it is based on that, but the average check in the State will be $600, and it will be going to 1.9 million homeowners. Members of the committee, New Jersey's experience gives me confidence that tax cuts can make a tremendous contribution to the well-being and prosperity of the community, whether it is a town of 5,000 or a Nation of 50 States. The U.S. Congress deserves credit for moving our Nation to a balanced budget and a Federal surplus. Having dealt with that kind of situation at the State level, I know that you have been offered hundreds of ideas and some of them very good ideas-as to how to spend that surplus even before it arrives. When considering what to do with the Federal surplus-and I hesitate to offer ideas to the Congress, because you know these issues far better than mere Governors of the States-but I believe that Congress should set aside funding for high priorities, like Social Security and education. I also believe, however, that Congress would do well to consider returning some of the surplus funds to hard-working, American taxpayers. As a Governor of a State that receives the lowest return on our Federal tax dollar-we are 50th of the 50 States-I also believe that kind of a tax cut would be the most equitable to the people of my State. Tax cuts work. They are important in sustaining economic growth, increasing savings and investment capital and, most of all, giving the working men and women of this country the opportunity to spend more of their hard-earned tax dollars on the needs of their families. Tax cuts keep government's relationship with the people in balance and help limit the size of government. What is more, they also keep our Nation headed toward prosperity as we head into a new century. Mr. Chairman, members of the committee, I thank you for your time, and I welcome any questions that you might have for me. [The prepared statement of Governor Whitman follows:] TESTIMONY OF GOVERNOR CHRISTINE TODD WHITMAN Thank you, Mr. Chairman, and good morning. I want to thank the members of the committee for this opportunity to speak about tax reform in the State of New Jersey. It has been said that the power to tax is the power to destroy. By the same token, the power to cut taxes is the power to restore. A responsible government balances the pursuit of revenue to do the people's business with the pursuit of low taxes to keep the people in business. When I ran for Governor six years ago, the tax system in New Jersey was out of balance. A national recession had been compounded by the largest tax increase in my state's history - $2.8 billion. Companies fled New Jersey, and we lost hundreds of thousands of jobs. In an increasingly global economy, I believe that states must do all they can to attract jobs and, just as important, retain the jobs they already have. And it is clear to me that establishing a competitive tax structure is one of the first things you have to do. During my campaign, I proposed a steep cut in the state's personal income tax, including a 30 percent cut for the majority of New Jersey workers. I believed it was the right way to help families who were struggling to make ends meet as government at every level took more and more from their paycheck. I believed it was a good way to force state government to spend its money more intelligently. I also believed it was the only way to start reversing the exodus of companies and jobs from the State of New Jersey. The critics had a field day with my proposal. Some said it was a cynical ploy to get elected - and were convinced I had no intention of making it happen. Some feared I would cut taxes because they said state government couldn't afford the loss of revenue. Others dismissed the idea as likely to have little effect on either families or businesses. We phased in the income tax cut between 1994 and 1996, a year ahead of schedule, and removed 350,000 low-income earners from the income tax rolls altogether. And let me tell you: in every one of those years, we increased the number of jobs and businesses in the State of New Jersey, we decreased the state tax burden on our families, and we still brought in more tax revenues than we did the year before. We recovered every job lost from the previous administration's tax increase and added well over 130,000 more. More New Jerseyans are working than ever before. În fact, New Jersey's unemployment rate is the lowest in nearly a decade. We received more good news in the most recent regional forecast analysis from WEFA. Let me quote from it briefly: "New Jersey has now had the fastest employment growth in the Mid-Atlantic region for the sixth straight year.... It has outpaced both New York and Pennsylvania in all major sectors except for the two that are shrinking in the middle Atlantic region – government and manufacturing." Mr. Chairman, we have proved the critics wrong. Tax cuts work. They allow families to keep more of the money they earn. Whether they save, spend, or invest that money, that activity has positive effects on the economy. Furthermore, cutting taxes challenges government to spend more efficiently And tax cuts send a signal to businesses that government understands their need for a competitive environment. In our case, we followed up on our personal income tax cut with several business tax cuts, including one that gave New Jersey the lowest small business tax in the region. In total, we have cut taxes 17 