Star-Ledger Missing the Chance for Helpful Journalism by Concentrating on the Politics, Rather Than Details, of StayNJ

As I reported last month, New Jersey Assembly Speaker Craig J. Coughlin has proposed a new tax “cut” he calls “StayNJ” which would, he says, “effectively cut most seniors’ property taxes in half.” (emphasis added) Once the details were revealed, we learned (surpise!) that it is not a tax cut at all, but another rebate scheme, no doubt intended to assure Democratic victories in November’s legislative elections.

The Star-Ledger/NJ.com extoll the importance of journalism and seek ever more of their readers’ money, but I wish they (and all journalists) did a better job of reporting facts and useful analysis, rather than rank opinion.((See, for example, my comments in Ruminations on Voting.)) It seems to me that they would better serve their readers by reporting on the details of the plan as it moves through the Legislature instead of concentrating their efforts on the conflict between the Democratic legislators and Governor Murphy, who is said to be ready to shut down the state if StayNJ is part of the budget. As usual, the reporting emphasizes the conflict of personalities over the issues.

One of the details that have been reported is the fact that StayNJ will not take effect until January 1, 2025. What is not explained is why it is part of the 2023-2024 budget (other than to seek votes for Democrats).

Jay Bohn

June 15, 2023

Passage in Unpublished Opinion Should Sound Red Alert for Tax Foreclosure Process

At the beginning of May I wrote about Tyler v. Hennepin County, Minnesota, a case then pending in 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.”

In New Jersey, when property taxes become delinquent, the municipal tax collector sells the tax lien and issues a tax sale certificate. 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 the applicable time period, 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. When the lien is sold to an outside “investor,” the municipality merely gets the taxes and interest it was owed; any windfall goes to the investor.

Although the mechanics of Minnesota’s process differ from New Jersey’s, the relevant similarity is that the property owner loses her entire equity in the property, even if it far surpasses that amount of the delinquency. Based upon the tenor of the arguments before the Supreme Court, I predicted that it would find that the windfall to the foreclosing tax sale certificate holder violates some constitutional right of the property owner and I concluded that “our Legislature would be well advised to change the way that property tax liens are enforced, such as by judicial sale like mortgages.”

The Court decided the case promptly and unanimously, ruling that Geraldine Tyler’s complaint indeed stated a takings claim and remanding for further proceedings.

I have not seen any significant coverage of the Tyler case in New Jersey news source or any hint that the Legislature is paying any attention to my warning. That may change due to a single sentence in an unpublished Appellate Division opinion issued last Friday. Absent Tyler, the case, PC7 REO, LLC v. Johnson, would be of interest only the parties. The property owner was seeking relief from a default judgment foreclosing a tax sale certificate for $250,000 in taxes on property that she claimed had a value of $1 million, relief which the trial court denied, a decision which, but for the intervening decision in Tyler, would almost certainly have been affirmed. But Tyler had been decided and the appellate court remanded the matter to the trial court for further proceedings, with the following ominous comment: “We leave to the trial court the determination of whether Newark, the entity that we assume, without deciding, would be responsible for providing just compensation to Johnson in the event of a taking, should be joined as a party in this matter.”

Jay Bohn

June 12, 2023

Too Much Hyperbole in Reaction to Glacier Northwest Decision

Lately Thursday has become the day that the U.S. Supreme Court announces its opinions as it marches steadily on to decide by July 4 the cases that have been argued this Term. We haven’t gotten to the hard cases yet. A fair number of the decisions issued in the last several weeks have been unanimous or nearly so, at least as to the result.

Take last Thursday for example. Unanimous decisions by Justice Thomas1 and Justice Gorsuch2 and an 8-1 decision by Justice Barrett in Glacier Northwest, Inc. v. Teamsters. The Court’s opinion in Glacier Northwest, however, only commanded the votes of five justices (Barrett was joined by Chief Justice Roberts and Justices Sotomayer, Kagan, and Kavanaugh), with Justices Thomas, Alito, and Gorsuch concurring in the result and Justice Jackson strongly dissenting. Most of the coverage I have seen sides with Jackson and considers the decision to be a disaster for labor unions and the right to strike.3

In Glacier Northwest a concrete company sued the union representing its employees. The complaint alleged4 that the union waited to start a strike of the drivers of the company’s concrete trucks until the trucks had been loaded with concrete for the day’s deliveries. The trucks were left spinning the concrete which, even so, would eventually harden, wasting the concrete itself and severely damaging the trucks. Although the company’s emergency measures were sufficient to unload the concrete and thus prevent damage to the trucks, but it still suffered damage to its property (the hardened, useless concrete) and sued the union in Washington state court.

The union sought dismissal of the complaint by arguing that the application of state tort law to this dispute was preempted by the National Labor Relations Act which grants the National Labor Relations Board primary jurisdiction. It cited San Diego Building Trades Council v. Garmon, 359 U. S. 236 (1959), which found preemption even where state law and the NLRA only arguably conflict (in other applications preemption is only found in the case of an actual conflict). The trial court agreed with the union, and the Washington Supreme Court affirmed.

The Court’s opinion ruled that, given the undisputed obligation of strikers to take reasonable precautions to protect their employer’s property from foreseeable, aggravated, and imminent danger due to the sudden cessation of work, the union’s conduct, as alleged in the complaint, failed to satisfy this obligation. Justice Alito (joined by Thomas and Gorsuch) concurred in the result because he believed that the Court had already held that the type of conduct alleged is not protected. Thomas also wrote an opinion concurring the result (which Gorsuch joined) in which he questioned the Garmon preemption rule and suggested that in an appropriate case the Court should “carefully reexamine whether the law supports Garmon’s ‘unusual’ pre-emption regime.”

