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Unread 06-18-2009, 10:14 AM
 
722 posts, read 1,461,834 times
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Default Corzine: Use amnesty windfall for property tax relief

It will be interesting to see how this plays out. Thoughts?

Corzine: Use amnesty windfall for property tax relief | APP.com | Asbury Park Press

Last edited by Stone28; 06-18-2009 at 10:25 AM..
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Unread 06-18-2009, 10:18 AM
 
636 posts, read 776,665 times
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Tax amnesty is such a joke. People who don't pay their taxes are able to pay less than they should because NJ wants to mortgage the future for cash today. Another incompetent policy, Corzine. Great job, as usual.

As for the cash, it should go towards closing the budget, not towards special interests like property tax relief.
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Unread 06-18-2009, 10:26 AM
 
231 posts, read 327,034 times
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Quote:
Originally Posted by The Michigan Man View Post
Tax amnesty is such a joke. People who don't pay their taxes are able to pay less than they should because NJ wants to mortgage the future for cash today. Another incompetent policy, Corzine. Great job, as usual.

As for the cash, it should go towards closing the budget, not towards special interests like property tax relief.
The solution is a pragmatic one rather than ideal. The thing is that a lot of the people with outstanding tax bills would never come forward and pay, especially given the existing steep penalties. Amnesty gives them an incentive to come forward and pay for a reduced penalty. So in theory the choice is between getting no revenue or less revenue with the existing penalty policy or getting more revenue with the amnesty policy.

I haven't seen statistical data to prove which method is more effective at producing revenue though so I can't prove whether this "pragmatic" solution is actually a good one.
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Unread 06-18-2009, 10:28 AM
 
Location: In My Own Little World. . .
3,238 posts, read 5,317,617 times
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Quote:
Originally Posted by The Michigan Man View Post
Tax amnesty is such a joke. People who don't pay their taxes are able to pay less than they should because NJ wants to mortgage the future for cash today. Another incompetent policy, Corzine. Great job, as usual.

As for the cash, it should go towards closing the budget, not towards special interests like property tax relief.
But doing property tax relief will get Corzine more votes. I understand from an article I read that the White House is watching the NJ governor's race closely. Somehow they think it's a connection to Obama. Not sure what that all means.

I remember from when I worked at the NJ Division of Taxation call center that most people thought the Homestead Rebate program was an entitlement. Not so. I'm sure Corzine cancelled it very reluctantly.
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Unread 06-18-2009, 10:34 AM
 
636 posts, read 776,665 times
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Quote:
Originally Posted by goonsquad View Post
The solution is a pragmatic one rather than ideal. The thing is that a lot of the people with outstanding tax bills would never come forward and pay, especially given the existing steep penalties. Amnesty gives them an incentive to come forward and pay for a reduced penalty. So in theory the choice is between getting no revenue or less revenue with the existing penalty policy or getting more revenue with the amnesty policy.

I haven't seen statistical data to prove which method is more effective at producing revenue though so I can't prove whether this "pragmatic" solution is actually a good one.
The flaw in the plan is that NJ offers amnesty plans every few years. Considering our deficit, I don't see why we won't offer another one later. Delinquent tax payers with shrewd accountants will continue to not pay their taxes and then get the balance reduced in the future.

I also don't think it's driven by pragmatism as much as desperation - we are so hungry for cash we will do anything to get it now. That limits our long-term revenue stream. Money we should have received in the future is now gone.

In addition, timely taxpayers are effectively subsidizing the deliquent ones.
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Unread 06-18-2009, 10:48 AM
 
231 posts, read 327,034 times
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Quote:
Originally Posted by The Michigan Man View Post
The flaw in the plan is that NJ offers amnesty plans every few years. Considering our deficit, I don't see why we won't offer another one later. Delinquent tax payers with shrewd accountants will continue to not pay their taxes and then get the balance reduced in the future.

I also don't think it's driven by pragmatism as much as desperation - we are so hungry for cash we will do anything to get it now. That limits our long-term revenue stream. Money we should have received in the future is now gone.

