Author Archive: Bill Orr

About Bill Orr

University of Virginia Masters in English. Have lived in Argentina, Panama, Delaware, Virginia, California, NYC, and New Jersey for the last 25 years. Former editor and manager at McGraw-Hill, former President of Gay Activist Alliance of NJ, founder of NJ ActUp, and North Jersey Community Research Initiative (NJCRI) in Newark.

Budget Cuts Plus Tax Increases: The better Way

New Jersey is not unique. Nation-wide 48 states are facing budget deficits, and because they have to balance their budgets, they must cut spending and/or raise taxes. Both approaches take money out of the economy making the downturn worse. However, two highly regarded economists, Nobel Prize winner Joseph Stiglitz of Columbia University, and Peter Orszag, director of the federal Office of Management and Budget, have written that  spending cuts could actually be more harmful for a state’s economy during a recession than tax increases. Furthermore, “The conclusion is that, if anything, tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.”

When NJ government cuts spending its impact is local. State, municipal, and county employees are let go, contracts and grants to small businesses and non-profits are reduced, local unemployment increases, and all businesses in the state suffer as a result. The costs to the state of increased or continued high unemployment are significant. The damage is particularly severe to the most vulnerable who suffer severely from cuts in services and transfer payments, such as public transportation, health care, and homestead rebates. The economy as  a whole is harmed when programs such as job retraining, bridge construction, and environmental protection are reduced. The negative impact of these cuts is magnified at a time when state revenues are decreasing, unemployment is high, and the economy remain in serious trouble.

Increasing taxes, on the other hand, provides NJ with more revenue to reduce some of the negative impact of whatever cuts are essential. Fortunately, the effect of increasing taxes impacts less on the local economy. As Stiglitz and Orzag point out, “Part of the decline in purchases that would occur if taxes were raised would be a decline in the purchase of goods produced out of state.” Likewise, taxes that can be charged to out-of-state residents, such as gas or road toll fees, increase revenue from non-state sources.

Increased taxes aimed at the wealthiest has the least negative impact.  This group has higher savings and investments and so can more easily meet its essential needs, as opposed to the less wealthy who face day-to-day difficult purchasing choices. As the wealthier tend to buy more out-of-state purchases, such has reduced impact on NJ. If they need to tap their savings, their expenditures further help our economy.  

Jon Shure, founder of NJ Public Policy has said, “When the recession hit New Jersey, it was like a tornado hitting a house that was already falling.”  Indeed property taxes, past increases in sales and income taxes, and general over-spending has put us in a difficult position. We of necessity will have to make budget cuts. However, in the midst of a severe recession, budget cuts like self-inflicted wounds will slow down our recovery. Tax increases, particularly those impacting the wealthier and the out-of-state, have to be a part of a sound recovery plan.  

Good Try Governor!

Promoted from the diaries by Rosi

UPDATE: I’ve posted the response to the governor’s plan in a diary in the right column, called ‘Dem response to Christie’s budget fix’ – Rosi Efthim

Our governor is proving himself wily as he seeks to counter the Legislature’s plan to vote tomorrow on a Millionaire’s Tax bill and a Funds Restoration bill. Acccording to the Star Ledger, suddenly today he announced availability of monies to eliminate his proposed increase in prescription copayments and annual deductibles on the Pharmaceutical Assistance to the Aged and Disabled Program (PAAD) recipients and annual deductibles on Senior Gold recipients.  How convenient! These newly available funds were part of the legislature’s Funds Restoration bill which would specify how monies collected from the millionaire’s tax were to be spent.  

So I guess we no longer need the millionaire’s tax? Not so.  His restoring funds for seniors and the disabled shows his “compassion” for this group, but really seeks to remove the need for a millionaire’s tax. The Funds Restoration bill is crafted to appropriate $619 million from the Millionaire’s Tax not only for the PAAD program but also for the Homestead Property Tax Rebate/Credit program for seniors and the disabled. Christie’s ploy is to restore $55 million for the PAAD program but nothing for property tax relief.  Naturally he is not proposing to restore library, transit, women health clinics, job training or any of the myriad of programs he is slashing in his budget.  In effect he is only restoring $55 million of the $619 million foreseen in the Legislature’s bill.

