemptions for the richest taxpayers in his state, effectively raising their tax rates.
Maryland’s credit rating is a sterling AAA. In contrast, New Jersey is rated in the bottom tier of states for credit quality. Christie is further destabilizing New Jersey’s fiscal condition by reducing the amount of revenue without corresponding reductions in expenses. A profligate Republican state and a prudent Democratic one — isn’t it supposed to be the other way around?
In some of the best local political journalism that I’ve seen (watch the fantastic video), New Jersey’s Star-Ledger reported that Governor Christie’s proposed 10 percent income tax reduction has practically no chance of passage. The Star-Ledger editorial page editor, Tom Moran, speculated that Christie’s action was either a legislative bargaining chip or an act of pandering to the national press. Democrat Loretta Weinberg, the New Jersey senate majority leader, pointed out that a millionaire would get about $7,200 in relief under Christie’s plan, while a family earning $50,000 a year would get about $80. Meanwhile, the tax cut would cost the state about $1 billion.
New Jersey’s fiscal house is a mess. In particular the state’s public pension plan is significantly underfunded, and New Jersey paid only 14 percent of its required pension contribution this year. Maryland, which is a AAA credit, made 84 percent of its required pension contributions this year, according to Pew Center on the States.
We’ve known for a while now that broad caricatures of party philosophies have been spun contrary to the facts. For example, Republican President George W. Bush raised federal spending as a percentage of U.S. GDP from 18.2 percent in 2001 to 24.7 percent of 2009. This massive government expansion came alongside a reduction in taxes. Now the federal government is starved for revenues, and our national debt grows bigger and bigger. New Jersey seems to be on a similar path.