February, 2019, Part 11, Political Class Insanity: Taxed Into Oblivion In New Jersey, Hating Israel In Congress, and Killing The Golden Goose in Queens

It is another month which means it is again time to review the latest political class insanity from Washington and around the world. Political class insanity takes many forms including the wasting of taxpayer wealth, criminal fraud within government programs, inane and stupid political quotes and actions, the inability to create and implement effective and efficient government programs, stupid and ill performing economic policies and strategies, and other forms of insanity that continue to evolve and surprise and shock us.

Let’s get started:

1) I used to live in New Jersey. When I moved to Florida over 13 years ago, I was paying over $12,000 a year in property taxes for a 3,000 square foot house or about $4.00 per square foot a year. This property tax payment did not include local police protection, we were served by the State Police, and did not include garbage collection, we had to contract with a private garbage collector. We lived in an unincorporated area so there was no need to support a local government structure. In addition, we had to pay sales tax and state income tax.

Thirteen years later, I pay just under $2.00 per square foot in Florida property taxes, for about the same deal: no local police, no local government, and paying for my own garbage collection but with the added bonus of not having to pay a Florida income tax. Thus, you can see that my property tax rate 13 years ago was double what my current Florida property tax rate today is. 

My point is that New Jersey residents are much heavier taxed than Florida residents, which may explain why there are a lot of people like me who have fled high tax states like New Jersey for places like Florida. However, this point seems to be lost, based on the political class insanity from New Jersey’s recently elected governor:

• Daniel Mitchell recently wrote an article for the Townhall website entitled, “New Jersey’s Message To Taxpayers: Move Or We Will Tax You To Death”
• Before getting into the current taxation problems and proposal about to hit New Jersey residents consider that “Freedom in the 50 States” has New Jersey ranked in the bottom ten states when it comes to freedom, it is in the bottom ten states according to “Economic Freedom of North America,” and dead last according to both the “State Tax Climate” and “State Fiscal Condition.”
• New Jersey residents have to pay a sales tax, a gasoline tax, an income tax, property taxes, inheritance taxes, and a tax if they sell a home and move out of state.
• And now the state politicians are putting together a “rain tax” that would tax a homeowner or business based on how much porous surface they have on their property.
• But a rain tax is just a start of the forthcoming increasing tax burden for the state.
• As the article explains, “…a silver lining used to be the Garden State’s relatively low gasoline tax of 14.5 cents a gallon—second lowest in the U.S. No more, and therein lies a tale of why taxing the rich to finance government is an illusion. In October 2016, then-Gov. Chris Christie signed a bill raising the gas tax by 22.6 cents to 37.1 cents a gallon…the bill also included a clause that automatically raises the gas tax if it doesn’t produce the expected revenue each year. This is a self-fulfilling economic prophecy. A higher gas tax causes people to drive less, which in turn has meant that revenues have fallen short of the expected $2 billion target. So on Oct. 1 the gas tax will rise another 4.3 cents to 41.4 cents per gallon, which will be the ninth highest in the U.S. …This will be the state’s third tax increase in four months, following June’s increase in income and corporate tax rates. …The larger lesson is that sooner or later the middle class always gets the bill for bigger government. Higher income and corporate taxes drive the affluent out of the state, which means less revenue. That leaves the middle class to pay in higher sales, property and now gasoline taxes.”
• A classic economic death spiral, taxing more gets you less which results in higher tax rates which gets you less, etc., etc., etc.

So let’s review: very high current tax levels, increasing with the creation of a rain tax and a gasoline tax program that almost guarantees that gasoline taxes will go up every year. Oh, and according to the Trump tax cut legislation, high earning New Jersey earners will have their Federal income tax deductions capped at $10,000.

So the question is basically: how many high earning taxpayers will leave New Jersey before the state goes bankrupt despite having some of the highest tax rates in the country? Insanity.

2) We have celebrated the ignorance, idiocy, and absence of worldly experience of new Congresswoman Alexandria Ocasio-Cortez over the past month or so. She is our new go to politicians for gaffes and stupid ideas.

But there is also another newly elected Congresswoman, Ilhan Omar from Minnesota, who is also causing a bunch of insanity with her quotes and views:

• Since being elected she has been accused, and rightly so, of being strongly anti-Semitic.
• In the past week she accused many in Congress of being controlled by Israeli interests and lobbyists which causes the U.S. to be very biased to helping Israeli interests vs. Muslim interests in the Middle East.
• For her quote she was roundly condemned by both Democrats and Republicans.
• This continues a trend over the years, including the following tweet from 2012: “Israel has hypnotized the world, may Allah awaken the people and help them see the evil doings of Israel. #Gaza #Palestine #Israel.” 
• Pretty anti-Semetic to me which leads to the following hypocrisy: Omar contends that the tweet is offensive but yet it remains live on her Twitter account.
• Back in 2013 she told a television host that Islamic terrorism is a reaction to America’s foreign policy and that America caused the Islamic terror attacks.
• The TV host has a history of anti-Israeli hatred, once calling Israel the “Jewish ISIS.”

