February 19, 2018
I was recently driving to see friends in Ocean City, New Jersey. The sign “Welcome to New Jersey” greeted me as I headed over the Walt Whitman bridge from Philadelphia. I was using Google Maps on my phone for directions. Looking down to check the recommended route, I manually enlarged the view on screen to make sure I was in the correct lane as I approached a junction. I glanced in the mirror to see a large police SUV right behind me. I assumed he was about to pass when suddenly the blue lights flashed on. A sinking feeling took hold of my stomach as I struggled to work out my crime.
Deciding that making a break for the State line was not the best idea, I pulled over and waited meekly. The State Trouper adjusted his hat before emerging from his car. His first request was for my driver’s license. Once he saw it was from Georgia he asked: “Do you know this is a hands-free State and I saw you using your fingers to dial a number?” I apologized for not knowing but explained that I was using Google Maps and not attempting to make a phone call. I even offered my phone for him to check. The trooper asked me to wait while he went back to his vehicle.
Returning five minutes later with my license, and a ticket, he announced: “I am going to be lenient. A ticket for using your phone other than hands-free is expensive and comes with points, but I have just given you a ticket for failure to indicate when I pulled you over”. I buried my outrage at this extortion, and accepted that paying the fine and moving on is the best outcome. The authorities have more time and power than me.
This incident got me thinking that traffic violations must provide an easy source of income for cash starved States. A bit of research into the finances of New Jersey confirmed my suspicions. Our tax-exempt bond manager stated that they are generally avoiding bonds issued by this State because of the decline in credit fundamentals, pension funding issues and headline risk. In fact, NJ has had substantial budget deficits the last several years, and has one of the lowest credit ratings of all States as ranked by S&P, Moody’s and Fitch. How long can that sort of financial ineptitude continue, or more to the point, how many traffic tickets do they have to write? In an act of seeming desperation they have even offered $7 billion in incentives to win Amazon’s new HQ2, and the associated tax revenues.
The new Tax Act will create additional pressure on State budgets as wealthier citizens decide if they really want to be residents of high income tax States now that those taxes will essentially have little to no deductibility in many cases. As budgetary mismanagement continues, be aware that you are a potential source of tax revenue when you are driving in a State like New Jersey!