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Of Tax Breaks and Budget Holes

(Recent letter to the editors of my local newspapers)

Dear Editor:

I don’t think most people in New Jersey get it yet. When politicians tell us revenue collected for a better 911 system had to go for other law enforcement priorities, they aren’t being honest.  Their “spending priorities” mask tax revenue  lost to off budget deals for special interest tax breaks.  These special  tax breaks loosely translate into campaign donation or political clout for New Jersey politicians.

Special tax deals don’t show up as a liabilities on a budget line. They show up as holes in the budge that must be plugged. They show up as insufficient revenue to pay for state pensions, or daycare assistance, or NJ Transit funding, or the Transportation Trust Fund.  Every time a dedicated funding stream is raided to plug a spending gap we should demand to know what created the revenue gap in the first place.

I believe we are intentionally distracted by dramatic spending conflicts to conceal the real action behind the revenue side of the ledger.  It’s time to claw back all those special interest tax breaks and make the rich and powerful pay their fair share of taxes.  Let’s require that all future budges contain a detailed accounting of all the tax breaks currently in effect.

Brian T. Lynch

Note: The readers of this blog are free to copy this letter or model their own letter after it to send to their own local newspapers.

A few other points that had to be left out:

  1. The tighter the state or municipal budget the greater the disparity between those who pay the taxes they owe and those who cheat on their taxes or get special interest tax breaks. Unfair taxation is at the root of revenue shortfalls.
  1. The article makes the point about wealthy corporations and the rich, because they have the means to make cheating on taxes legal (special interest tax loop holes). They also pay the least amout of taxes relative to their income and wealth. But the tax revenue drain also comes from a growing underground cash economy. Just the other day a buildings trade contractor told me he would lower an estimate if I paid cash (I declined).
  1. No matter where people fall on the wealth and income spectrum they feel cheated by a tax system that allows others to pay less than their fair share. Everyone feels entitled to cheat a little on their taxes. Today, cleaver manipulation of the tax code to avoid paying even massive amounts of federal taxes is admired. This is a far cry from when the current progressive tax code was first implemented 101 years ago. Paying taxes was considered a patriotic duty. Considering how strongly people voice their support for our military, coupled with the fact that nearly 50 cents of every federal income tax dollar goes to the military, you would think that it would still be patriotic to pay taxes today.unclesamtaxes

OR AT LEAST YOUR FAIR SHARE OF TAXES

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Tax Breaks are the Rigging in a Rigged System

by Brian T. Lynch, MSW

(A letter to the editor I submitted today. Please feel free to copy and send to your own local editors without attribution.)

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Dear Editor:

Have we all lost our minds? Have we all forgotten that special interest tax loopholes are a tax burden for the rest of us? Are we so jaded that we no longer see tax breaks as evidence of political corruption?

Who among your readers would vote for a special tax break knowing it would raise their own taxes? If the majority ruled, as it should in our Republic, most tax breaks wouldn’t exist.

While Trump and his supporters say how genius it is of him to so cleverly exploit these disgusting  loopholes, wouldn’t the financial gains of a corruptly created tax breaks also be tainted?

Muck money!  Graft booty!  We don’t have a precise word for it, but exploiting ill gotten tax breaks for personal gain isn’t honorable.  It is unfair. It is the rigging in a rigged system. Tax loopholes may be legal but that doesn’t make them  respectable.

No Fairness in Funding NJ Public Schools

by Brian T. Lynch, MSW

Fairness Formula? Governor Chris Christie is proposing a plan to give an equal amount of State Aid funding to every student in every school districts in New Jersey. Specifically, his proposal would take the higher amounts of State Aid we currently give to very poor districts and distribute it equally across the state to reduce property taxes in the wealthier suburbs. This, he says, is fair.

For those who are not familiar with New Jersey, most school funding is raised through a local wealth tax based on the assessed value of residential and private property. This is a highly regressive way to raise revenue, as you will see below.

We are big on home rule in New Jersey, so each town has its own independent school board. Each towns Board of Education proposes an annual school budget which is voted on in a public referendum.  If passed, the costs are incorporated into the municipal budget and property tax rates are raised if more revenue is needed.  If the school budget fails, town and school officials have to either cut the school budget or make other adjustments to municipal services so property taxes don’t rise.

Here is truism:  Wealthy municipalities tend to grow more affluent over time while poor districts tend to decline even further.

