Thursday, March 30, 2006

Even HIGHER Taxes For New Jersey?

It's not a good time to be a big earner in Jersey..

From the Star Ledger:

Coalition advocates further tax raises

Gov. Jon Corzine is drawing fire for proposing $1.5 billion in tax increases for the cash-strapped state budget, but a coalition of citizens groups and union yesterday said he isn't going far enough.

The Fairness Alliance yesterday called for nearly $800 million in higher taxes to restore cuts in higher education and other areas targeted by Corzine.

The groups, which include the New Jersey Education Association and the Communications Workers of America, two powerful unions, urged a $462 million income tax increase for more than 100,000 taxpayers who earn $200,000 to $500,000, and more than $300 million in extra business taxes and suspended tax breaks.
...
Two years ago, the alliance persuaded the Legislature to boost the income tax rate on taxpayers who earn more than $500,000, a move that netted $800 million. It now would impose the same 8.97 percent rate on all taxpayers who earn more than $200,000 -- up from a top rate of 6.37 percent.

The younger generation and lower income earners are leaving the state seeking a better quality of life elsewhere, and now the rich will have a reason to leave. Is there any reason for anyone to stay in New Jersey anymore?

Caveat Emptor!
Grim

41 Comments:

Anonymous Anonymous said...

Higher taxes. WOW!

Can't wait for these slugs that ovepaid to get hit with these high taxes.

They will running for the exits because they can't afford to live in NJ.

Bring on higher taxes and higher rates. Of course according to Realtors house prices are immune to any of this. Yes.

3/30/2006 07:27:00 AM  
Anonymous Anonymous said...

Higher taxes + Higher interest rates = Massive House price correction

It's the only thing that can go down now, since taxes are never going down and interest rates are going to creep higher due to reckless FED Money Printing Policies.

3/30/2006 07:29:00 AM  
Blogger grim said...

Sanity break.

Get 'em While They're Young

Great blog post by Tim over at The Mess That Greenspan Made about the Federal Reserve Kid's Page. Yes, the Federal Reserve Web Site has a childrens section.

grim

3/30/2006 07:37:00 AM  
Blogger grim said...

Anyone cheering for the Fed to keep boosting rates will be happy to hear that the GDP chain deflator came in at 3.5% for Q4, well above consensus estimates of 3.3%.

For the 10y yield junkies, initial claims came in below estimates at 302k today (305k consensus).

IMHO, 5.25-5.5% is beginning to seem very possible.

grim

3/30/2006 08:47:00 AM  
Anonymous Anonymous said...

How's this for a taxation system: you go into a restaurant and order a burger. When the bill comes, they verify your annual salary and if you make $50K your burger is $4, if you make $75K your burger is $6, and if you make $100K your burger is $8.

Sound fair? That's the current system.

3/30/2006 08:48:00 AM  
Anonymous Anonymous said...

"Can't wait for these slugs that ovepaid to get hit with these high taxes. They will running for the exits because they can't afford to live in NJ."

And the jobs they create will hit the exits with them...

Punishing the most productive members of society is an odd strategy. How about a 15% flat tax for every American, regardless of income? Abolish the IRS (save billions there), and there will be no more loopholes for the mega-wealthy; they'll be paying 15% like everyone else.

Fair and equal for one and all.

3/30/2006 08:51:00 AM  
Blogger Richie said...

Punishing the most productive members of society is an odd strategy. How about a 15% flat tax for every American, regardless of income? Abolish the IRS (save billions there), and there will be no more loopholes for the mega-wealthy; they'll be paying 15% like everyone else.

That's just too simple for the government to understand, and it's a great idea. So that's 2 reasons why it could never happen.

3/30/2006 08:59:00 AM  
Blogger grim said...

Increasing taxes on corporations will kill this state.

Joe Sixpack seems to love the idea. Economists cringe in fear of it.

grim

3/30/2006 09:01:00 AM  
Anonymous Anonymous said...

The sacred cow Real estate writeoffs will be on the table at some point. It has been abused with helocs and its use to cover consumption not homeownership.

3/30/2006 09:45:00 AM  
Anonymous Anonymous said...

"Punishing the most productive members of society is an odd strategy"

Who is most productive those that make above average incomes?

You must be kidding me.

You call an actor, an overpaid ceo, or a Wall Street Trader/Investment Banker doing failed deals productive?

