Month: May 2023

StayNJ Details Revealed: It Is a Gimmick

Last week I noted that New Jersey Assembly Speaker Craig J. Coughlin was proposing a scheme he called “StayNJ” which would, he said, “effectively cut most seniors’ property taxes in half.” (emphasis added) At the time actual details of the plan were not available, but I was skeptical that it was just a one-shot deal intended to keep Democratic majorities after the upcoming election. Now that some details are available, I still believe the policy to be a gimmick.

Yesterday NJ.com reported (in a subscriber exclusive) that the plan would provide a 50% credit directly on seniors’ tax bills, capped at $10,000, starting Jan. 1, 2025, with no income limit on eligibility. So, as I suspected, it is not actually a tax cut. No government agency is going to have to reduce its spending. Rather, taxes collected at one level will be used to subsidize taxes which will not be collected at another.

Remember the homestead rebate? When I first moved to New Jersey, property taxpayers would receive a check from the State conveniently near election time. How much was always part of the summer budget negotiations. Then someone decided that sending checks to individuals was too expensive, so now the rebate (when there is one) appears as a credit.((I have two big issues with the new system. First of all, as the eligibility is partially based on income and age, and the status of property tax payments is properly public information, privacy is compromised. Second, as the benefit of the credit follows the property, special arrangements must be made if the eligible taxpayer sells the property between the time of application and the time of receipt of the benefit. These same issues will apply to the StayNJ program.)) StayNJ will become part of the annual budget circus and there will come a time when the 50% is reduced, an income limit is imposed, or the government will say that we just cannot afford it this year because those pesky millionaires insist on keeping some share of their income.

The other news is Governor Murphy’s reaction to Speaker Coughlin’s proposal: he is so much against it that he would shut down State government if necessary to prevent its passage.((In a letter to the editor, I point out that the article reporting the reaction (another subscriber exclusive), continues the practice by the Star-Ledger and NJ.com of criticizing former Governor Christie “at every opportunity, fair or not.”))

As I mentioned before, all the sudden concern for senior citizens uses age as a proxy for ability to pay. StayNJ makes income taxpayers (where there is some relationship to ability to pay) subsidize property taxpayers based upon this assumption. Why should ability to pay matter for senior citizens but not younger property taxpayers? As I said before, “I believe that school funding (and just about everything else involving the running of schools) should be handled by the state and strict limits to the remaining spending supported by the property tax should be imposed.”

Jay Bohn

May 29, 2023

Plan to Cut Property Taxes for Senior Citizens Seems like an Expensive Gimmick

In a recent guest column, New Jersey Assembly Speaker Craig J. Coughlin said: “It’s time to cut property taxes in half for seniors in New Jersey.” He calls his plan “StayNJ” and says StayNJ “will effectively cut most seniors’ property taxes in half.” (emphasis added)

Okay, so it’s not actually a tax cut; more likely it’s a new or replacement rebate scheme, with no guaranty of funding beyond its first year, by which it will (or will not) have accomplished its principal objective, continued Democratic majorities in the State Legislature. It is not clear who is a senior citizen and what criteria will be used to determine who does and does not qualify. We don’t know because his bill has an impressive number, A1, but as of this writing the text is not available.

While cutting taxes for senior citizens sounds good at first, let’s think about why that class should be favored. Either age is used as a proxy for ability to pay or there is the thought that by age 65 (or whatever the favored age is set at) they have “done their bit,” particularly in paying for schools.

This latter observation reminds me of a comment I made last year:

“Everyone wants to reduce property taxes. Unfortunately, the suggested “solution” is often replacing property taxes with some other tax, essentially taking from a different pocket, hopefully of someone else’s pants.”

Governor Murphy’s budget proposal includes a surplus of $10 billion (derived from COVID aid and increased revenues from COVID-spawned tax increases) and that money is, to use the familiar metaphor, burning holes in the pockets of legislators of both parties. Instead of preserving the money against leaner times (and the State treasurer recently reported tax collections 14% below projections) or using it for necessary capital projects (no, not the New Jersey Hall of Fame, but remember during the pandemic when it was reported that the computers running the unemployment system used a decades-old programming language?), they see the short-term political value in bribing voters.