Wealthy towns have better school systems in New Jersey. That is also a fact. So parents who can afford to upgrade their home often move into towns with better schools. Property values rise with the demand for homes in districts with better schools.  Property values decline in districts that have underfunded or troubled schools, so property tax rates must increase in poor districts just to break even on current school spending.  As property values increase in wealthy districts, more property tax revenue is generated.  Some of this additional revenue goes into further improving the schools without the need to increase taxes.  In some cases tax rates may even decline in affluent municipalities as home values rise. The result is that wealthy districts have much better public schools and lower tax rates while poor districts cannot afford to keep up the disadvantaged schools they have.

State Municipal and School Aid was designed to help level municipal tax burdens in New Jersey. State Aid is allocated to local municipalities and school districts to fill in the gaps that exist between wealthy and poor municipalities. This funding solution grew out of a state Supreme Court ruling, Abbott vs. Burke, that found New Jersey school funding did not result in equal education opportunity, as mandated by the State Constitution.

This vicious cycle of migration between rich and poor districts is a big reason for the educational funding disparity. It is the one usually mentioned by NJ state legislators and the press. But this cycle only exacerbates an underlying funding flaw. A wealth tax based on residential property values is incredibly regressive.

I wrote another article about the regressive education taxes in New Jersey last year. The Governor’s new School Aid plan only compounds the problem.

To show just how unfair residential wealth taxes are for funding public schools, consider that people who own million dollar homes almost always have significant other wealth investments and ownership interests that aren’t being taxed to funding public schools.  The rich have far more wealth and investment income. On the other hand, people who own homes in economically depressed areas, people whose homes are well below the state average in value, have few investments or ownership stakes. Many of them have a negative net worth, almost no savings and many of them struggle to pay their monthly bills.

Most economists agree that a flat tax is a regressive tax. It favors the rich, but it is still far less regressive than the property tax scheme in New Jersey.  To illustrate, the table below looks at information from three actual New Jersey municipalities: a poor district, an modestly affluent district and a wealthy district. The number of students in these districts tell you that these aren’t all K-12 districts, but the tax lesson here is still valid whether a district is a sending district or not.

Table 1

WealthTaxComparison

Hammonton and Margate are municipalities in Atlantic County and Stone Harbor is in Cape May County.  In all three districts the average tax bill is below the state average. Hammonton does a pretty good job of keeping per pupil costs down so it’s residents can afford their property taxes.  It is a town where the average home value of $205k is significantly below the state average of nearly $400k. It is not an affluent community like Margate, or a wealth district like Stone Harbor where the average home sells for over a million dollars.

The average tax bill in Hammonton is just under $5,000 per year, almost half the state average. The $14,384 annual per/pupil cost of education is also below the $19,211 state average.  The low tax bill per resident is due, in part, to the fact that Hammonton receives $20 million dollars in State Aid.

Despite all of their frugal budgeting to keep tuition costs down, and despite a good amount of state assistance, look at Hammonton’s general property tax rate.  It is double the tax rate in Margate and more than five time higher than the tax rate in Stone Harbor. Hammonton’s property tax rate is still well above the state average.

The residents of Margate and Stone Harbor pay a few thousand dollars more per year in property taxes, but they can well afford it. They pay less than the state average in property taxes yet spend far more than average in student tuition.  Even so, Margate currently receives $2.5 million in State Aid while the very wealthy Stone Harbor receives nearly a half-million dollars in State Aid.  Ironically, Under Governor Christie’s plan, each of these three districts would receive substantially more State Aid, but this would come at the expense of the very poor urban districts, the so call “Abbott”  districts, where poverty levels are very high and property values are very low.

If instead of a flat State Aid rate for every student, Governor Christie proposed a flat property tax rate, and used additional revenue from wealth districts to fill funding gaps in poorer districts, how would that effect property taxes in these three communities?

Keeping in mind that a flat tax is still regressive, and that home values are not a good indicator of wealth ownership (it under represents the wealth of the wealthy) the table below shows what property taxes would look like if a flat property tax was implemented based on New Jersey’s average property tax rate.

Table 2

FlatTaxEduFunding

This exercise illustrates just how incredibly regressive the current property tax scheme is.  More affluent towns are paying a lower property tax rate and middle class communities are paying a higher rate. Even a flat property tax rate would double Margate’s tax bill and more than quadruple Stone Harbors tax bill. A flat property tax rate would probably generate enough additional revenue to adequately fund and rehabilitate Abbott district schools and disadvantaged schools throughout the state.  A progressive property tax formula would go even further to fully fund New Jersey’s public schools and give every child their constitutionally protected right to an equally good public education.  Giving the same amount of state aid to both the rich and poor isn’t fair at all. A progressive wealth tax based on residential property values would be.

