N.J. tax revolters (the silent majority) make a plea to public employees

BY MICHAEL BUSLER

COMMENTARY

For the past six months I have tried to present the tax revolters' view on how to solve New Jersey's budget deficit crisis. Basically their view is to not increase taxes at all but rather to significantly reduce spending. But who are these tax revolters?

They represent what is likely the majority of people. They are primarily hard working individuals whose contributions comprise the vast majority of income earned in New Jersey. They are generally well educated, either formally or informally, are actively involved in the lives of their children and family, and have very little free time to publicly express themselves, except at the voting booth. For that reason they seem to be silent most of the time.

Some squeeze time out of their busy productive days to join organizations like the Tea Party, but most can't do that and have to remain silent. For this reason we can call the tax revolters the "silent majority" whose voice is heard only on election day. But on that day their voice is generally loud and clear.

They started out by noting the extremely heavy and counter-productive tax burden that they carry, While studies show that almost half of the adult population pays no income tax, these people pay a heavy federal income tax burden on top of the heavy state income tax burden which is on top of the heavy property tax burden which is added to the 7% sales tax that they pay on almost everything they buy and the more than 6% social security tax they pay. Added together they find that they work half of the day to pay their taxes and the other half to support their families. They believe that this tax structure discourages them from producing more. Their current position is that they will not allow one more penny to be paid in taxes, while they understand that this could result in smaller government.

This "silent majority" knows that due to poor economic conditions, tax revenues are about 10% less than what is needed to fund all the committed spending. Governor Christie, who recognizes that the "silent majority" is extremely overtaxed, has vowed to hold the line on taxes while decreasing spending by 10%. Most of the decrease comes in fewer social programs and drastic cuts in education funding. But this is causing severe problems. Is there a solution?

Every study that compares the average salary and benefits of public employees to the salary and benefits of private sector employees concludes that public employees earn much much more than their private sector counterparts. On top of that these employees will receive a 3.5% salary increase on July 1, 2010 and another 3.5% salary increase six months later. The result is that public employees will earn much much much more. And remember that they can retire at 62 rather than the 66 that Social Security currently requires.

Public school teachers have correctly pointed out that the cuts in funding for education will result in the elimination of extremely important programs and the laying off of vital teachers. This would be a disaster, they claim. The silent majority agrees. So they want to make a plea. They would ask public employees to accept the 10/70 plan. That means decline the scheduled 7% salary increase and instead accept a 10% salary reduction. In addition allow the retirement age to be raised to 70. This would balance the budget while maintaining virtually all of the education programs without laying off any teachers. It would mean that instead of public employees earning "much much much" more than those in the private sector, they would earn only "much" more.

The teachers and other public employees say that this is not fair. And they may be right. At this point, though, finding a fair solution to the budget deficit problem may be impossible. But the 10/70 plan represents the least unfair solution. That's probably the best we can do.

Michael Busler is an Associate Professor of Finance and a Fellow at the William J. Hughes Center for Public Policy at The Richard Stockton College.