As if taxes were the only measure of whether or not a state is a good place to live. Corzine was not a good governor, but Christie is almost exponentially worse. He’s a bully.
What is a state going to do when it has no more money?
That is the situation facing New Jersey. It is borrowed up to the point where they can’t borrow any more. The spending budget is higher than the tax revenues.
The government departments and unions refuse to look at actual spending for previous years, but only want to deal with “budget requests”.
One of the talking heads on television told Christie to just raise taxes. Christie said that when they raise taxes now, they actually collect LESS, not more.
That’s because people who can afford to pay taxes are leaving the state in droves. So the more that they raise taxes, the faster the people move out. And the companies in New Jersey expand elsewhere and when they shut down unprofitable businesses, the employees who get laid off cannot find replacement jobs. So they move out of the state to where the job prospects are better. Or, they just collect unemployment for two years and in the meanwhile pay minimal, if any, income taxes.
Many people are working just to pay the real estate taxes. As soon as they can, they sell and move out.
If a municipality assesses the value of your house at $500,000 [a SMALL Cape Cod style house in NJ with real estate taxes of $1000 per month] and if you sell it for $400,000 then the new assessed value is $400,000 so the real estate taxes collected drop by 20%. And the reduced assessed value is reflected onto the tax rolls for the rest of the homes in that town. If the town then raises the taxes to keep the amount collected stable, then the value of the houses drops because the taxes have gone higher. And more people are driven out, depressing the home valuations still further.
Christie inherited a situation in which there are no longer any new or additional sources of tax revenue to tap into.
And the unions of the government workers refuse to make any concessions or even agree to a freeze on increases. And they, in many cases, do not contribute to the medical or pension plans. And they refuse to contribute anything. When the complain about being paid below average, it turns out they are committing falsehoods.
So, Christie has a real mess to deal with.
The equivalent would be if you were getting a $10 per week allowance, and then your parents lost their jobs, but you demanded to continue getting the same $10 per week allowance, even with no money coming in.
The Federal government can print money; states cannot.
The downside of the Federal government printing more money is high inflation. Sometimes it doesn’t show up right away if demand for products is low due a recession when demand is low. However, it can show up in the price of gold, for example. Or other products such as bread or services such as repairs and service calls.
Nevertheless, the Federal government is taking on more tasks and more spending, not less. And the tax revenues are not keeping up because economic growth is now negative. The economy is not growing, it is contracting. And President Obama’s spokespersons have stated that it is unreasonable to expect the United States’ economy to continue to increase.