Below are the URL internet addresses for all of the data presented above.

_____________________________________________________________

http://www.nj.com/education/2015/04/nj_schools_how_much_is_your_district_spending_per.html

http://www.nj.gov/education/data/fact.htm

http://www.state.nj.us/education/data/enr/enr14/stat_doc.htm

http://www.state.nj.us/treasury/taxation/lpt/taxrate.shtml

http://www.state.nj.us/treasury/taxation/pdf/lpt/class2/avgsale15.pdf

http://www.state.nj.us/treasury/taxation/lpt/class2avgsales.shtml

http://www.joeshimkus.com/NJ-Tax-Rates.aspx

http://www.state.nj.us/dca/divisions/dlgs/resources/stateaidinfo.shtml

A Silent Rage Approaching

by Brian T. Lynch, MSW

The rich are not like you and me. I can safely say that knowing they’ll never read this.

The massive leak of documents from the Panamanian law firm Mossack Fonseca shows the extent to which the global elite shield their wealth from us. They have no interest in sharing the cost of governing.  We pay for the military, the courts, the police, the roads, the schools and all of our social and physical infrastructure. The wealthy mooch off of us by not paying their taxes.  The system is rigged to benefit those who least need the benefits. Some of the tax dodges are written into the law by politicians deep within the pockets of the rich. But as the Panama Papers reveal, most of the unreported wealth is hidden illegal. All of it is underhanded and immoral.

The sheer number of documents leaked is enormous. It covers 40 years of financial transactions and 2.6 terabytes of data. If media coverage of this scandal were proportional to the size of the document cashe, there would be no other news on television for weeks. Here below is a graphic depiction of the scale of the leak compared with other huge scandalous leaks.

PanamPapers Size

Source: http://www.niemanlab.org/2016/04/heres-how-over-400-journalists-at-dozens-of-news-orgs-reported-out-the-massive-panama-papers-story/

As it stands, the owners and share holders of our corporate media are likely involved somewhere in this scandal. If not them directly, then surely their customers who buy advertizing are caught in this vast net of stinking fish. The hard working, front line journalists responsible for turning this data mountain into intelligible information have little control over how their work will be broadcast. For now, at least in the United States, coverage of the scandal is trumped by presidential politics.

If our society were healthy, if so many of us had not already given up on government’s lack of responsiveness to public demands, this would be a watershed moment. It would be a tipping point for righteous indignation and hot pursuit of substantial reforms.

The wealthy will tell you their fair share is in the paltry proportion they do pay in taxes, but the proof of the lie is the growing number of children living in poverty whose benefits are cut by the budget knife. The proof of the lie is in our crumbling bridges and crowed roads that we can’t fix without killing off other essential services. No matter how big some people say government is, it’s too small and corrupted to make these powerful people pay all their taxes.

It is all too depressing. All the more so if you believe, as I do, that a failure to mobilize for real change now puts the world on the path to real revolution, bloodshed and destruction. It is a well documented historical pattern, just as inevitable yet avoidable as global warming. It has happened countless times before, except this is different. This time tearing down our institutions in a murderous fit of rage would likely condemn the Earth to mass extinctions.

As much as we rail against the “system” we need it for the higher level of coordination and cooperation it will take to solve the global catastrophe we face. We can’t solve these challenges without reforming our current power structures and the eliminating the barriers created by greedy capitalists. Only the collective power of our vast social institutions can bring about the kind of changes we must make to survive. Radical reform is our best option for survival.  How do we get a critical mass of people to understand this before it is too late?

The Panama Papers Scandal Parses the Difference Between Bernie and Hillary

by Brian T. Lynch, MSW

IMG_1508

This is yet another example where a clear eyed, independent Bernie Sanders warned against passing legislation that he knew would be disastrous while Hillary Clinton pressed for its passage. Sanders said exactly what would happen if the Panama free trade agreement passed. He said it would make it easier for, ” … the wealthiest people and most profitable corporations in this country to avoid paying their fair share in taxes by setting-up offshore tax havens in Panama.

Today we read headline stories like this:

“Years before more than a hundred media outlets around the world released stories Sunday (April 3, 2016) exposing a massive network of global tax evasion detailed in the so-called Panama Papers, U.S. President Barack Obama and then-Secretary of State Hillary Clinton pushed for a Bush administration-negotiated free trade agreement that watchdogs warned would only make the situation worse.”

