Snip

by Tyler Durden
Wed, 03/14/2018 - 04:40
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Last week we noted that in what was a radical U-turn to what other public pension funds have been doing in recent years - most notably Calpers - the struggling New Jersey public pension system decided that instead of lowering its expected rate of return, it would raise it, from 7% to 7.5%.

The simple reason behind this odd increase in projected returns was an accounting sleight of hand which would allow the state of New Jersey to save some $238 million in pension contributions as a result of the higher discount rate applied to the fund's liabilities. And with a pension funding level of only 37% for the 2015 fiscal year, the worst of any state in the US, New Jersey would gladly take even the most glaring accounting gimmickry that would delay its inevitable death.

Unfortunately, being the not so proud owner of the most distressed and underfunded public pension fund in the US is just the start of New Jersey's monetary woes, and as Bloomberg reports, New Jersey's fiscal situation is so dire that new Governor Phil Murphy has proposed taxing online-room booking, ride-sharing, marijuana, e-cigarettes and Internet transactions along with raising taxes on millionaires and retail sales to fund a record $37.4 billion budget that would boost spending on schools, pensions and mass transit.

The proposal which is 4.2% higher than the current fiscal year’s, relies on a tax for the wealthiest that is so unpopular it not only has yet to be approved, but also lacks support from key Democrats in the legislature, let alone Republicans. It also reverses pledges from Murphy’s predecessor, Republican Chris Christie, to lower taxes in a state where living costs are already among the nation’s highest.

. His solution? Socialist wealth redistribution: "A millionaire’s tax is the right thing to do –- and now is the time to do it."

A better way of putting it, as Bloomberg has done, is that New Jersey's budget "would raise taxes on almost everything."

Of course, that is not a politically palatable thing to say, so let's first crush the millionaires; the same millionaires who - like David Tepper in April 2016 - have decided they have had enough and departed for Florida long ago, taking with them hundreds of million in foregone taxes. Because what New Jersey fails to grasp, is that the truly rich can pick up and go at a moment's notice, and transfer to any place in the country (or outside of it) that actually does not endorse daylight robberies.

Meanwhile, the idiocy proposed by Gov. Murphy counts on total revenue growth of 5.7%, an impossible number and the most since at least 2013... when it fell short. Murphy would increase the tax rate applied to income above $1 million to 10.75 percent from 8.97 percent, generating $765 million; and restore the state’s sales tax to 7% from 6.625%, raising $581 million.

Guaranteeing that the state's hedge fund residents would promptly flee, the budget would also "gain" $100 million by closing a carried-interest loophole on hedge-fund income.

“He must be kidding,” Senate Minority Leader Tom Kean Jr., a Republican from Westfield, said after the speech. “I don’t think anybody could have anticipated this level of tax increases.”