The Legislature should continue with its Millionaire’s Tax plan undeterred, but  present it next month to the governor, and negotiate its passage as an integral part of passing the larger budget bill.  The Legislature can also modify its Fund Restoration bill to restore other cuts.  

Two Bills Made for Each Other

Senator Sweeney’s new millionaire tax bill is wisely being combined with a funds restoration bill – measures that should appeal to people who believe the tax burden must be more fairly shared and that the elderly and disabled should be better treated.

There is a misconception that Sweeney’s proposal increases the tax rate on people earning $1 million. It does not. Depending on people’s filing status their tax remains $72,657 or $74,573. It is only on any excess above $1 million that they pay the higher 10.75% rate.

The bill indicates that the revenue generated from this bill “will be used to restore critical programs that would otherwise be cut or reduced in the annual appropriations act.”  Although a separate appropriations bill would specify the specific programs to be affected, it appears the emphasis for funding restoration is on the elderly and disabled.

This tax bill only becomes operative if the funding restoration bill is enacted.  From a strategic point-of-view I hope the the legislature passes both the tax bill and funding restoration bill at the same time preferably in mid or late June.  If the tax bill were enacted quickly and sent to the governor he would likely veto it and render it dead as the legislature would be hard-put to override it.  As a package, presented to the governor together as the June 30 deadline looms, the tax bill combined with the funds restoration bill will have more appeal to the general public and be harder to veto.  

NJ Needs Federal Immigration Reform Now

Arizona’s new pending law has propelled federal comprehensive immigration reform into the spotlight, but the stakes are particularly high in New Jersey. The Pew Center reported in April 2008 that in N.J. we have the sixth largest number of unauthorized immigrants – approximately 550,000 people, or 6.4% of our total population.  In addition, we have the fourth highest per cent of unauthorized immigrants in our labor force – 9.2%, or 425,000 in a total pool of 4,588,000.  As a point of comparison, based on March 2008 data collected by the Census Bureau, the Pew Center estimates that unauthorized immigrants are 4% of the nation’s population and 5.4% of its workforce.

The Star Ledger indicates the most recent NJ immigration rally took place yesterday in Newark. The Star Ledger also reported on April 25 on an event in Elizabeth: “Citing the need to correct serious flaws in the nation’s immigration system, hundreds of people came to a church for a town meeting attended by Sen. Robert Menendez and Rep. Albio Sires.”  Many New Jerseyans attended a recent rally in Washington DC, and other events are planned in May throughout our state.

Senators Menendez and Schumer put together a 26-page Conceptual Proposal for Immigration Reform. The plan includes stepped up efforts at securing the border first, increased detection, apprehension, and removal of unlawfully present persons and ending illegal employment through biometric employment verification.  It also provides a path toward citizenship with mandatory registration, acceptance of responsibility, and administration of punishment for unauthorized immigrants.

Nonetheless, support in congress has been luke warm at best.  Portions of the plan that create a pathway for citizenship are disliked by cultural/nativist Republicans and other portions that make hiring of inexpensive labor more difficult are disliked by traditional businessmen Republicans.  Likewise, Democrats are suspicious about a biometric social security card and concerned that a more open immigration policy can not co-exist with a robust safety net for all. In the midst of midterm elections, the public’s vociferous opinions on both sides have rendered most legislators frightened and spineless. Indeed, President Obama said on Thursday there “may not be an appetite” in Congress to deal with immigration.

We send people to Washington to deal with these tough issues. All our NJ legislators and our president must demonstrate leadership, not excuses.  We now have a template for reform, one that can jumpstart negotiations and lead to a final bill. Ironically, the fact that different people dislike the proposal for different reasons is all the more indication that the plan is not just a Republican or a Democratic plan but one aimed at a fair resolution for all involved.