Source: http://www.ibtimes.com/panama-papers-obama-clinton-pushed-trade-deal-amid-warnings-it-would-make-money-2348076

After the free trade agreements passed in Congress, then Secretary of State Hillary Clinton released the following statement:

“The Free Trade Agreements passed by Congress tonight will make it easier for American companies to sell their products to South Korea, Colombia and Panama, which will create jobs here at home. The Obama Administration is constantly working to deepen our economic engagement throughout the world and these agreements are an example of that commitment.

Source: https://blogs.state.gov/stories/2011/10/13/passage-colombia-panama-and-south-korea-trade-agreements

In opposition to the Panama free trade agreement bill being debated in the Senate, Bernie Sanders said this on October 12, 2011 (Panama comments printed here in full) :

Finally, Mr. President, let’s talk about the Panama Free Trade Agreement.

Panama’s entire annual economic output is only $26.7 billion a year, or about two-tenths of one percent of the U.S. economy.  No-one can legitimately make the claim that approving this free trade agreement will significantly increase American jobs.

Then, why would we be considering a stand-alone free trade agreement with this country?

Well, it turns out that Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade U.S. taxes by stashing their cash in off-shore tax havens.  And, the Panama Free Trade Agreement would make this bad situation much worse.

Each and every year, the wealthy and large corporations evade $100 billion in U.S. taxes through abusive and illegal offshore tax havens in Panama and other countries.

According to Citizens for Tax Justice, “A tax haven . . . has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of non-cooperation with other countries on exchanging information about tax matters.  Panama has all three of those. … They’re probably the worst.”

Mr. President, the trade agreement with Panama would effectively bar the U.S. from cracking down on illegal and abusive offshore tax havens in Panama.  In fact, combating tax haven abuse in Panama would be a violation of this free trade agreement, exposing the U.S. to fines from international authorities.

In 2008, the Government Accountability Office said that 17 of the 100 largest American companies were operating a total of 42 subsidiaries in Panama.  This free trade agreement would make it easier for the wealthy and large corporations to avoid paying U.S. taxes and it must be defeated.  At a time when we have a record-breaking $14.7 trillion national debt and an unsustainable federal deficit, the last thing that we should be doing is making it easier for the wealthiest people and most profitable corporations in this country to avoid paying their fair share in taxes by setting-up offshore tax havens in Panama.

Adding insult to injury, Mr. President, the Panama FTA would require the United States to waive Buy America requirements for procurement bids from thousands of foreign firms, including many Chinese firms, incorporated in this major tax haven.  That may make sense to China, it does not make sense to me.

Finally, Panama is also listed by the State Department as a major venue for Mexican and Colombian drug cartel money laundering.  Should we be rewarding this country with a free trade agreement?  I think the answer should be a resounding no.

Source: http://www.sanders.senate.gov/newsroom/press-releases/senate-speech-by-sen-bernie-sanders-on-unfettered-free-trade

It is very difficult for average citizens like me to see clearly what our politicians are really up to. This is true in part because we no longer have an independent press challenging our politicians pro-business policies. If “free trade” is good for businesses and the wealthy (the donor class), it’s good for corporate media profits and for campaign funding PAC’s.

It is this nexus between business, politics and the media that form the self-interested “establishment” in America. It is a ruling elite that competes with itself along party lines without  faithfully serving the interests of ordinary citizens. Both the extraordinary outsider presidential campaigns of  Donald Trump and Bernie Sanders are driven by this single aspect of our national polity, the  establishment elite.

Donald Trump representing opposition to the Republican flavor of the establishment elite. He thrashes about like a wild man trying  to cobble together a rage tag constituency of the disillusioned on the right.

Senator Sanders, on the other hand, has always seen through the self-serving positions of the New Democrats (or Third Way Democrats). The centrist moves of the modern Democratic party has always been a slide towards corporate power. It helps Democrats win elections because centrist positions are more lucrative for Democratic campaigns.  By not accepting PAC money or wealthy donations, Bernie Sanders has demonstrated just how clearly good politicians can see the true impact of proposed legislation.

In this and many other examples, Bernie Sanders is like a prophet.  Not the religious kind, but in the secular sense. He sees where we are headed more clearly than most and then uses that information to try and get us to change course. That is what prophets, and parents and true statesmen do.