3/30/2006 09:49:00 AM  
Blogger delford said...

I have been trying to tell friends and neighbors this for the last couple of years, anybody could have seen this mess coming. It is time to pay the piper now.

There were many school expansion referendums that people voted yes for last year. The local BOE's pushed hard to have these approved

They used the bogeyman of if you don't your property values will go down. They also stressed that the state would pay towards the construction costs.


I tried to warn people that the SCC was out of money, and that the state promise to pay was just that a promise, not a gurantee.

The local BOE's focused only on the construction costs, I tried repeatedly to get answers from my BOE, on what the impact would be on the operating expense of the new addition, no answer, and people I have spoken to sine about it, said they ahd not even realized or thought about that,well too late now, because the referendum has passed, and construction will start in the summer.

One final note our local school budget will be going up 7% this year, what kind of increases will we get after the addition is done, and all the new teachers, and teachers aides, and custodian are hired? Not to mention heating, lighting and all the rest.

I have no pity for the people of NJ, they are for the most part uninformed, apathetic and lazy, we are getting what we deserve as a state.

3/30/2006 09:50:00 AM  
Blogger grim said...

I agree about the property tax and mortgage interest deductions.

I expect those two deductions to be converted to credits in the future. Those credits will not be geared towards high incomes or expensive homes.

Very easy way of keeping real estate appreciation in check with reality.

grim

3/30/2006 09:53:00 AM  
Anonymous Anonymous said...

"I expect those two deductions to be converted to credits in the future. Those credits will not be geared towards high incomes or expensive homes."
I agree.

So how will this impact avg joe?

CD

3/30/2006 09:57:00 AM  
Blogger skep-tic said...

there's only 100,000 people making over 200k in NJ? that seems really low. if true, then house prices are even more out of whack then I thought

3/30/2006 10:02:00 AM  
Blogger njAndrew said...

100,000 people making over 200k as income, not cap-gains, not dividens. Still sounds low but the realy rich don't make their money as 'income'.

Lets forget a flat tax and all income, including cap-gains, dividens, etc the same.

Andrew

3/30/2006 10:51:00 AM  
Anonymous Anonymous said...

"$462 million income tax increase for more than 100,000 taxpayers who earn $200,000 to $500,000"

Sure - these are the "rich" people. Not people like Corzine who have $50+ million in assets. How about a 10% wealth tax on those who have > $10 in assets? That alone would mean the rest of us would pay almost no tax.

3/30/2006 10:53:00 AM  
Anonymous Anonymous said...

"Punishing the most productive members of society is an odd strategy. How about a 15% flat tax for every American, regardless of income? Abolish the IRS (save billions there), and there will be no more loopholes for the mega-wealthy; they'll be paying 15% like everyone else."

Either that or a consumption tax - tax the consumers NOT the PRODUCERS!!! Good post in any event.

3/30/2006 10:55:00 AM  
Anonymous Anonymous said...

"Who is most productive those that make above average incomes?"

Most millionaires are small business owners. They leave NJ, so do their businesses, and their employees are left in the lurch.

Actors? NJ isn't Hollywood.

3/30/2006 11:18:00 AM  
Anonymous Anonymous said...


Abolish the IRS (save billions there), and there will be no more loopholes for the mega-wealthy; they'll be paying 15% like everyone else.


Yup, no small loopholes, just one giant loophole.

3/30/2006 11:21:00 AM  
Blogger Grim Ghost said...

Something thats worth mentioning is that a lot of the highest income people in NJ make their money in NYC. Increasing the marginal tax rate on such people probably has much less impact than realized.

For instance, we (I and my spouse) made in the mid 6 figure plus range last year. But we pay 10 times as much to New York (10s of thousands) as we do to NJ because we work in NY (and get a credit for NJ taxes). It is a little unfair to NJ because we use far more facilities in NJ than in NY.

Maybe there is some way in which NJ could get a larger sum of the money paid in taxes people working in NY make (WITHOUT increasing their overall tax burden, just increasing the % that NJ gets). I'm sure NY would try and block that.

But today -- New York has a state budget surplus, whereas NJ has a deficit ..

3/30/2006 11:28:00 AM  
Blogger Grim Ghost said...


Most millionaires are small business owners.


In NJ, the most millionaries are likely to be Wall Street traders, ibankers, analysts and the like.

