Jersey Shore Business Journal

April 16, 2008

Pig Book could help trim the government fat

Ocean City’s bare-bones municipal budget is coming down to the wire. Squabbling abounds; the already over-heated rhetoric might just combust before it’s all over.
Let’s chill a moment; put our problems in perspective. Local taxes are just the tip of the iceberg; a few pennies on the dollar might seem like small potatoes next to what’s in store for us at the state and federal level.
We stand at the precipice of an enormous federal tax increase, unless the next congress and President agree to rescind it. Allowing the Bush tax cuts for the middle class to expire will drive the personal tax increase up by 25 percent – the largest since World War II. Rep. Charlie Rangel, chairman of the House Ways and Means Committee, has big plans for our money. The tax code changes enacted in 2001 and 2003 are scheduled to expire at the end of 2010, he’s already waving goodbye.
“Americans have no idea what is in store for them,” said Rep. Frank LoBiondo. “This is flying under the radar screen; a tax hike of unbridled proportion. It’s going to have a dramatic impact on all taxpayers. It could mean $3,700 in Federal taxes alone. It’s massive.”
On my blog, some have claimed that I am slightly hypocritical; staunchly defending the local budget, with a tax increase for public safety while railing against state and federal tax increases. There is a big difference between municipal property taxes and income taxes paid to Trenton and Washington bureaucrats.
There is a big difference in how taxes are calculated, and generated. Local taxes are based on property value; the more it’s worth the more you pay. The onerous, complex federal tax code bases taxes on income. New Jersey just takes as much as it can get. If you cut local taxes, you don’t raise enough to fund city operations. If you cut federal taxes, you spur investment and create new revenue.
Local taxes support schools and government, but mostly provide services. More than half the municipal budget funds people; salaries and escalating pensions and health care costs. Most of those people wear a uniform and took an oath to defend and protect; police officers and firefighters. You pay for public safety, fighting crime and fires.
You pay for municipal employees who run day to day city operations and keep the city clean, resulting in a clean, safe, desirable hometown. While there may be some waste, the “pork” is limited.
On the other hand, at the state and federal level, where the dollars grow from the millions to the billions and trillions, the waste expands exponentially.
Last week, Citizens Against Government Waste (CAGW) – a nonpartisan, nonprofit, organization dedicated to eliminating waste, fraud abuse and mismanagement in government - released the 2008 Congressional Pig Book, the latest installment in an 18-year exposé of pork-barrel spending. They identified pork barrel spending of more than $17.2 billion on 11,610 pork “earmarks,” including  $372,375 to study the management of pig manure; $188,000 for something called the “Lobster Institute,” $183,705 for asparagus technology, and over $871,000 to fund a project called the catfish genome.
With April 15 safely behind us, the IRS received a disproportionate amount of your hard earned wages. Think it was bad this year? A Democratically-controlled congress, and heaven forbid, President Hillary Clinton or President Barack Obama, will make sure it gets worse.
“We live in very challenging times,” said LoBiondo, who by the way does not make the list of pork barrel spenders. “When Republicans had control of congress we were not as prudent as we should have been. Americans basically said let the Democrats take control in 2006. People have no idea what is in store for them. I’ve always thought the best policy is for Americans to control their own money.”
LoBiondo and his Republican colleagues would prefer tax cuts to stimulate economic growth; generating expanding revenue. Clinton and Obama believe that tax hikes are the answer to financing long-term entitlement growth.
According to the Wall Street Journal, the tax hike resulting from allowing Bush’s tax cuts to expire would be more than twice as large as President Lyndon Johnson’s surcharge to finance the Vietnam War and the war on poverty. It would be more than twice the combined personal income tax increases under Presidents George H.W. Bush and Bill Clinton.
If this is allowed to happen, statutory marginal tax rates will rise across the board ranging from a 13 percent increase for the highest income households to a 50 percent increase in tax rates faced by lower-income households. The marriage penalty will be re-imposed and the child credit cut by $500 per child.
The long-term capital gains tax rate will rise by one-third, to 20 percent from 15 percent and the top tax rate on dividends will nearly triple, to 39.6 percent from 15 percent. The alternate minimum tax will reach far deeper into the middle class, ensnaring 25 million tax filers.
“The Democrats promised to do something about that, they were so anxious to report Republican shortfalls,” said LoBiondo. “Yet they’ve been in control, and they have done nothing about it.”
