NJ Fiscal Folly

Thursday, March 16, 2006

Federal Taxes And Federal Spending

The Tax Foundation has published an update to their annual state-by-state comparison of Federal taxes paid versus Federal spending received. I had previously posted about this topic below.

For the fourth consecutive year, NJ ranked #50 (ie, worst). For every $1 in Federal taxes paid, NJ received $0.55 in Federal spending. For FY 2004, NJ's "balance of payments" deficit was $34.6 billion, a big deal given our current financial situation.

As the report notes, "Thanks to a steeply progressive federal income tax, states with higher incomes pay vastly higher federal taxes, payments that are unlikely ever to be matched by federal spending directed to those states. Ironically, most of these high-paying states are the so-called blue states that have generally elected politicians who support a more steeply progressive tax system even though their own constituents bear a greater share of the burden as the code gets more progressive." To be blunt, Democratic grandstanding on income taxes ("tax the rich") ultimately hurts NJ residents.

There's another reason NJ residents get hurt. States like NJ, NY, and Massachusetts suffer from an excess of politicians with national ambitions. As a result, they spend too much time campaigning for higher office and too little time representing their states. They never stay in place long enough to acquire sufficient seniority or expertise to increase Federal funding for their states. They seek out TV exposure rather than more mundane responsibilities with greater practical impact. They do a poor job of organizing effective coalitions with other politicians from similar states. Corzine is a perfect example. The irony now is that Governor Corzine must deal with the consequences of Senator Corzine's shortcomings.

(Lautenberg's problem isn't national ambition. He's just ineffective.)

Update: The next worst state on the list was Connecticut, which received $0.66 in Federal spending for every $1 in Federal taxes paid. If NJ only reached that level, we would receive over $8 billion in additional Federal funds every year.


At 8:16 PM, Blogger Enlighten said...

Last year we continuously wrote about the 57 cents return on the federal tax dollar New Jersey receives and other than a few comments, no one seems to care. We wrote about the New Jersey Democrats representing us in Washington voting time and again against the state’s taxpayers and our fellow citizens elected Jon Corzine as Governor as a reward.

Even as you point out it’s getting worse with a return of 55 cents on the dollar, look for the New Jersey Democrats to join others in their party in an attempt to block making the “Bush tax cuts” permanent. They don’t represent the people of New Jersey, they represent a socialist philosophy.

At 9:54 PM, Blogger Bob said...

Last year I wrote about this as well. I had the figure at 62¢.

Slippage is rampant in government. Out governor is still committed to increasing property tax rebates which fuels the state government machine. Remember, Corzine is greatly responsible for the Garden State only receiving 55¢ for each dollar sent to DC.

At 8:29 AM, Blogger PN said...

If I take the optimistic view, I'd say that Corzine really doesn't have a choice. All of his other revenue options are exhausted, so he'll have to put more emphasis on Federal funds.

I don't expect miracles, but even a small improvement would be a big help to NJ.


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