Jay Bohn

May 25, 2023

Why Should the Online Sale of Goods Get a Pass From Taxes?

The so-called news aggregators, websites that repackage articles that appear elsewhere with their own advertisements, do provide a greater variety than many news sites, and I have occasionally found an interesting piece there that I would not have seen elsewhere.

Recently I came across an article((I first saw it on MSN, then traced it to the original article on Moneywise.)) about new IRS requirements for the reporting of online transactions. The threshold for the reporting requirement has been reduced so that the IRS will now be told about more transactions. As far as I can tell, this change requires the online sites to report more transactions so makes it more likely that the IRS will know about a taxpayer’s online sales, which the taxpayer already was required to report (and pay taxes on) anyway. The new requirement does not actually increase the scope of taxation, but it will make it more likely that the IRS will be able to identify those who evade taxes.

The internet has made it easier to run a business, so much so that some perhaps don’t realize that they are. If you rent a brick-and-mortar storefront, stock merchandise, and sell to customers who come in, it’s pretty hard to argue that you are not running a business. But, if you create a graphic on CafePress and set up to sell t-shirts and coffee mugs and let the website handle orders, payment, and shipping and simply receive your cut periodically, maybe there’s plausible deniability. In the online world “virtual” is still real and, to the point here, taxable.

Some of the e-commerce websites that make their money by providing the virtual storefronts for these businesses formed the Coalition for 1099-K Fairness, which has a slick website advocating against the expansion of the reporting requirement. Their rhetoric is all about the impact upon “casual” sellers, but I’m pretty certain the motivation is on their own bottom lines (not that there’s anything wrong with that) as it will discourage some sellers from participating in the marketplace and will generate compliance costs for preparing, submitting, and distributing the 1099’s.

The Coalition’s primary argument is bolded on its front page: “Millions of Americans have sold an item online, and many of these sellers use those funds for critical needs such as food, medicine, and bills and are not running a business.” The use of the revenue from online sales is no more relevant than the use of income from a job and they are not suggesting that employers should not have to issue W-2’s.

Remember, the new rule does not expand the scope of what is taxable, but the increased reporting requirement will move many of sellers out from under the table. Just as a side job is not tax free, so a side gig with a virtual storefront may still be taxable.((Even in my day job as an attorney I do not give tax advice, but those using e-commerce sites to sell their own used goods for less than they paid for them are not facing the prospect of paying taxes on the transactions, although some explanation may be required.))

Jay Bohn

May 22, 2023

“For the Price of a Cup of Coffee”: ‘Daily Value’ Monetary Appeals Understate the Cost

I’m sure you’ve heard it, such and such a social good can be had for “less than,” “only,” or “little more than” the price of a cup of coffee a day.((Of course, the price of a cup of coffee has gone up a lot since those pitches started. A Cup of Coffee Costs Almost $5 Now. Blame Inflation, and the Weather. (businessinsider.com).)) This is a form of time-unit argument, such as a personal injury attorney’s appealing to a jury to think of each day of the plaintiff’s pain and suffering.

Of course, those making this pitch do not expect that you will actually cease spending that money on a cup of coffee. (Do you hear the sigh of relief from the Starbucks of the world?) Instead, the idea is that the audience will see it as a small cost (or perhaps be shamed into thinking that if they can spend that much on a cup of coffee they should also be willing to pay it for the social good). By slicing the cost into daily increment, it is meant to seem lower.((It would be lower still of the increment were hourly or shorter, but there is no familiar hourly cost for comparison and it would rapidly get ridiculous. No, daily is the sweet spot.))

But just as the jury must multiply each day of pain and suffering by the plaintiff’s life expectancy to arrive at a verdict, the social appeal audience must multiply the “price of a cup of coffee” by the length of the relevant pay period, or month, or year, to understand the impact upon the household budget. An annual cost of $1800 is probably more daunting.