Coal Ash Disaster Turns Capitalists into Socialists (Again)

by Brian T. Lynch, MSW

Commentary:

Coal ash is what’s left after coal is burned. It’s a toxic stew containing heavy metals including arsenic, lead and mercury.  For many years Duke Energy has mixed coal ash with water and pumped this cocktail from coal fired power plants into huge open pits. In February, one of the sludge pits located in North Carolina began releasing millions of gallons of toxic coal ash into the Dan River, a source of public drinking water for thousands of people.

coal-ash-spill.jpeg3-1280x960

 Photo and article: http://www.salon.com/2014/02/26/north_carolina_might_finally_crack_down_on_duke_energy_after_disastrous_coal_ash_spill/

Duke Energy spent millions over the years to keep government from properly regulating their waste products.  For all those decades the stockholders and upper management of Duke energy have profited from this arrangement. Now that the inevitable has occurred, clean up effort will take years and cost a billion dollars. Millions more will have to be spent to correct the improper disposal problems that Duke Energy has practiced for decades.

Lynn Good CEO

Safely storing coal ash should have been a cost of doing business for Duke Energy all along, but they have deferred that cost to boost their profits. Now Duke Energy’s president and CEO, Lynn Good, thinks taxpayers should bear the cleanup costs. She said, “Ash pond closure has been a plan for very long time. And because that ash was created over decades for the generation of electricity, we do believe that ash pond disposal costs are ultimately a part of our cost structure.” She believes the burden of this clean up should be shared by everyone equally.  (Corporate socialism? Again?)

Corporation are legally obligated to maximize profits for their shareholders. This would be fine if they were also legally obligated to paid the full cost of doing business without cutting corners. Cleaning up toxic spills is far more expensive than preventing themand regulations to enforce safe disposal are less expensive in the long run. But asking the victims of their environmental crimes to pay for cleaning up their mess and fixing their problem should not be an option.

(See also: http://www.politicususa.com/2014/03/14/republican-hypocrites-force-nc-taxpayers-pay-duke-energys-toxic-coal-ash-dumping.html )

Immigration Myths Hide the Benefits Says US Chamber of Commerce

From the US Chamber of Commerce: This ultra-conservative organization finally comes clean with a DATA DRIVEN VIEWPOINT support their position on immigration and how it benefits the US economically.  http://www.scribd.com/doc/179652570/Immigration-Myths-and-Facts

 Immigration Myths and Facts

Despite the numerous studies and carefully detailed economic reports outlining the positive effects of immigration, there is a great deal of misinformation about the impact of immigration.  It is critical that policymakers and the public are educated about the facts behind these fallacies. [Says the US Chamber of Commerce]  

Below I present the major points of their arguments. Please go to their website to read a detailed explanation for each of these points. 

JOBS  MYTH: Every job filled by an immigrant is a job that could be filled by an unemployed American.

FACT: Immigrants typically do not compete for jobs with native-born workers and immigrants create jobs as entrepreneurs, consumers, and taxpayers
WAGES MYTH: Immigrants drive downthe wages of American workers.
FACT: Immigrants give a slight boost to the average wages of Americans by increasing their productivity and stimulating investment
ECONOMY MYTH: The sluggish U.S. economy doesn’t need more immigrant workers.
FACT: Immigrants will replenish the U.S. labor force as millions of Baby Boomers retire.
UNEMPOLOMENT MYTH: At a time oF high unemployment, the U.S. economy does not need temporary foreign workers.
FACT: Temporary workers from abroad fill specialized needs in specifc sectors of the U.S. economy.
HIGH-TECH WORKERS MYTH: There is no shortfall of native-born Americans for open positions in the natural sciences, engineering, and computer science and thus no need for foreign-born high-tech workers.
FACTS: Job openings are expanding at educational levels where demographic data show too few native-born students, so we can expect these shortfalls to persist in the future. Moreover, relative to other economic indicators, wages are increasing in STEM jobs requiring higher education.
COMMUNITY IMPACT MYTH: Immigrants hurt communities that are struggling economically.
FACT: Immigrants have economically revitalized many communities throughout the country.
TAXES MYTH: Undocumented immigrants do not pay taxes.
FACT: Undocumented immigrants pay billions of dollars in taxes each year.
WELFARE MYTH: Immigrants come to theUnited States for welfare benefts.
FACT: Undocumented immigrants arenot eligible for federal public beneftprograms, and even legal immigrants face stringent eligibility restrictions.
INTEGRATION MYTH: Today’s immigrants are not assimilating into U.S. society.
FACT: Today’s immigrants are buying homes, becoming U.S. citizens, and learning English.
CRIME MYTH: Immigrants are more likely to commit crimes than native-born Americans.
FACT: Immigration does not cause crime rates to rise, and immigrants are actually less likely to commit crimes or be behind bars than native-born Americans.
BORDER SECURITY MYTH: Reforming the legal immigration system will not help secure the border.
FACT: Immigration reform is an integral part of any effective border security strategy.