New Jersey’s Fiscal Situation Just Got Even Worse

Local New Jersey governments could experience a double whammy. Not only will the currently passed national tax reforms in the form of the Tax Cuts and Jobs Act of 2017 potentially diminish New Jersey’s tax base of wealthy residents, but a critical arbitration cap that kept municipal costs in line with the government’s revenue is now also gone. Moody’s, for its part, doesn’t like how this situation is playing out for municipal bondholders. JPMorgan's Michael Cembalest had previously said the state's bond problem is "not mathematically solvable" graphing the following scary chart:

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Losing arbitration cap is another negative for the New Jersey tax regime

Categorizing the recent elimination of a 2% arbitration...