Jay Bohn

May 18, 2023

“Congestion Pricing” Another SEP Problem

In yesterday’s Star-Ledger, its Editorial Board printed an opinion titled “On congestion pricing, New York is Right.”((The editorial also appears as a subscriber exclusive on NJ.com under the title “On congestion pricing, New York is right, NJ is wrong.” I note that “New York” is spelled out but New Jersey is only identified by initials.))

Under congestion pricing New York will charge drivers to enter the central business district (south of 60th Street) ostensibly to encourage and subsidize mass transit. Lots of details still to be worked out (or at least publicly revealed).((There is a pretty good explanation of everything here.)) Much of the money will be paid by New Jersey residents for the privilege of working in, and paying taxes to, New York. All of the money will be spent by New York.

Not only is this another example of New York getting the better of New Jersey every time((See Paul Mulshine’s column on that topic here.)) but also of SEP((I introduced the concept of “someone else is paying” in a post almost two years ago.)) increasing the effective demand for whatever the funds wil be used for.

Jay Bohn

May 15, 2023

Media Reports of Public Opinion of Courts a Sort of Self-Fulfilling Prophecy

Because the only information most Americans get about court decisions (as just about any other public institution) comes from an increasingly opinion-dominated professional news media, and those media emphasize the politics and personalities of major judicial decisions rather than the actual legal issues and arguments, it is not surprising, as ABC News recently reported,1 that public opinion tends to accept the narrative that judicial decisions are driven by politics.

We don’t have to rely solely on major media. The United States Supreme Court’s website is a comprehensive resource to learn about the cases before it, the arguments of the parties and the Court’s own decision. A reader can find all the briefs, on the day the case is argued a live audio feed is provided, later that day both the recorded feed and a transcript is available, and of course all the opinions are available as soon as they are released. Other courts are not quite so comprehensive, but usually at least the decisions can be found.((New reports of judicial decision, at least the on-line stories, should link to a freely available opinion or at least provide sufficient information, like case name and docket number, that a search can locate it.))

Of course, the subtext of the most media coverage is that being driven by politics is a bad thing only of the judicial decisions under discussion are viewed as supportive of conservative policies. Many conservatives advocate interpreting constitutional and legislative texts according to the meaning they would have conveyed at the time of their adoption. Liberals decry reliance upon originalism and might well argue that the law’s text must not get in the way of its primary goal which is . . . well, whatever the judge wants to say it is. If that’s not politics, what is?

Jay Bohn

May 11, 2023

  1. More say politics, not the law, drive Supreme Court decisions: POLL [↩]

Not a Fan of Term Limits

The House of Representatives is considering an amendment to the Constitution that would limit the terms of members of Congress. H. J. Res. 11. The Twenty-Second Amendment already restricts the number of times a person can be elected President. In many States a two-term (or at least two consecutive term) limit is standard.

Many good government advocates believe that term limits are good for democracy, but I’m not so sure.

Rather, I believe that term limits (and all but the most basic legal qualifications for office) limit democracy by reducing the choices that the people can make. It is common, but not universal, to require would-be legislators to reside in the district they seek to represent. One the one hand this is fully understandable, but on the other, perhaps the non-resident is really a better candidate. I’d rather have us be able to elect a non-resident than encourage carpetbagging.

Jay Bohn

May 8, 2023

Trump’s Decision Not to Testify in Civil Rape Trial Perplexing

Unless you are completely oblivious to national news, you may have heard that former President Donald Trump is currently on trial in civil court for sexual assault and defamation. E. Jean Carroll accuses Trump of raping her in New York City’s Bergdorf Goodman department store in 1995 or 1996. He has denied the event and these denials form the basis of the defamation claim. I wasn’t there and I have no particular insight on the truth of the charges, but I am really perplexed about the decisions that Trump has made in how the case is being tried.

Donald Trump is running for President (again — how I wish he wouldn’t). With any other candidate you would think that the prospect of being found by a jury to have raped someone would be an existential threat that would call for the most vigorous defense. Yet, although Trump has denied the accusation in various public statements, he is not going to testify at the trial to deny it under oath. Moreover, his attorney announced yesterday that when the plaintiff rests, he is not going to present a defense.

