*Please reply with your name and affiliation by Friday, March 6, to
either Eva Bonime at [email protected] or (973) 986-4578, or to
[email protected]
**************************************************
*
SIGN-ON LETTER FROM NEW JERSEY ECONOMISTS
As of Feb. 20, 2009
Dear Governor Corzine:
The challenges confronting New Jersey are daunting. As this is written
the state faces a huge potential shortfall in the Fiscal Year 2010
budget. The depth of what could be a severe national recession is yet to
be determined, but it appears clear there will be no rapid turnaround.
We commend you for the leadership you have shown in trying to strengthen
New Jersey state government's financial situation. And we agree with you
that the federal government must do its part by providing meaningful
fiscal relief to help states maintain essential public services during
this crisis.
We are concerned, however, that state budget cuts of the magnitude being
discussed will seriously worsen the effects of this economic downturn on
low- and moderate-income New Jersey residents. The requirement of a
balanced budget presents states with difficult choices in balancing
their budgets during recessions. The only two options are budget cuts
and revenue increases. It is important to point out that the best course
is a combination of the two, as opposed to balancing the budget by cuts
alone. Economic theory and historical experience make this clear: it is
preferable from an economic standpoint to raise taxes on those with high
incomes than to cut state spending.
The reasoning is straightforward: in a recession, it is important to
raise (or not decrease) the level of total spending---by households,
businesses and government---in the economy. Doing so keeps people
employed and making purchases, and makes it more likely that businesses
will want to invest in order to serve that consumer demand. Budget cuts,
on the other hand, reduce the level of total spending. Raising taxes on
high income households also will reduce spending, but by much less than
the amount of the tax increase. That is because those with plenty of
income typically spend only a fraction of their income.
By contrast, almost every dollar of state and local government spending
on transfer payments to the needy and for the salaries of public
servants providing vital services to our communities enters the local
economy right away. That means it generates a greater economic impact.
The New Jersey local spending impact difference is even greater when you
consider that much of the higher state income tax will be deductible
against federal income taxes.
A state tax increase on households making $250,000-plus a year would
affect only four percent of tax filers in New Jersey, while raising
significant revenue to ease the impact of budget cuts. It is a crucial
part of a balanced approach that also would include federal assistance
and some level of inevitable state budget cuts.
Raising taxes and maintaining public expenditures and investments also
helps New Jersey and the nation in meeting their long run needs. America
today faces two major problems---inadequate investments, especially in
infrastructure, and growing inequality. The poor are particularly
dependent on government expenditures, and cutbacks would hurt them the most.
Our nation is at an historic juncture. In both Washington and Trenton,
we need to move toward economic and fiscal policies that restore a
better balance between the private and public sectors and share the
burden of sacrifice more equitably than has been the case in recent years.
Signed,
Eileen Appelbaum, Rutgers Center for Women and Work
Ron Caplan, The Richard Stockton College of New Jersey
Henry A. Coleman, Bloustein School of Planning and Public Policy,
Rutgers University
Oliver Cooke, The Richard Stockton College of New Jersey
Deborah M. Figart, The Richard Stockton College of New Jersey
Teresa Ghilarducci, Schwartz Center for Economic Policy Analysis, The
New School for Social Research
Reza Ghorashi, The Richard Stockton College of New Jersey
Norman J. Glickman, Bloustein School of Planning and Public Policy,
Rutgers University
Ellen Mutari, The Richard Stockton College of New Jersey
Michele Naples, School of Business, The College of New Jersey
Carl Pray, Department of Agricultural, Food and Resource Economics,
Rutgers University
Robert H. Scott III, Monmouth University
Eldar Shafir, Princeton University
Stuart Shapiro, Bloustein School of Planning and Public Policy, Rutgers
University
To add your name to the list, please email [email protected]
or call Eva Bonime at (973) 986-4578.
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