Of course, given the run up in RE prices, soon all homeowners will be millionaries.

3/30/2006 11:36:00 AM  
Anonymous Anonymous said...

Wait until those who sell at a 50K, 100K, 200K loss find out that their personal real estate losses are not tax deductable.

The crash may be coming sooner than we think.

3/30/2006 12:14:00 PM  
Anonymous Anonymous said...

You do not think a homeowner I mean Bagholder will accept a $50K $100K or $200k loss this early in the downdraft in home prices?

They are not. They are in total denial right now like they were when cisco lucent and microsoft grinded lower and they held saying it will comeback it will come back.

Problem is the stakes are higher now. margin debt was about $275 billion at the top of NASDAQ market in March 2000. the leveraged associated with this real estate bubble is enormous is comparison. Can you say meltdown?

Just like melting ice that picks up speed as is shrinks in size.

3/30/2006 12:42:00 PM  
Anonymous Anonymous said...

"Abolish the IRS (save billions there), and there will be no more loopholes for the mega-wealthy; they'll be paying 15% like everyone else.

Yup, no small loopholes, just one giant loophole."



How so? Last year, Billionaire John Kerry for example, paid 6% income tax.

His tax would nearly triple with a flat tax.

There is no loophole with a fixed tax rate, that's the beauty. And it's fair for all.

3/30/2006 12:45:00 PM  
Blogger skep-tic said...

the wealthiest people (many of whom work in NYC) have a lot of options of where to live.

top income tax rate in CT is 5%.

in NY it's 7.7% (if you don't live in NYC).

this plan to raise taxes at the top could easily backfire on NJ

3/30/2006 12:53:00 PM  
Anonymous Anonymous said...


How so? Last year, Billionaire John Kerry for example, paid 6% income tax. His tax would nearly triple with a flat tax.There is no loophole with a fixed tax rate, that's the beauty. And it's fair for all.


1) Kerry is not a billionaire. Even his wife, most of whose assets are separate may or may not be a billionaire. Forbes estimated her wealth to be around 750 Million - 1.2 Billion.
2) I don't know where you got your 6% rate from. The only thing we know about Teresa Kerry's income is her return from 2003, which was disclosed. Her effective rate then was 12%, which is hardly one third of 15%. And incidentally, her income then was around $5 million. Quite a large chunk of change, but using the term billionaire is misleading, because that is capital, not income.

3) The reason her tax rate was 12% is that she got most of her income from munis. Now, anyone who knows anything about bonds knows that
a) munis are about as vanilla in terms of tax deductions as possible,as much as the charitable deduction or mortgage interest.
b) munis almost always trade at lower prices than taxable bonds of equivalent coupons, the discount being derermined by tax rate. Yes, there is still some value for a wealthy person in getting munis, but the discount means that they could easily have got a far higher rate with taxable bonds. All this means is that you will find after adjusting for the non market rate muni that Teresa Kerrys effective tax rate was probably at least 20 %.


In any case, even if you had a totally flat tax rate -- no exemptions, no deductions, no munis, no credits, no mortgage interest deduction, no property tax deduction, no 401k exemption, there would still be loopholes. From what we know of some of the shelters that KPMG et al. created (which they're now defending in court), they didn't rely at all on garden variety exemptions. What they did was to use exotic financial instruments to reduce income, or transfer between income and capital or transfer money to corporate S-corps or the like. A totally flat tax may reduce this (although I suspect you'll see huge transfers to capital and dividend accounts), but its just the nature of the beast -- whatever tax laws you come up with, people will design loopholes.

Finally, the large majority of Americans would pay considerably more in taxes under a totally flat tax regime (no mortgage interest, no munis, no charitable deductions, no 401k, no medical insurance exemption). That may be fair, it may be good for wealthier Americans to keep more of their income, but lets stop pretending that we're going to get the same budget receipts by magically closing loopholes for the billionaries -- no, most of the money will come from less wealthy Ameriocans

3/30/2006 02:01:00 PM  
Blogger Grim Ghost said...


this plan to raise taxes at the top could easily backfire on NJ


Its not a plan. Its a proposal, and the Governor claims to oppose it so far.

But like I said, for people who make the bulk of their wage income in NYC, it makes less difference than you might think because we pay most of our taxes to NY.

