October 20, 2008
 | STATE SALES TAX HOLIDAY A LIFELINE |
As the U.S. and global stock markets continue their rollercoaster ride, New Jersey consumers, now, more than ever, need a break while our state’s businesses need a boost.
Much of the focus so far has focused on how to bail out the big Wall Street investors, but someone needs to throw a lifeline to middle class families and small businesses. This is especially vital as we head into the holiday shopping season which is the height of consumer spending and the all-important make-or-break period for many small business owners.
The prognosis for the holiday shopping season and beyond as you might well imagine is bleak. The New York Times is reporting that the impending Christmas shopping season could be one of the worst in 25 years while the Associated Press reported that the Strategic Research Group expects 1,000 to 1,500 stores to close shop in the two months following Christmas.
While no one party has the cure all for all of the state’s economic ills, Assembly Republicans, with Senate Republican support, have proposed a plan to give consumers and the small business community a shot in the arm by calling for a temporary roll back of the state sales tax from 7 to 3.5 percent (and from 3.5 percent to 1.75 percent in Urban Enterprise Zones) starting on November 28, 2008 – Black Friday, and ending at midnight Sunday, January 4, 2009. We fully recognize that our plan is not a long-term fix for our state’s economy, but it could very well provide much needed short-term benefits for our struggling families and the decimated small business owner.
It is important to understand that the ultimate cost of not doing this may be much greater than the immediate cost to the state. Again, many businesses depend on holiday season sales to carry them through the year; if we don’t spur consumer purchases and greater competition with New York and Pennsylvania retailers, many NJ employers could be forced to cut jobs and perhaps even shut down. That would be devastating to employees and to our economy. We must keep people working in New Jersey.
We also believe that the reduced sales tax will draw additional shoppers on the hunt for a bargain from neighboring states where sales taxes are already higher than New Jersey’s, namely, New York and Pennsylvania. For New Jersey consumers, the lower sales tax, combined with high gasoline costs, may be just the incentive to keep them from crossing state lines and spending their holiday dollars in Delaware.
Reducing the sales tax by half for the last five weeks of the year could reduce state revenues by approximately $500 million, however, increased economic activity should make up for a large part of any lost revenue. Any additional lost revenue could be offset by spending cuts.
In May, Assembly and Senate Republicans proposed its “Common Sense Plan for an Affordable New Jersey,” which identifies 1.32 billion in comprehensive, practical spending cuts and contains a long-term plan for economic growth. If the Legislature were to enact just a third of the proposed budget cuts, it would more than make up for any potential loss in sales tax revenue – even if the sales tax reduction failed to generate any increase in sales activity, which is unlikely.
Let’s be honest, the economic crisis facing New Jersey isn’t the result of what is currently happening on Wall Street. The Garden State’s economy has been free falling for several years now due to a crushing tax burden, choking debt and obscene state government spending.
Basic economics tells us we can’t tax, spend or borrow our way to prosperity. Yet for almost three years, that has been the Corzine Administration’s fiscal policy for our state. We hate to say “we told you so,” but governor, “we told you so.” His refusal to pull the reigns in on taxes and spending has inflicted undue and extraordinary pain on our middle class, senior citizens, and small business owners. Instead of putting our state economy in a position to ride a national economic storm, the failed financial policies of the Corzine Administration and ruling Democrats have exacerbated the pain for our citizens.
When Governor Corzine recently unveiled his big government, more spending economic stimulus plan he said “...we cannot stand idly by.” On this, we agree. However, his plan provides no immediate or long-term relief for the battered middle class and small business owner. Our sales tax holiday, on the other hand, is the first and only proposal that would provide immediate relief to everyone. It requires no application forms, no “checks in the mail,” no rebates or delays. You buy, you save. It’s that simple.
Assemblyman David Rible represents the 11th Legislative District
