NJ is not exactly known for affordable living – especially when it comes to taxes. It appears that will only get worse in 2009 as lawmakers scramble to close holes in the budget. The state budget currently sits at $28.6 billion, about $4 billion less than last year.
Faced with flat revenues, the legislature has made some reductions in spending. Despite resistance from state unions, cuts will be made for public employees as part of a deal struck earlier this year. Although by cuts, I really mean “delayed pay raise.” Additionally, state aid to local governments will be reduced.
But here’s where the bleeding begins. Since the budget must balance, the drop in revenue has to be made up somehow. And while cuts have been made, it isn’t enough to fill the gap. What does this mean? Taxes are going up.
There’s no doubt that the income tax increases will make an impact. They are not across the board: the current proposal would raise taxes on incomes above $400,000. Worse, it would eliminate the property tax deduction for those making more than $150,000 and eliminate property tax rebate checks for residents other than senior citizens and the disabled. Considering that NJ has one of the highest property tax rates in the nation, that is a significant bite.
NJ will also lose its appeal as a cheap place to buy wine and hard liquor for Pennsylvanians and other neighboring states: excise taxes on wine and hard liquor will go up.
And just when residents of NJ thought they couldn’t possibly pay anymore to buy cigarettes, they find out they’re wrong. Levies on cigarettes will also rise.
Interestingly, this budget looks a lot like the pre-Corzine budget in 2004. I wonder how much it will affect the gubernatorial race this year.
It’s Fix the Tax Code Friday!
Earlier this week, the Philadelphia Inquirer ran an article about an issue that has been on the minds of many local taxpayers as the city prepares for major cuts in services: real estate tax abatement. Many municipalities – from major metropolitan areas like Philly and NYC to smaller towns like Oskaloosa, IA and Shaker City, OH – offer temporary property tax breaks to developers or homeowners who buy new construction or significantly improve existing construction. The tax breaks range from as short as one tax year to as many as ten tax years.
Opponents of property tax abatements argue that such measures disproportionately favor the wealthy. The Philadelphia Inquirer notes, for example, that Phillies hottie outfielder Pat Burrell benefits from a tax abatement to the tune of about $25,000 per year. Opponents also claim that developers and homeowners already have plenty of incentives to pursue projects in most municipalities. At a time when cities like Philadelphia and New York City are facing huge losses, these opponents believe that the property tax abatements should end and that property owners should pay up.
In contrast, those in favor of property tax abatements consistently cite the tax break as a major incentive for taxpayers to choose to live within the boundaries of the city or town. That choice, the argument goes, brings increased revenue in terms of patronizing existing businesses like retail stores and restaurants. Additionally, proponents note that property tax abatements may be offset by other expenditures, including local income taxes, associated with living in a certain municipality. Burrell, for example, is one of a handful of sports super stars who chooses to live within the city limits – and pay an increased city wage tax as result. Burrell pays an estimated $500,000 more to City Hall as a city resident than he would as a resident of the suburbs.
So today’s Fix the Tax Code question is:
Are property tax abatements, like the one in Philadelphia, a good investment? Or a drain on already taxed resources?
Last year, I posted about Wal-Mart’s aggressive stance on paying property taxes; not surprisingly, Wal-Mart isn’t a fan of paying property tax and has challenged a disproportionately high percentage of assessments for its stores (more than 2,100 property tax challenges nationwide). I titled the piece “Does Wal-Mart Want Your Kid To Read?”
Flash forward to this weekend. I was desperately searching for canning jars (a little known fact about taxgirl: I enjoy gardening). I called around and found a store that purported to have Mason jars, so we piled into the car and headed out. Along the way, at Route 202 and Swedesford Road near Berwyn, we saw a sign advertising a new Wal-Mart. There is no Wal-Mart near our home, and quite frankly, I’ve never had need for one. But if anyone has canning jars, it would be Wal-Mart, and the location was convenient. So, we decided to give it a try.
We pulled into the parking lot only to discover that the Wal-Mart had not yet opened. As we were leaving, I happened to notice something peculiar painted on the pavement. In giant white letters, at one of the intersections in the lot, the word “YEILD” (sic) was carefully painted. And then again. At every yield in the lot, the word “YEILD” (sic) is painted in letters at least 12 inches tall.
Apparently, the folks that painted the drive never heard of the “i before e” rule.
Hmm. Perhaps Wal-Mart should reconsider its stance on funding local schools…
In San Mateo County, California, the Board of Supervisors is holding a closed-door session to deal with a $20 million mistake. As mistakes go, it’s a pretty big one.
The San Mateo County Superior Court awarded Genentech, a self-described profitable biotech firm, $20 million in a recent court case. Genentech had filed suit against the county, claiming that the company had been overtaxed. The court didn’t agree – or disagree. The court didn’t even hear the case. The case wasn’t heard within the appropriate time frame – resulting in a default judgment in favor of Genentech.
How could this have happened? Officials aren’t giving out any specifics, stating merely that it was it was “probably a combination of a poor calendaring system and human error.” I’ll say. With this kind of money, I’m guessing that the human that contributed to that error is now out of a job…
As for the county, Supervior Mark Church notes that this couldn’t “have come at a worse time, with the state budget crisis and the cutbacks we’re experiencing.” This is especially a concern since property tax dollars are largely used in the county for school budgets. Church went on to say that he is hopeful that Genentech would not take advantage of a technicality.
I wouldn’t bet on it.
Especially after Genentech spokeswoman Caroline Pecquet has said, “Like any other taxpayer, we simply want to pay the amount of tax we believe is legally owed.”
And remember, they believe that they had already overpaid.
You do the math on that one.