In addition, timely taxpayers are effectively subsidizing the deliquent ones.
I think we're in need of data if one side is to be argued over the other. Last time I heard about this being discussed at the federal level (~2 months ago), they were basically saying that some people who sheltered gains in offshore accounts would in effect never come forward because of the steep penalties. Providing partial amnesty--the penalties, which were in addition to back taxes, are reduced but not fully cut--would cause some people to come forward and declare taxes. I'm not sure if the state amnesty program works the same way.
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Unread 06-18-2009, 10:55 AM
 
636 posts, read 776,665 times
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Quote:
Originally Posted by goonsquad View Post
I think we're in need of data if one side is to be argued over the other. Last time I heard about this being discussed at the federal level (~2 months ago), they were basically saying that some people who sheltered gains in offshore accounts would in effect never come forward because of the steep penalties. Providing partial amnesty--the penalties, which were in addition to back taxes, are reduced but not fully cut--would cause some people to come forward and declare taxes. I'm not sure if the state amnesty program works the same way.
This still doesn't reconcile my initial point. NJ has had tax amnesties less than every five years since 1996. This creates a moral hazard. People who come forward this year will probably not pay taxes again and wait it out until the next one comes around in a few years. If amnesties are effective, they have to be rare to have teeth. They can't be frequent.
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Unread 06-18-2009, 11:10 AM
 
231 posts, read 327,034 times
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Quote:
Originally Posted by The Michigan Man View Post
This still doesn't reconcile my initial point. NJ has had tax amnesties less than every five years since 1996. This creates a moral hazard. People who come forward this year will probably not pay taxes again and wait it out until the next one comes around in a few years. If amnesties are effective, they have to be rare to have teeth. They can't be frequent.
Agreed. I suppose the question becomes whether it is financially advantageous (for the individual) to not pay taxes and then pay them during the amnesty period. A better question is whether the state is taking in more revenue by taxes+penalties for those that take advantage like this than they would if these offenders had paid on time, factoring in the state's weighted cost of capital (assumed interest rate from proceeds of invested on-time tax receipts).
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Unread 06-18-2009, 01:17 PM
 
Location: NJ
1,801 posts, read 3,747,818 times
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I read the article, Im not dumb, but I seem to be mising something here or rather im just not 100% sure I understand the issue.

This $600mil+ in additional revenue has been collected from people with past due/unpaid NJ State Income tax through an amnesty program in which they were not charged penalties for non/late payment? So, its not really "Additional Money" its money that should have been received in the first place? Correct?
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Unread 06-18-2009, 01:45 PM
 
231 posts, read 327,034 times
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Quote:
Originally Posted by RobRiguez View Post
I read the article, Im not dumb, but I seem to be mising something here or rather im just not 100% sure I understand the issue.

This $600mil+ in additional revenue has been collected from people with past due/unpaid NJ State Income tax through an amnesty program in which they were not charged penalties for non/late payment? So, its not really "Additional Money" its money that should have been received in the first place? Correct?
Below is the amnesty program FAQ.

http://www.taxamnesty.nj.gov/pdf/nj_2009_amnesty_faq.pdf (broken link)

Quote:
[SIZE=3][SIZE=3][LEFT]In general, a Tax Amnesty is a limited-time opportunity offered by government entities to allow taxpayers
to pay taxes owed and to file late tax returns with reduced penalties and interest. New Jersey is
offering a Tax Amnesty that waives all penalty and reduces interest. We trust this publication will[/LEFT]
answer the most frequently asked questions.
[/SIZE]
[/SIZE]
I don't see in this FAQ what sort of hit NJ is taking in terms of the interest rate they're actually charging late payers. If indeed they are taking a hit, then the money we're getting as a state is actually less than what we should have collected. The 600mil they're talking about though are revenues that were supposed to have been collected anyway but weren't until the amnesty program. The the assertion of this press release is that the amnesty program convinced these people to pay their tax bills.
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