Tag: taxes

Ledger touts conservative study: Credentials matter as much as affiliation

The breathless reporting of studies like these drive me crazy. It’s not the conclusion that I question — there is no doubt that people are leaving New Jersey — but the motivation behind these studies and the failure of major news organizations to call the groups that author them what they are.

Let’s put the facts on the table: The Tax Foundation may be nonpartisan, as it claims, but it is not nonideological. Just one look at its board of directors — high-level corporate officers, former members of or advisors to the Bush administration and the McCain campaign and a former Republican Congressman — and you can see the genesis of my concern.

As I said, the results may be spot on, but the characterization of the organization pushing the study is misleading. Imagine if the Economic Policy Institute or the Center for Economic Policy Research were described only as nonpartisan research groups — which they are. What would conservatives do?

  • Send me an e-mail.
  • Read poetry at The Subterranean.
  • Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. it can be ordered here.
  • Suburban Pastoral, a chapbook by Hank Kalet, available here.
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So much for property tax reform

Chris Christie ran for governor on the promise that he would cut property taxes. Instead, the average New Jersey taxpayer will be paying more out of pocket for local government and schools.

From The Asbury Park Press:

The average property tax hike in New Jersey will be 3.3 percent this year — and will hit 23.5 percent after the loss of the homestead rebate is factored in, a statewide review of new tax rates show.

Property taxes increased 3.7 percent in 2009, only nominally more than what has happened so far this year. But, as the story points out, taxpayers had rebates to help them deal with the pain. No such luck this year, though the governor says he will offer a revamped rebate program for next year — a manuever that promises to be difficult.

The rebate program was a victim of this year’s budget balancing act, so his promise raises the question of how he’ll pay for the rebates in the 2011 budget. What programs can we expect to be slashed? Colleges and public schools already are paying the price and the public workforce has been gutted, with the expected increase in unemployment. So, dear governor, what is your plan?

  • Send me an e-mail.
  • Read poetry at The Subterranean.
  • Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. it can be ordered here.
  • Suburban Pastoral, a chapbook by Hank Kalet, available here.
Email me at grassroots at comcast dot net.

Paying Honeywell to stay

Honeywell — and its 1,800 jobs — will be staying in New Jersey. The questions is, however, at what cost?

According to Forbes.com,

Cote said the $33 billion company had been seriously considering moving out of New Jersey and taking its 1,800 jobs with it. He said the company was persuaded to stay after getting assurances from Gov. Chris Christie that his administration will work with the Legislature to expand a tax credit program aimed at retaining companies.

So what’s the cost? At $2,225 per job saved — which is what the governor wants the tax Business Retention and Relocation Assistance Grant program expanded to — that amounts to $4 million a year for six years. The compnay, according to its annual report, had state tax liabilities in all the states in which it operates totalling $71 million (combined currrent and deferred obligations) in 2009.

I’m not arguing that the tax credit is bad in this particular instance. The preservation of 1,800 jobs cannot be sniffed at, nor can the property and other taxes generated. The question, however, is whether tax credits like this encourage companies to shop around, to see if they can find communities that are willing to bid down their tax liabilities to get companies like Honeywell to pick up and move and whether the benefits to the state offset the tax costs in the longrun.

New Jersey Policy Perspective has issued several reports on this, including this one on Citigroup in 2007 and this one on Jersey City tax abatements. The upshot, according to NJPP, is that these kind of incentives might be better reserved for small businesses and not tossed at multinationals.

From the executive summary of the Citigroup report:

An analysis of Citigroup’s practices in four states–New York, New Jersey, Kentucky and Texas–suggests that the world’s largest financial institution rarely makes a move without getting taxpayers to help foot the bill.

Using the threat of moving facilities and jobs elsewhere, Citigroup has repeatedly played state against state and locality against locality to attract at least $285.9 million in subsidies in just the four states.

STATE AND LOCAL ECONOMIC DEVELOPMENT
SUBSIDIES TO CITIGROUP
1989-2007
STATE * AMOUNT
New York* $125.5 million
New Jersey $101.1 million
Kentucky* $46.7 million
Texas* $12.6 million
TOTAL * $285.9 million

Given that Citigroup operates in many states in the US and more than 100 other countries, these findings are in all likelihood just the tip of the iceberg.