In any case, the budget is in a real crisis because previous administrations both democratic and republican, borrowed and spent. At this point, some sort of combination of tax increase and spending cuts are inevitable.

3/30/2006 02:08:00 PM  
Blogger chicagofinance said...

Everyone complains about the AMT, but if you review it's stipulations, it is the straighforward and equitable tax system for which everyone has been clamoring for decades.

3/30/2006 02:09:00 PM  
Anonymous Anonymous said...

So here for someone who's interested are Teresa Kerry's 2003 taxes

Taxable income : 2.3 M
Tax exempt interest income: 2.77 M

Taxes = 750K.

That means on her taxable income of 2.3M, she paid around 30%.

Now lets consider the tax exempt interest.

Vanguard's Pennsylvania money market fund currently yields 3.06 %. Vanguard's prime money market fund (which is probably better quality than PA notes) yields 4.46 %.

So roughly (using current rates), Mrs Kerry would have made around
2.77 * 4.46/3.06 = 4 M in taxable income i.e. 1.23 Mill extra if she had bought taxable bonds.

At a 35% marginal rate, she would have paid an extra 1.4 Million, in taxes, ending up with 170K less net.

So all told, instead of paying 2.15 million taxes on 6.3 million, she effectively paid 1.98 million or so, which is still over 30%.

3/30/2006 03:39:00 PM  
Anonymous UnRealtor said...

Anon, 2:01 wrote:

"The only thing we know about Teresa Kerry's income is her return from 2003, which was disclosed. Her effective rate then was 12%"


Anon, 3:39 wrote:

"That means on her taxable income of 2.3M, she paid around 30%."



This should shed some light:

"Teresa Heinz Kerry on Friday released a portion of her 2003 federal tax return, reporting that she paid $627k in federal income taxes on $2.3 million of AGI, primarily from dividends and interest. She received $5.1 million of gross income, $2.8 million of it tax exempt interest income. Ms. Heinz Kerry, who filed separately from Senator Kerry, thus paid federal income tax at the rate of 12.3% of her gross income and 27.4% of her AGI."

http://taxprof.typepad.com/taxprof_blog/2004/week42

3/30/2006 03:53:00 PM  
Anonymous Anonymous said...

"Ms. Heinz Kerry, who filed separately from Senator Kerry, thus paid federal income tax at the rate of 12.3% of her gross income and 27.4% of her AGI.""

Funny, I didnt make anywhere near 5 million and I paid well over 12.3%. I guess when good ol' John was talking about raising taxes on the "rich", he meant "raise taxes on those trying to get rich". Those who are already rich like his wife should pay almost nothing.

3/31/2006 09:22:00 AM  
Anonymous Anonymous said...

"Everyone complains about the AMT, but if you review it's stipulations, it is the straighforward and equitable tax system for which everyone has been clamoring for decades."

I usually agree with you, but it just unecessarily adds complexity to our already oppressively complex tax system.

3/31/2006 09:24:00 AM  
Blogger chicagofinance said...

Anon 9:24AM:

Just to rebut - don't review the AMT as a calculation that adjusts your taxes. If you look at the AMT as a stand alone calculation, it is far less complex than the standard one.

Standard - AMT < 0, you report it on your taxes as Standard + [AMT - Standard] = AMT.

Effectively, if you could just fill out a tax form that was AMT, you would at least appreciate better what I am saying even if you don't agree.

chicago

3/31/2006 11:01:00 AM  
Anonymous Anonymous said...

Funny, I didnt make anywhere near 5 million and I paid well over 12.3%. I guess when good ol' John was talking about raising taxes on the "rich", he meant "raise taxes on those trying to get rich".


It's also a joke that neither of these two have earned or created anything in their lives. John Kerry, who has never held an actual job, married a Millionaire heiress (Julia Thorne) years ago, then divorced her and upgraded to Billionaire heiress Theresa Heinz.

Theresa Heinz, in turn, inherited all her money from her dead husband John Heinz, a Republican US Senator.

She had voted Republican her entire life, and after inheriting her husband's wealth, registered as a Democrat in 2003.

Interesting history that the media seem to suppress.

I recall during the heated 2004 election campaign, Mr and Mrs Kerry stopped at a Wendy's for lunch. Upon seeing a poster on the wall of Wendy's famous chili, Theresa said "What's that?"