True, he’s not going to jail over this, and he has a hard core of followers for whom it would not be disqualifying even if he admitted to the assault, but if he really didn’t do it, why not tell the jury so? It makes one wonder if the denial would be perjury.

Jay Bohn

May 4, 2023

Supreme Court Case May Require Significant Changes to the Way New Jersey Collects Real Estate Taxes

Until the recent oral argument, the major media have not given much attention to Tyler v. Hennepin County, Minnesota, a case before the United States Supreme Court that may up-end the way in which New Jersey and many other States enforce the requirement to pay real estate taxes.((There was a guest column in the Star-Ledger on the issue last September that appears as a subscriber exclusive on NJ.com, under the title “New Jersey stole an immigrant mother’s investment.”)) Last Wednesday’s oral argument (audio | transcript) should be a warning for the Legislature to put together a replacement mechanism.((See, for example, Amy Howe, Justices appear likely to side with homeowner in foreclosure dispute, SCOTUSblog (Apr. 26, 2023, 3:22 PM).))

The Pacific Legal Foundation, which describes itself as “a national nonprofit legal organization that defends Americans from government overreach and abuse,” represents the plaintiff in Tyler and is campaigning to end what it calls “home equity theft.” As the PLF concisely described the case, “When Geraldine [Tyler] fell behind on the property taxes for her one-bedroom condo, the government seized the home, sold it, and kept every penny—even though it was more than double what Geraldine owed. ‘When the government takes more than it is owed in taxes, that’s home equity theft’ . . .” While Tyler may not be the best case factually to achieve this goal (there is some question whether the plaintiff actually had any equity on the condominium unit after mortgage and condominium association liens), other cases are pending with better facts, as the attorney for the county acknowledged.

New Jersey real estate taxes((This discussion is somewhat simplified and for its purposes I am considering other amounts enforceable by municipalities as taxes, such as municipal utility charges, as taxes.)) are a lien on real estate superior to every other lien (except subsequent taxes). When taxes become delinquent, the municipal tax collector sells the tax lien and issues a tax sale certificate. (It is a public sale and if more than one person wants to buy the tax lien there is an auction process in which they bid down the interest that will accrue. Interest rates start at 18%.) The purchaser pays the delinquent taxes and may pay subsequent taxes and add that amount to the lien. If the property owner has not redeemed the property by paying the amount of the lien, accrued interest and costs and penalties within two years (for a private lien holder, if the lien holder is the municipality the period is six months), the lien holder may start a foreclosure action that will ultimately result in an order setting the time, place, and amount necessary for redemption. If the property owner does not pay by that deadline, the lien holder then has title to the property.((As noted, this discussion is somewhat simplified.))

This procedure differs from the manner in which other liens, such as mortgages, are enforced. There the foreclosure process will result in a court order for the sheriff to sell the property at auction. After the sheriff’s fees, the proceeds are paid to the lienholder, up to the amount adjudicated to be due, and thereafter paid into court. If there are no other liens to be satisfied, the surplus funds go to the (former) property owner.

The purchasers of tax sale certificates do so because it is a relatively secure investment, backed by real estate, with a good return and the possibility of a significant windfall if the value of the property is much greater than the tax debt. It also works for the municipalities because they do not carry large delinquencies for years as the purchasers of tax sale certificates will not only have paid what was due as of the sale but are also likely to continue to pay subsequent taxes that come due to protect their investment from future tax sales.

Whether in this case, or one of those others pending, I expect the Supreme Court to find that the windfall to the foreclosing tax sale certificate holder violates some constitutional right of the property owner and our Legislature would be well advised to change the way that property tax liens are enforced, such as by judicial sale like mortgages.

Jay Bohn

May 1, 2023

Post script

Earlier today the Supreme Court ruled unanimously that the former owner’s takings argument stated a claim and remanded for further proceedings. Here is some additional coverage of the decision on SCOTUSblog.

J.B.B.
May 25, 2023