No matter how difficult it might be to pass this reform in the midst of midterm electioneering it is unlikely to be any easier after the elections. Indeed if Democrats lose seats in the Senate and House, the gridlock will be worse, and progressives’ hopes for meaningful reform will be dashed. Concerned NJ residents should keep up their rallies and demands. Legislators and President Obama should shore up their courage.  The time is now.

CONSOLIDATION: End the Gridlock

So entrenched is the “Home Rule” attitude embedded in the NJ psyche that with 566 municipalities (the most per capita of any state) since 1952 only Pahaquarry and Hardwick have consolidated into a single unit. As Bruck and Pinto concluded in a Seton Hall journal article, Overruled by Home Rule, “Residents tend to develop an attachment to their tiny communities, even if the only thing that distinguishes them from neighboring towns is an arbitrary political boundary. More importantly, however, are local government officials who are crucial for reform efforts but have strong personal incentives to maintain the status quo. Add to this mix the thorny issues of racial and socioeconomic segregation, and the situation is ripe for political gridlock.”  

To address this gridlock, in early 2007 Governor Corzine and the legislature created LUARC (the Local Unit Alignment, Reorganization and Consolidation Commission.) Based on the federal procedures for closing military bases, this commission was to review the municipalities, periodically present to the legislature a package of municipalities to be consolidated, and then have the legislature vote the package up or down. However opposing legislators added a provision that each municipality to be merged had also to vote favorably on the matter. Guess what?  Back to square one.

Over the years even soaring property taxes have been insufficient to motivate towns to consolidate. Then along came our blustering bully governor who by severely reducing funding both to schools and municipalities might have provided the impetus for towns and even school districts to reconsider. It is curious how both Corzine and Christie seem yolked together with separate actions that may yet result in beneficial consolidation.

It is possible for state government to provide further assistance, including additional funding to LUARC to extend education and expertise. However, given the “third rail” nature of the issue, it seems unlikely that the legislature will modify the law to remove the provision requiring a favorable vote in each affected municipality. And such a requirement is not necessarily unreasonable as consolidation has an impact on many parts of each community. Where there is mutual agreement among towns’ residents there is likely to be a more successful outcome.

Because of economic pressures, we may be at a unique moment.  However, don’t expect local mayors and councils to advocate for consolidation. Just as Jeff Gardner joined with 25 democrats in Hawthorne to contest the entrenched powers in a primary, so too in the case of consolidation local activists have to learn about the issues, develop an appropriate local rationale, and speak out to community members.  

Experts and activists are important but the larger community has to be fully involved. It can be difficult enough within a given town to reach agreement on thorny issues.  In this case activists need to work with colleagues in all the towns that might join in any particular merger.  To achieve the desired economies of scale five or more towns including possibly a city should join together. Such typically involves finding common ground with people of different socio-economic, racial, ethnic, educational, and religious backgrounds.

In addition to LUARC, there is further help for people who want to end the gridlock. Courage to Connect NJ is one such non-profit organization. Its Executive Director Gina Genevese says, “When residents recognize that their local government is not the sole creator of their sense of community, then we can begin to connect communities through petitions and referendums.  Connected communities with one government are more efficient, more affordable and can create better plans for the future.”

The challenge is there and waiting. Aroused activists and experts, who in turn might generate further assistance from state government, have the opportunity to galvanize communities and bring an end to this gridlock.  

Budget Debate: Lines in the Sand

In the current budget battle Governor Christie has drawn his line in the sand: he will veto any bill that re-institutes the higher 2009 income tax for those earning more than $400,000. Legislative leaders are arguing the 2009 tax rates are necessary, but they have yet to bring such a bill to the floor or to reach such an agreement internally. In the On the Record show this weekend Senate Budget Chair Sarlo said he had not yet decided about the necessity to re-institute the higher tax. In fact just passing such a bill is not enough as Christie can veto it and the legislature might not be able to muster enough Republicans to override the veto.

The Star-Ledger weekend editorial and Tom Moran’s article today talk about  maybe instituting an increase only half as much as the 2009 level – “splitting the difference.”  Given the size of cuts Christie has proposed and his desire for a 2.5% cap on property taxes, a second round of pension cuts, and reform of Civil Service rules, “splitting the difference” on just the tax issue is no compromise. It is a cave-in.

