Killing the Sacred Cow

One of the problems with New Jersey taxation is that it tends to be regressive. That is, the bulk of the state’s tax income comes from the lower and middle economic strata, while the wealthy use loopholes, expensive tax lawyers, and other methods to minimize their tax share.

Governor Christie’s approach of slashing taxes is a sham, since the result will be increased burden on the municipalities, more user fees, as well as a general reduction in government services reducing the quality of life in the Garden State.

There is no doubt that we need to reduce state government spending, but this should be done with a scalpel instead of an axe. The state should take a lesson from business and aggressively apply Lean/Six-Sigma techniques to every aspect of state services. But this will not be enough. Like it or not, the state is in a financial hole, and some taxes will have to increase.

Right now, New Jersey has one of the lowest gasoline taxes in the nation. We should immediately raise the gasoline tax by 10¢ per gallon. Assuming a person drives 12,000 miles per year and gets 25 miles to a gallon, this is a modest $48.00 tax increase. To make this non-regressive, licensed drivers with income less than $30,000 should receive an equivalent tax credit on their income tax.

This proposal has many benefits:

• Since a gasoline tax is already being collected, the additional overhead burden on tax collection is minimal.
• Increases in gasoline prices would encourage conservation and purchase of more fuel-efficient vehicles.
• More people would consider using mass transit (assuming the Governor doesn’t decimate NJ Transit)
• Less driving would reduce wear and tear on our highway infrastructure.
• Given that we are in the New York to Philly corridor, a good portion of the added tax revenue would come from out of state drivers when they fill up at our newly renamed Corporate rest areas.

A wise person told me that low gasoline taxes are a sacred cow in New Jersey. Well, these are tough times in the state, and even sacred cows are on the chopping block.