Just a real class act, Pretty sad that an elected politician has such much overt hate for an American ally, a hatred that is counter productive to addressing any and all issues facing the world.

3) As a Libertarian, I am generally not in favor politicians using taxpayer money to entice private interests to come to their city/county/state. Study after study almost always show that this money never gets a positive return on investment and anyway, why should private citizens’ tax money be used to subsidize private, often wealthy, business interests?

I say “generally” against such government payouts. But the potential to land an Amazon headquarters location may be the exception. As most probably know, Amazon put out a proposal that said they were planning to open up not one but two new headquarters locations across the country and wanted to know what states and cities wanted to host those locations, i.e. what cities and states would put forth the best economic incentives for Amazon.

Amazon finally chose two locations, northern Virginia and Queens in New York City. According to news reports, for the New York City deal, Amazon was to receive about a $3 billion in favorable tax treatment. In return, a downtrodden part of Queens would get the following:

• Amazon would invest $2.5 billion in developing the location for their headquarters location.
• This $2.5 billion would result in a load of high paying construction jobs and ancillary jobs and economic benefit to the area, e.g. food trucks to service the construction workers.
• Eventually Amazon would station 25,000 employees at the location, highly paid employees that would buy and renovate housing in the area, eat in local restaurants, go to local movie theaters, buy clothes from local merchants, buy furniture to furnish their new homes, spend money on local transportation, etc.
• Amazon promised to provide computer science course to 130 area high schools.
• Amazon promised to hire at least 30 people from a nearby housing complex to work in its call center.
• Amazon would help fund local infrastructure improvements.
• Amazon would help fund a new 600 seat public school
• Amazon would create a 3.5 acre waterfront park open to the public.
• Amazon would set aside 25,000 square feet for a “community facility use/artist workspace.”
• Amazon would set aside 10,000 square feet for an art and tech accelerator.
• Amazon would set aside 263,000 square feet for light manufacturing space.
• Amazon would set aside 10,000 square feet for workforce development and training space.
• Amazon would set up internships for high school students.
• Amazon, starting in 2020, would host semi-annual job fairs and resume workshops at the local housing complex for at least three years.

Again, I generally do not support so-called corporate welfare programs but this is a once in a lifetime deal for a local area, especially given all of the community efforts besides housing employees that Amazon had committed to do.

The community service commitments is in addition to the financial windfall that would come to Queens:

• As mentioned above, just during the construction phase, the city, county and state would reap state income tax benefits from construction and other jobs and would get state sales tax gains as contractors purchased material to build the complex.
• But once open with 25,000 highly paid employees on site, state taxes of all sorts would go up from the area as 25,000 employees make purchases from everything from furniture to restaurant meals to lord know what else, purchases that were no going to happen without an additional 25,000 employees and taxpayers in the area.
• And speaking of taxpayers, that is where the real upside comes in.
• Published reports indicated that the 25,000 employees would annually be earning $150,000 on average.
• This comes out to $3.75 billion a year in taxable salaries.
• Since the city income tax is 3.876% and the state income tax is 6.28% let’s say the total annual tax rate for these two entities is 10% to keep the math simple.
• This means that New York governments would get about $375 million a year in new tax revenue from the Amazon deal.
• At $375 million a year, within about 8 years that $3 billion tax incentive the company got would be paid off and any income tax the city or state received after the eighth year would be purely incremental tax benefits JUST FROM AMAZON EMPLOYEES!
• The economic break even is actually less than eight years because there would have been incremental tax benefits from the construction jobs and the neighborhood economic growth serving 25,000 employees.

Wow, like I said a once in a lifetime opportunity. A chance to increase the tax base directly and indirectly, benefits to the local community from a job and standard of living perspective, investment in education, and a nicer place to be from a park and improved neighborhood perspective.

And yet, as hard as it is to believe, the New York political class blew the deal. They made life so miserable for Amazon that the company last week said adios and dropped the entire project. No more 25,000 jobs, no more improved neighborhood, no more construction jobs, no more computer training for high schools kids, no more internships for kids, etc., etc., etc. Local opinion polls showed that local residents approved of Amazon coming to town by a two to one margin and a plurality were in favor of giving them a $3 billion incentive to come to town and yet, the local politicians still blew the deal.

The local political class got so petty, so demanding, so stupid that they blew the entire deal. And of course, our new favorite gaffe machine, Congresswoman Alexandria Ocasio-Cortez was the leading political buffoon in hassling Amazon, And she was actually proud that the deal fell through. Proving again, in her case, there is still no cure for stupid but still a requirement to serve in Congress. We will be discussing her political class insanity and economic ignorance as it pertains to this misadventure in upcoming posts.

That will do it for today’s insanity: taxed into oblivion in New Jersey, hating Israel in Congress, and killing a golden goose in Queens.

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