New Jersey's Whitman Rides the Tax-Cut Wave
How well her reductions work will help determine her standing as a national political figure
CALL her Governor Tax Cut.
New Jersey's Republican Gov. Christine Todd Whitman has now crossed the Delaware and stepped into the national focus with her Trenton tax cuts.
In a manner that would make the leaders of the Boston Tea Party proud, Governor Whitman has jettisoned a significant chunk of the state's income taxes. This week, she announced plans to complete her 1993 campaign pledge of a 30 percent reduction in the state income tax - and one year ahead of schedule.
With the New Jersey economy participating in the nation's economic recovery, Whitman had the extra money to move the tax cuts up.
Those sizable cuts became the talk of Washington on Tuesday when Whitman became the first governor in history to give the reply to a State of the Union address.
Her short reply - ``I won't ask for equal time,'' she joked after President Clinton's 81-minute speech - included a reference to tax cuts 15 times. And she pledged lower federal taxes by next January's State of the Union address.
``With national TV she has moved into a whole new strata,'' says Cliff Zukin, acting chairman of the Public Policy Department at Rutgers University. There has been some discussion about Whitman as a potential vice-presidential candidate in 1996.
Whitman has accomplished her tax reductions without dramatically slashing the state's budget. In her fiscal 1996 budget, government operations will shrink by $129 million; but total state spending will rise by about 3 percent to $16 billion.
Even with the tax cuts, the state will end the fiscal year with a projected surplus of $500 million dollars.
Instead of moving into new programs, the governor decided to give the funds back to citizens in the form of tax cuts.
Most of the savings are the result of reductions in appropriations for the state's pension funds. Last year, Whitman reduced state contributions to the pension plan by $3.2 billion over four years.
Future hikes needed
``In the long run, after 10 to 12 years, when she is out of the statehouse, whoever is governor will have to deal with the issue and put the required appropriations back in at a higher level,'' says Hyman Grossman, managing director of Standard & Poor's, a rating service.
Despite the maneuver, New Jersey's rating has remained strong, and Mr. Grossman gives Whitman high grades. ``She's come up with some innovation and has some talented people around her,'' says Grossman.
Democrats, however, have had no problem criticizing Whitman. Assemblyman Bernard Kenny points to higher property taxes, saying they rose 15 percent last year and are expected to go up 6 percent this year.
The rising property taxes have soured Manalapan, N.J., resident Jerry Levinson on Whitman's tax cuts. ``My property taxes went up $1,600 last year,'' complains Mr. Levinson, who owns a delicatessen. He says the tax cuts ``didn't really compensate for the increase in property taxes.''
Whitman maintains the state has little to do with property taxes. ``High property taxes are the price homeowners pay as school boards and local and county governments struggle to control costs,'' she said Monday.
The property tax hikes have come even though New Jersey has kept its funding for local governments level for the last four years.
Municipalities ``are confronted with the same inflationary increases that the homeowner is confronted with,'' says William Dressell, director of the New Jersey League of Municipalities in Trenton. He cites increases in postage, fuel, and insurance. ``These are costs that go beyond our ability to control,'' he adds.
In fact, Grossman of Standard & Poor's says the property-tax hikes are not really the state's fault. He points to falling commercial and residential real estate values. As owners have demanded lower assessed values, local communities saw their revenues shrink. ``It results in a lower tax base, and unless you make cuts, the situation requires an increase in property taxes,'' explains Grossman.
Professor Zukin of Rutgers says the Whitman tax breaks will pass the legislature without any problems. He says there is strong public support that should translate into votes.
Pressure on New York
The tax cuts in New Jersey should put more pressure on neighboring New York to cut its income taxes, says David Shaffer, president of the Public Policy Institute in Albany.
``The fact that she started it should have inspired us to get cracking,'' states Mr. Shaffer, who notes that New Jersey's job growth is double New York's. ``If we don't do the same, the gap will only get worse,'' he predicts.
Once Whitman gets her tax cuts, political observers will be watching to see if she has any more new ideas. ``Right now we don't see an agenda - where she would spend the money if she had it,'' says Zukin. ``Next she has to show us a vision of where she wants New Jersey to go.''