The estate tax, which has gradually lowered over the past five years, will roar back from extinction at the same time, with a top rate of 55 percent. Keep in mind, the death tax is imposed on the money you have left after you have paid taxes all your life. The exemption will go down to $600,000, rather than passing on the wealth you build in your lifetime to your children, you’ll hand it over to the government.
I recently enjoyed a lovely birthday dinner for my aunt hosted by a group of her friends. The delightfully seasoned gals, mostly widows, joked that they would host a get-together on Dec. 31, 2010. It would be their last, a goodbye. They’d rather hold hands and drink cyanide - allowing their estates to pass to their children - than hand the money over to Hillary. They were only half joking.
“We laugh, but the Democrats are the real jokers,” said LoBiondo. “Tax cuts stimulate economic growth and bring money into the treasury. After not paying these taxes, they are going to turn around and say to Americans, oh, by the way we were just kidding about the tax cuts and let them expire?
“Tell that to a mom and dad trying to raise a family,” he said.
You hear the mantra repeated, “tax cuts for the rich,” which includes a police offic09er married to a teacher, a nurse married to a small businessman.
“They are going to stick it to middle class working couples,” said LoBiondo. “A teacher who has been in the system for 10 or 15 years would be considered wealthy. That’s wrong. They are making a statement that hard work is not the way to go. The small businessman has taken risks and gambled to get his business going. Washington, to reward his hard work, says send it to us. They want all the wealth created in this country.”
LoBiondo says over 100,000 people left New Jersey last year.
“These were high paying jobs, people who were paying a large share of the pie,” he said. “They are moving out of state. They’re moving their businesses because we are essentially telling them they are not welcome. We are one of only three states with taxes this onerous. Look at the statistics; we don’t have a favorable business climate.”
LoBiondo acknowledged that balancing the federal budget without tax increases will take financial restraint. Democrats argue that tax increases are necessary to balance the federal budget and finance the retirement and health-care promises made to the Baby Boom generation. Speaker of the House Nancy Pelosi and Rangel “have a list,” says LoBiondo.
“They promised to do something about the price of energy,” he said. “Last time I looked the price of a gallon of gas went up, not down. It’s a complicated problem, but they were going to fix it. They were going to fix a whole host of things, isn’t it amazing?
“We have a massive tax increase coming,” he said. “Who creates jobs? When you increase business and capital gains taxes, you curb economic growth. The percentage of Americans invested in the stock market is huge. You have to provide incentives for growth and investment. A rising tide lifts all boats. The so-called rich people they are going after are the people who put their capital at risk and hire the rest. The one who has the means to invest, the ability to envision a successful product, a successful company is being punished.
“Instead they talk about universal health care and other new programs,” he said. “Mrs. Clinton will garnish our wages. Who could not be in favor of everyone having health insurance, but they want to pay for cradle to grave coverage with pixie dust. The Canadian system flat out doesn’t work. Her plan was going to cost $1 trillion in 1992, imagine what health rationing would cost us now. I don’t’ think America is ready for this, not when she is going to garnish our wages to do it. If a Republican had suggested that, there would not be a flag pole high enough to hang them from.”
Perhaps one of LoBiondo’s colleagues has the answer for those, who like Obama, and Hillary - having raked in upwards of $109 million in a few years - wish to pay more taxes.
The Put Your Money Where Your Mouth is Act, sponsored by Rep. John Campbell, a California Republican, will amend the tax code to allow individuals, via the form, to make contributions above and beyond what they already pay.
“It is time for Americans who like the fact that the government spends so much of their tax dollars to ‘put their money where their mouth is’ and give up extra taxes voluntarily,” said CAGW president Tom Schatz.
According to a 2007 Harris Interactive survey conducted on behalf of the Tax Foundation, only two percent of respondents claimed the amount of federal income tax they pay is too low, compared 58 percent of respondents who said that their taxes were too high.
“If the bill passes, it will be easy to send extra tax dollars to Washington, where everyone knows they will be spent wisely,” he said; a tongue in cheek reference to the 2008 Pig Book.

Ann Richardson can be e-mailed at annrichardson@catamaranmedia.com or you can comment on this story by calling 624-8900, ext. 250.