Once the the Senate and Assembly budget committees complete their review within the next few weeks they should immediately start negotiations with the Governor so as to try to prevent the government having to close down in July. The legislature should stand firm and insist that full reinstitution of the 2009 level is necessary, infusing up to $1 billion into the budget. They should seek acquiescence from the governor on some of the key budget lines to be restored or increased. Legislators in turn would agree to forgo many budget lines being increased as $1 billion is insufficient to restore fully the current levels. They would also agree to certain structural changes regarding property tax, pension cuts, and Civiil Service rules. As the governor can both veto bills and line veto budget expenditures, it is critical that negotiations be held and verbal agreements be reached.

The governor has taken a clear, strong position on the tax issue, one which polls indicate runs contrary to public opinion. The Legislature should take an equally clear, strong position. Its leaders will have to act as leaders by forging support of the Democratic legislators and by displaying sharp negotiation skills. They must draw their own line in the sand: the 2009 tax on higher income should be fully restored.  

Millionaire Tax: Less Than You Think But a Big Help

In the midst of the NJ millionaire tax debate it is useful to look at what the higher rates mean in terms of dollars to individual taxpayers, what they mean in total dollars to the state government, and what one millionaire feels about the usefulness of higher taxation.

For tax year 2009 the New Jersey gross income tax rates increased over 2008 with increasingly higher rates for taxpayers with income over $400,000 but not over $500,000; over $500,000 but not over $1,000,000; and over $1,000,000. For tax year 2010 the gross income tax rates will revert to the rates for tax year 2008 unless a new law is passed.

What this means dollar-wise for individual taxpayers is not as much as you might think. For taxable income below $400,000 the tax for 2008 and 2009 was the same. For $450,000 in taxable income the tax in 2008 was $26,539 and in 2009 $27,354. For $550,000 in taxable income the tax in 2008 was $34,209 and in 2009 $36,479. For $1 million in taxable income in 2008 the tax was $74,574 and in 2009 $82,604. In effect, for the following income the increases are $815 on $450,000, $2,270 on $550,000, and $8,030 on $1,000,000. You be the judge of whether these amounts would have a significant impact on wealthy individuals.

Cumulatively for state government it means about an extra $1 billion. Such an amount could restore all or parts of cuts in women’s health clinics, transit fares, universities, TAG grants, libraries, PAAD for senior citizens, AIDS prescription drugs, Hagedorn Psychiatric Hospital, aid for the disabled, aid for grandparents raising kids, and welfare checks. It could also provide monies to reduce cuts in school and municipal funding and permit a modest contribution to the pension fund.

As recently reported in the Record, one NJ millionaire almost a decade ago, Eric Schoenberg of Franklin Lakes decided that the Bush tax cuts were a bad idea, even though he stood to benefit personally from them, so he started donating the money he saved through the tax cuts to charity. He says, “My fundamental argument is that what’s in my best long-term self-interest is that we have a well-functioning society. I have two daughters, 14 and 16, and I believe it’s more important for them that they grow up in a society that works for everybody. These Bush tax cuts are coming from one of the few groups in society that really wouldn’t miss the money.”

Christie: Shrinking Government, Harming Citizens

It was  probably Henry David Thoreau who said, “I heartily accept the motto: That government is best which governs least.”

Long a Republican tenet, it is this belief that more than anything else seems to be driving Governor Christie. Yes he is slashing the budget, attacking unions, and bludgeoning the vulnerable.  However, in a more profound way he is seeking to destroy the concept that in a complex society government has an important, necessary role.  

As the Star Ledger pointed out this weekend, “From homeland security to family-planning services and the environment, state agencies use their money as leverage to win matching federal grants. As the state desperately cuts spending to balance its budget, it loses the ability to ante up its share to qualify for millions in federal funding.”

By not only cutting the budget but by disallowing his departments from obtaining federal grants he is further shrinking the size and role of state government.  It like some other conservative governors who do not want to accept federal unemployment insurance or Medicaid funds because they have to make some contribution to the total.  An unwarranted intrusion these governors say, while depriving their constituents of needed benefits.

