THROUGHOUT MY TENURE IN CONGRESS AS A

REPRESENTATIVE FORM THE MID-HUDSON VALLEY OF

NEW YORK, I HAVE HAD THE PLEASURE OF KNOWING

AND WORKING WITH THE GOVERNOR FIRST-HAND

WHILE HE WAS MAYOR AND THEN IN THE STATE

LEGISLATURE...

MOREOVER, DURING THE PAST FIVE YEARS, AS THE

REPUBLICAN DEAN OF THE NEW YORK DELEGATION IT

HAS BEEN A DISTINCT PLEASURE TO WORK WITH

GOVERNOR PATAKI AND HIS ADMINISTRATION DURING

OUR EFFORTS TO PROVIDE NEW YORK WITH THE BEST

POSSIBLE TOOLS FOR AN ECONOMIC AND QUALITY OF

LIFE RENEWAL....

I AM CONFIDENT THAT THIS MORNING'S

TESTIMONY WILL PROVE ENLIGHTENING AND I BELIEVE

ALL OF US IN CONGRESS CAN LEARN IMPORTANT

LESSONS FROM THE GOVERNORS EXPERIENCES AND

POLICIES IN NEW YORK...

5

Mr. BURTON. Ms. Whitman, thank you very much for being with us today. We really appreciate your being here, and, as you can see, there is some political jousting going on as is normal, but we would love to hear from you about what has been going on in your State and how you have dealt with your problems.

STATEMENT OF CHRISTINE T. WHITMAN, GOVERNOR, NEW

JERSEY

Governor WHITMAN. Well, thank you very much, Mr. Chairman and good morning. I want to thank all the committee for the opportunity to talk about tax reform in the State of New Jersey.

It has been said that the power to tax is the power to destroy; conversely, 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 busi

ness.

When I ran for Governor 6 years ago, the tax system of New Jersey was, frankly, way out of balance. A national recession had been compounded by the largest tax increase in our State's history, $2.8 billion in tax increases. Companies had fled New Jersey, and we were losing jobs by the hundreds of thousands. In an increasingly global economy, I believe that States must do all they can to attract jobs and, just as importantly, retain the jobs they already have, and it is clear to me that creating a competitive tax structure is integral in that effort.

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 took more and more money out of their paychecks. I believed it was a good way to force the State government to spend its money more intelligently, and I 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, not surprisingly. Some said it was just a cynical ploy to get elected, and I had no intention of ever 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 families or businesses.

We phased in that income tax cut between 1994 and 1996, a year ahead of schedule and removed 350,000 low-income earners from income tax payments 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's tax burden on our families, and we still brought in more tax revenues than we had the year before. We recovered every job lost during the previous administration and added well over 130,000 more. More New Jerseyans are working today than ever before. In fact, New Jersey's unemployment rate is the lowest it has been in a decade.

We received more good news in the most recent regional forecast analysis by WESA, and I would like to quote from it briefly: "New Jersey now has the fastest employment growth in the mid-Atlantic region for the sixth straight year. It has outpaced both New York and Pennsylvania and all major sectors except for the two that are

shrinking in the mid-Atlantic region, government and manufacturing," and I am very pleased that government leads that.

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 those dollars, that activity has a positive effect on the overall economy. Furthermore, cutting taxes challenges government to spend more efficiently, and tax cuts send a signal to business that government understands their needs for a competitive environment. In our case, we followed up on our personal income tax cuts 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 taxes save taxpayers the most, I would like to mention a few other key reforms in New Jersey's tax structure. We eliminated, as the chairman mentioned, a sales tax on yellow pages advertising which saves businesses, particularly small businesses who are very dependent on that advertising as the only way to meet their customers, $35 million a year. We enacted three tax cuts for researchintensive, high-tech businesses which ultimately will mean $34 million in savings to this key sector of the New Jersey economy. We have also restructured New Jersey's energy tax and have provided for a 45 percent 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 a message that State government in New Jersey is on the side of the taxpayers. Yes, we are in the midst of a Nationwide boom, but I don't think it is 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, at the same time as their property values were going down. During my administration, we have managed to help local government keep the rate of tax increases, of local property tax increases at historically low levels. But because property taxes are still too high in the State of New Jersey, we continue to fight for our taxpayers.

Just yesterday, I signed four pieces of legislation that create 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. We have over 600 school districts, 566 municipalities, enumerable water districts, fire districts, and other forms of local government. By combining efforts, these local governments can deliver better services at lower cost to the taxpayer.

I am also pleased to say that we are going to provide an even more immediate and direct relief to property taxpayers. Tomorrow-and it is tax day, and there is some significance in that, which is why we are doing it then-I will sign into law a $1 billion Property Tax Relief Program. It is the largest property tax relief in our State's history. When it is fully phased in by the year 2002, every homeowner in New Jersey will receive a check averaging $600. It depends on their local school tax-property tax burden, and

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:]