Just common folk, eh?

3/31/2006 11:34:00 AM  
Anonymous Anonymous said...


Funny, I didnt make anywhere near 5 million and I paid well over 12.3%. I guess when good ol' John was talking about raising taxes on the "rich", he meant "raise taxes on those trying to get rich". Those who are already rich like his wife should pay almost nothing.


Why do some people insist on lying so much ? I posted the full details on Mrs Kerry's tax return. The only reason Mrs. Kerry paid 12.3% was because she bought munis, in short she took a considerably lower coupon payment on munis that were tax free. If she had bought taxable bonds, she would have probably paid considerably more money and paid more taxes, ending up with around 25 - 30% in taxes. [ And incidentally, weren't you claiming 6% earlier]

Munis are the most basic investment strategy. Its really a subsidy from the Federal government to cities, townships and states so people will buy their bonds and they have to pay less in interest. Lots of people buy them (I have lots of NJ munis myself). If there were no such tax benefits, NJ's interest servicing (at state, county, city, government corporation level) would rise dramatically, and you would have to pay for that through higher taxes at all levels.

In effect, Mrs Kerry (or any muni bond buyer) pay less tax, but most of that gain (upto 90-95%) is negated by the lower coupon on munis. My effective tax rate may seem lower, but my income is also lower because of this investment.


In any case, most proponents of the flat tax propose no tax for dividends or capital gains. That would mean that people who make most of their money from passive investments (like most rich people) would pay almost no taxes. There is a case and a reasonable one to be made for the flat tax, but please spare me the faux populism of how it would prevent billionaries from using tax loopholes.

3/31/2006 09:41:00 PM  
Anonymous Anonymous said...


Theresa Heinz, in turn, inherited all her money from her dead husband John Heinz, a Republican US Senator.


So ? She was married to him for 25 plus years. And in any case, Senator Heinz didn't earn his money himself either, it very largely came from his father.


She had voted Republican her entire life, and after inheriting her husband's wealth, registered as a Democrat in 2003


Nonsense. Senator Heinz died in 1991. Teresa Kerry didn't switch her registration till much later. But in any case, so what ? Lots of people switch voter registrations. Senator Heinz himself was very much the centrist/moderate Republican.


Interesting history that the media seem to suppress.


Nonsense. The media covered it. Newsweek or Time did a cover story on Teresa Kerry after John Kerry became the nominee. In any case, what the devil is there to suppress in that ?


Just common folk, eh?


Well, not all of us are so common as to have a President as our father.

I'm not that political myself, didn't vote in 2004, but I did live in Pittsburgh for several years. Both Senator Heinz and later Teresa Heinz were major philantrophists in Pittsburgh, contributing to dozens of causes. Both did (and in Teresa's case do) a great deal of good in Pittsburgh. You may disagree with her politics, but please spare me these bizarre distortions.

3/31/2006 09:53:00 PM  
Anonymous Anonymous said...

"She had voted Republican her entire life, and after inheriting her husband's wealth, registered as a Democrat in 2003.

Nonsense. Senator Heinz died in 1991. Teresa Kerry didn't switch her registration till much later."


Yes, she switched in 2003, as indicated. To wit:

"She chose to keep her name as Teresa Heinz, and also remained a registered Republican, until John Kerry's presidential bid. ... Teresa Heinz was a registered Republican for most of her voting career... In January of 2003, she changed her registration to the Democratic Party."

http://en.wikipedia.org/wiki/Teresa_Heinz_Kerry



"You may disagree with her politics, but please spare me these bizarre distortions."

Everything I wrote is 100% fact. Please spare everyone your distortions...

4/01/2006 04:07:00 PM  
Anonymous Anonymous said...

"Why do some people insist on lying so much ?"

What lie? Just because you do not agree with something does not entail that it is a lie. Everything I posted was 100% fact.

4/03/2006 08:42:00 AM  
Anonymous Anonymous said...

"The only reason Mrs. Kerry paid 12.3% was because she bought munis, in short she took a considerably lower coupon payment on munis that were tax free."

I dont give a rats a$$ on how she paid only 12%. The fact of the matter is she is a mega millionaire who makes many multiples a year more than I do doing a hell of a lot less. You are going to have a hard time convincing me that me paying 50% vs her 12% is somehow "fair".

4/03/2006 08:48:00 AM  
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