A lawyer, prosecutor, and politician, Governor Christie is no businessman and no steward. No businessman would turn down tax cuts, tax credits, or federal grants which help the company in its mission. Likewise, as elected governor, Christie has been entrusted as the steward of NJ’s government, but instead he seeks only to shrink it. More significantly he is doing so in the midst of a steep and long recession when weakened individuals and businesses need  help to recover.  

He displays reckless disregard for government’s role in helping citizens and in performing tasks which individuals by themselves cannot. In denying the state access to federal grants, particularly when needed most, he is harming NJ residents. And he does so with arrogance and egotism, “Any of the cuts that you see us make in the budget are all about me setting priorities that I think are important for New Jersey.”

As our constitution indicates (Article VII, III, 1), “The Governor and all other State officers, while in office and for two years thereafter, shall be liable to impeachment for misdemeanor committed during their respective continuance in office.” At what point does this harm rise to the level of a misdemeanor or higher? Possibly not yet, and one has to consider that his successor would be Lieutenant Governor Kim Guadagno who, in the mold of Christie, has served as federal prosecutor, NJ Assistant Attorney General, and Sheriff of Monmouth County.  

Nonetheless, a sick patient needs nourishment not starvation. What doctor would not lose his or her medical license for such recklessness?

Budget: Read, Weep and Protest

The Treasury Department has just placed on the web more details about Governor Christie’s budget.  We can read and weep, but we should also protest. Below the fold is a selection of his cuts. Here is the full list.

Many of the cuts strike those most vulnerable: elderly, low-income, disabled, and sick.  But there is also pain for the middle class. These cuts will have very little impact on the wealthy who as of now can look forward to reduced taxes.

Between the cuts listed below the fold and others on the full kill list there is plenty of opportunity to let the governor and legislature know that many of these cuts will do more harm than good.  We need to increase taxes for the wealthiest and make smart investments to ease our way out of the Great Recession.

NJ Finances: Unsurprising, Sobering & a Call to Action


An April 6 report in Bloomberg indicates, “NJ will get about $250 million less revenue than Governor Christie projected for this fiscal year and next because of lagging retail sales taxes.” This news is not surprising.  Most state budgets tend to underestimate their projected net return. Also, we are undergoing the steepest and longest recession since the Great Depression.

The report is sobering because in the Bloomberg article, David Rosen, Legislative Budget and Finance Officer, projects: “At the state’s average growth rate of 5 percent annually, revenues won’t return to 2008 levels until 2014.” Such a slow recovery would be catastrophic for the most vulnerable, very unpleasant for lower/middle class residents, and harm our future. We would be mired in mud for four years and less able to take advantage when the economy improves.

A slow recovery is not inevitable if the legislature takes this news as a further call to increase investments that assure a safety net, aid individuals in getting back to work, maintain key infrastructure, pay down some debt, and foster confidence in business. NJ remains the second wealthiest U.S. state in per-capita income. This is the time to spend a little more not less. Invest now and then save as better times arrive.

This news should give the legislature more incentive to increase the tax rate on brackets for income over $250,000. In addition, a recent state report released quietly by the governor indicates, “New Jersey foregoes more than $15 billion a year in tax revenue through various credits, deductions, exemptions and other special provisions in the state’s tax code.” The governor and legislature should follow up on this report in order to generate more revenue.

Smart businesses, when confronted with a downturn, will reduce certain expenditures, but more importantly to assure growth they emphasize investments to increase new revenue, as for example both Apple and Microsoft have done in difficult periods. Compare them with firms which confronted by a downturn cut their expenses and lower the price of their products for Walmart only to find themselves revenue-depleted in a downward spiral.

A smart $2 billion increase in expenditures, coupled with a similar short-term increase from the two above-mentioned tax sources, will do more to help us out of the mud than mean-spirited, ill-advised cuts proposed by our governor. Activists have already been advocating strongly against certain cuts. This should be a call to action for all civic-minded individuals: make the investments we need to assure a better future for NJ.