In some cases, Citigroup sought special tax deals even though it was not pledging to create any new jobs. Worse, despite the company’s claims at the time that the job subsidies were necessary or that they determined where the company ultimately decided to expand or relocate, our findings also suggest that business basics–such as a skilled work force, affordable housing, good transportation infrastructure and a modern telecommunications system–mattered far more in determining where Citigroup jobs went.1

Giving Citigroup such large subsidies is no guarantee the company will stay or that it will avoid layoffs. The latest proof of that came in April 2007 when the firm announced it will eliminate 17,000 positions worldwide. In that respect, Citigroup is a revealing case study in the perils of granting large, company-specific tax breaks.

Sometimes, Citigroup appears to have taken advantage of rivalry among states, exploiting the “prisoners’ dilemma” dynamic to mislead one government that it is competing against another, when no rival offers actually have been made.

Finally, the idea that Citigroup “needed” the tax breaks is undermined by its willingness in the same years to spend lavishly on global acquisitions, baseball stadium naming rights and executive compensation. For those who argue that economic development incentives are best reserved for small businesses that truly lack access to adequate or affordable capital, Citigroup–with more than a trillion dollars in assets and more than $21 billion in profits last year–presents compelling evidence.

Admittedly, this is an incomplete picture, but what we have here does not paint a convincing picture that these kinds of tax breaks create economic growth — which contradicts the conventional wisdom. At the least, it should offer ammunition to other entities to do a comprehensive study of tax incentives in the state.

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Tax cap still a bad idea

The governor spoke before a joint-session of the state Legislature today and reiterated his desire to see a constitutional amendment be placed on the ballot that would limit tax increases to 2.5 percent — or, barring that, a state law that would do the same.

Gov. Chris Christie calls it tax relief, but it really is nothing more than an abrogation of executive and legislative responsibilities and an admission of failure.

Property taxes have been and continue to rise in New Jersey, driven upward by a mix of bad policy and the high cost of health insurance. The bad policy part — a belief that we could avoid making hard decisions without paying the cost of those decisions, cannot be addressed by a cap; rather, it takes one of the decisions out of the hands of the people we’ve elected and sent to Trenton — or that we have sent to town hall.

The problem in New Jersey is not just out-of-control spending. A good chunk of the money the state spends is on programs its citizens want: Good schools, police officers, open space, etc. The problem is that the state government has ignored the revenue side of the ledger for years, preferring to offset rising costs with one-shot gimmicks and magical sleight-of-hands that delayed the day of reckoning.

For 15 years, for instance, governor after governor has shorted the state pension fund, which reduced expenditures in the short-term, but shorted the fund for the longhaul.

We have sold roads from one the state to the Turnpike Authority, borrowed agagainst a settlement with the tobacco industry, and so on until we had run out of shell games to play.

All the while, property taxes continued to rise, angering taxpayers and leaving the state in the lurch.

The governor’s response has not been to put the state on sound fiscal footing, though he has talked as if that is his goal. His budget is balanced using an assortment of tricks — pension shortfall, anyone? — that are no different than those used by his predecessors. And now he wants to enact the biggest gimmick of all, an artificial cap that removes all fiscal flexibility from elected officials. That sounds good now but, as the folks in California and Colorado and elsewhere are finding out, it is going to come back to bite us hard on the ass in the future.

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Three reasons this is a bad idea — and a fourth that makes it seem good

Three things you need to know about this story:

1. The county had to balance its budget, though I can’t for the life of me figure out how cutting the open space tax does it.

2. All of us could use a tax cut during this climate.

3. Cutting the open space tax is downright short sighted. The reason is that these kinds of measures often prove to be far less temporary than initially claimed.

There is a fourth issue to consider, as well: Cutting funding for open space will hit us down here a the southern end of the county pretty hard, because most of the remaining open space and farmland is in five or six towns. If the county does not have the money, the land will not be preserved — and you can do the rest of the math (while you are sitting in the traffic created by the development that occurs on property that can no longer be preserved).

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