New Jersey Governor Chris Christie got a lot of media attention this week when he announced that Warren Buffett “should just write [the government] a check and shut up,” on CNN’s Piers Morgan Tonight. His great one-liner obscured the more profound question he was being asked, which was: Shouldn’t the wealthy pay a higher proportion of taxes? Beliefs about progressive taxation vary widely, but income taxes at every level of government are structured so that the wealthy pay a higher proportion of taxes.
If I had been asking the governor questions, I would have focused on his fetish for cutting income taxes when his state’s cashbox is nearly empty. Or as the rating agency Standard & Poor’s defined the problem:
New Jersey Gov. Chris Christie released his proposed $32.15 billion budget for fiscal 2013 on Feb. 21. The budget remains structurally unbalanced, is built on what Standard & Poor’s Ratings Services regards as optimistic economic projections to close the budget gap, and increases New Jersey’s (AA-/Stable) reliance on nonrecurring revenues.
Assuming no further reductions to fund balance are needed to cover revenue shortfalls in fiscal 2012, reserves would fall to $300 million or less than 1% of expenditures at fiscal year-end 2013 if the legislature adopts the proposed budget. At this level, New Jersey’s fund balance would provide a limited financial cushion with which to offset revenue shortfalls should current revenue growth assumptions turn out to be optimistic.
I’ll translate the rating agency jargon: The state revenue projections are fantasy. If New Jersey gets lucky and revenues don’t fall short again as they did this year, then the state will end up with a cushion of $300 million to buffer a $32 billion budget. But if economic conditions slow at all (remember, many New Jerseyans work on Wall Street), then take out the midyear budget ax and start chopping. Basically the state is and will be running on fumes.