times during my tenure, with a cumulative savings of $6.5 billion by this July While the income tax has saved taxpayers the most, let me mention a few other key reforms New Jersey has made. We eliminated the state sales tax on Yellow Pages advertising, which saves businesses $35 million a year. We enacted three tax cuts for research-intensive high-tech businesses, which ultimately will mean $34 million in savings to this key sector of New Jersey's economy. We have also restructured New Jersey's energy tax and have provided for a 45% reduction in the energy tax rate. In replacing our utility tax, we will save homeowners and businesses $68 million by the end of next year. By cutting these taxes, we have sent the message that state government in New Jersey is on the side of taxpayers. Yes, we are in the midst of an economic boom nationwide, but I don't think it's a coincidence that states like New Jersey, which have cut taxes, are doing exceptionally well. As I mentioned earlier, when I came into office, citizens were feeling overburdened by taxes at every level of government. Not only had their state taxes gone up, but so had their local property taxes, while their property values had gone down. 2 During my administration, we have managed to keep the rate of increase of local property taxes to historically low levels, but because property taxes are still too high, we continue to fight for our taxpayers. Just yesterday, I signed legislation that creates a new $35 million State fund to reward towns and school districts that consolidate or share services. New Jersey suffers from an overabundance of local government with 566 municipalities, more than 600 school districts, and a host of other local units of government. By combining efforts, these local governments can deliver better services at lower cost to the taxpayer. I'm also pleased to say that we are going to provide even more immediate and direct relief to property tax payers. Tomorrow, I will sign into law a $1 billion property tax relief program - the largest property tax relief effort in our state's history. When it's fully phased in by the year 2002, every homeowner in New Jersey will receive a check averaging $600 every year. Members of the committee, New Jersey's experience gives me confidence that tax cuts can make a tremendous contribution to the well-being and prosperity of a community, whether it's a town of 5,000 people or a nation of 50 states. The U.S. Congress deserves credit for moving our nation to a balanced budget and a federal surplus. Having dealt with that kind of situation on the state level, I know that you have been offered hundreds of ideas for how to spend that surplus even before it arrives. When considering what to do with the federal surplus, I believe Congress should set aside funding for high priorities like Social Security and education. I also believe, however, that Congress would do well to consider returning some of the surplus funds to hard-working American taxpayers. As the governor of a state that receives the lowest return on our federal tax dollars, I also believe that a tax cut would be the most equitable. Tax cuts work. They are important to sustaining economic growth, increasing savings and investment capital, and - most of all - giving the working men and women in this country the opportunity to spend more of their hard-earned dollars on the needs of their families. Tax cuts keep government's relationship with the people in balance and help limit the size of government. What's more, they can keep our nation headed toward prosperity as we head into a new century. Mr. Chairman and members of the committee, I thank you for your time, and I welcome any questions you may have for me. 3 THE NEW JERSEY RECORD Since Governor Christine Todd Whitman was inaugurated in January 1994, there have been so far - a total of 17 tax cuts enacted. These cuts include: 30% Tax Cut - Cut the state income tax three times to fulfill the promise to cut taxes 30% for most New Jerseyans in three installments. Off the Tax Rolls - Eliminated state income taxes altogether for 350,000 New Jerseyans earning $7,500 or less. Property Taxes Enacted property tax deduction act to restore the property tax deduction for personal income. Business Tax Cuts - Enacted a series of business tax cuts that have stimulated the economy and will assure the continuation of existing jobs and the creation of new jobs. Energy Tax Reform - Cut energy tax rates by 45% over a five-year period beginning in 1999. Small Business Tax - Enacted the region's lowest corporate tax rate for small business. • Corporation Tax - Lowered the corporate business tax rate to 9%. • Yellow Pages Tax - Eliminated the sales tax on "yellow pages" advertising. Double Weighting - Restructured the corporation business tax formula, to make it more advantageous for companies to remain and grow in New Jersey. • Broadcast Equipment Tax - Enacted a sales tax exemption for broadcast equipment. Aggregate Tax Reduction - As the result of these tax changes, the cumulative savings for New Jersey's taxpayers will be $6.5 billion by July of this year. Job Creation - Aggressive tax reduction has helped spark a net increase of approximately 330,000 private-sector jobs since January 1994, including higher paying jobs in fields such as communications media and pharmaceuticals. New Jersey's unemployment rate is now the lowest in nearly a decade. |