Jackson was the only justice to dissent. She pointed out that the NLRB’s General Counsel, a presidentially appointed official responsible for initiating unfair labor practice charges, has in fact done so, not against the union but against the company for filing the lawsuit. She asserted that the filing of the complaint by the general counsel implies “that the union’s conduct is at least arguably protected by the NLRA” and that courts “should suspend their examination.” (emphasis added)5

The facts of this case, as least as alleged by the company, are pretty bad for the union. Indeed, unions should be glad the factual allegations are such that the Court was not asked to revisit Garmon preemption. It is by no means clear to me why the preemption analysis should be different for labor relations than other matters where an administrative agency is tasked with implementing federal law.

Jay Bohn

June 8, 2023

  1. See, for example, CBS News: Supreme Court ruling deals another blow to organized labor, NBC News: In blow to unions, Supreme Court rules company can pursue strike damage claim, Vox: The Supreme Court deals another blow to labor unions. I think this reaction is overblown (pun a happy accident). ↩︎
  2. The case had not reached any point where there would have been any factual adjudication, so the plaintiff’s factual allegations are assumed to be true in connection with the defendant’s motion to dismissing invoking the “so what?” defense. ↩︎
  3. Maybe I don’t fully understand Garmon preemption, but it seems to me that if the filing of a complaint by the general counsel is sufficient to establish that the union’s conduct was “arguably” protected, then why should courts merely “suspend” review of that conduct? If the conduct was arguably protected at the time it occurred, does it matter if sometime later the NLRB were to rule that it is not actually protected? ↩︎

Another Good Gorsuch Opinion in Mayorkas Case

In the beginning of the year, I commended any reader’s attention to Justice Gorsuch’s dissenting opinion in Arizona v. Mayorkas, a Supreme Court case involving a challenge to “Title 42” orders. (The specific issue was whether the court of appeals should have allowed several states to intervene in the case; the court had denied the motion.) I said then:

Justice Gorsuch correctly notes that the public health justification for the exclusion orders is no longer in force. “The States contend that they face an immigration crisis at the border and policymakers have failed to agree on adequate measures to address it.” But, as Justice Gorsuch concludes, “courts should not be in the business of perpetuating administrative edicts designed for one emergency only because elected officials have failed to address a different emergency.”

The Title 42 orders were premised upon the existence of the COVID-19 emergency, which has now been terminated. As a result, the Supreme Court vacated the order denying intervention and remanded to the court of appeals with directions to dismiss the motion.

Gorsuch issued a statement in which he recounted the “head-spinning” procedural history in detail “because it is so typical . . . [n]ot just as an illustration of the quandaries that can follow when district courts award nationwide relief, . . . [but e]ven more importantly, the history of this case illustrates the disruption we have experienced over the last three years in how our laws are made and our freedoms observed.” Justice Gorsuch proceeds to criticize the plethora of COVID emergency decrees I have previously discussed. Because I perceive much agreement with what I have said, I naturally find the discussion profound.

Jay Bohn

June 5, 2023

Moran Editorial Against Expiration of “Temporary” Surcharge Shows Importance of Caveat Emptor for Political Promises

We all know that “temporary” tax increases have a tendency to become permanent. At the time they are first imposed, their proponents deny that they are really tax increases at all because they are only temporary, justified as necessary for some particular, presumably equally temporary, economic condition. Then, when the temporary increase is made permanent just as it is supposed to expire, the proponents again deny that there is really a tax increase: the temporary increase is just being made permanent. Despite there being no tax increase on the front or back end, taxes have in fact been raised, but no one is responsible. Now suppose that the temporary increase is allowed to expire; that is criticized as a tax cut.

The constant refrain of those who wish to have the government be in charge of spending more of your money is the claim that “the rich” do not pay their fair share. We know this because they have some left. The view that others should pay more taxes so that we can get more benefits is exactly what I talked about almost two years ago as the “SEP Problem;” which means that “someone else is paying.”((Charity is indeed a virtue, but is it really charity to give other people’s money to the poor?)) This view is reflected in Tom Moran’s recent editorial “Murphy’s temper tantrum, and the makings of a budget deal” (subscriber exclusive).

Moran begins by describing mansions in Montclair((Opinion pieces, whether labeled as such or not, often begin by personalizing the argument; either by introducing a sympathetic person who would be benefitted by the writer’s position or vilifying those who would be hurt.)) and asserting that their owners should not qualify for StayNJ, Assembly Speaker Craig Coughlin’s proposal to provide a property tax credit/rebate for senior citizens with no income limit for eligibility.((This proposal is discussed in my two most recent posts: Plan to Cut Property Taxes for Senior Citizens Seems like an Expensive Gimmick and StayNJ Details Revealed: It Is a Gimmick.)) Moran cites as support for his position none other than well-healed Governor Murphy, whom he quotes as saying, “I don’t think we should be in the business of giving the likes of me tax breaks.”

Moran then pivots to say that Murphy is in fact giving the rich (personified as Jeff Bezos, the Amazon founder and multi-billionaire) a tax cut because Murphy insists that the 2.5% corporate tax surcharge imposed in 2018 should be allowed to expire at the end of the year, almost as promised. (The surcharge has already been extended once, among the many things blamed on COVID.) Moran’s point is that the the temporary tax increase should be made permanent and used to fund a means-tested tax subsidy.

What about the promise that it would be temporary? “[Murphy’s] promise in 2018 does not obligate the Legislature of 2023 even one bit.” Legally correct, which only strengthens the view that voters should NEVER rely upon the promises of politicians. They have no credit because there is no obligation to keep their word.

Jay Bohn

June 1, 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