Last November, Atlantic City government had to pay $34.6 million in tax refunds to several casinos that appealed their tax assessments. Instead of cutting spending or raising taxes to come up with that money, local officials borrowed $38.5 million and agreed to pay $4 million in interest.

Last week, Cape May County Chief Financial Officer Ed Grant said Cape May County is short money because of an “unprecedented” drop in Cape May County property values. But instead of drastic cuts in spending, county officials are proposing tax hikes.

But the real problem in both cases is taxation without representation.

When New Jersey voters approved casino gambling, most people thought real estate taxes would go down in Atlantic City, since casinos would be paying so much of them.  But it didn’t work out that way, because state law banned virtually everyone in the casino industry from being involved in politics in any way.

Casino companies, unlike racetrack owners, cannot contribute to political campaigns. Most casino employees are barred from running as candidates. And because the politicians on the Casino Control Commission can yank the license of any casino and destroy a $2 billion investment like the Tropicana at any time, casino executives won’t even talk about New Jersey politics.

Casinos are heavily involved in Nevada politics. But did you ever hear any casino executive complain that it costs Atlantic City $216 million each year to run its local government for 40,000 residents? Did any New Jersey casino suggest cutting any of the $153 million Atlantic City spends on its public schools each year? For years, casino companies were even afraid to appeal their tax assessments.

Because most casinos rushed to open during the boom years, they grossly overpaid to assemble their land. And they paid too much for the “right” lawyers, consultants, contractors and unions with the right connections to quickly get their government permits and approvals.
As a result, most casino properties in Atlantic City were never worth anywhere near what it cost to build them.

But for 20 years Atlantic City’s assessor taxed them based on the inflated prices they paid to buy and build them. Meanwhile, everyone else in town was assessed at current fair market values.

The result was that casinos paid 60 percent to 80 percent of Atlantic City’s real estate taxes – two to three times what they should have been paying. This led to taxation without representation for the casinos, and representation without taxation for most voters.

Most voters in Atlantic City live in tax-free or tax-abated housing, qualify for senior citizen tax breaks, or have high-pay jobs or contracts with the local government or public schools.

But now casinos must deal with a bad economy and out-of-state competition. As casinos like Resorts, Trump Marina and Hilton sell for a fraction of their assessed value, they are proving in court that they are overtaxed and entitled to refunds.

To avoid disaster, Atlantic City officials must immediately shrink the size and salaries of local government to what they would be without casinos.
Otherwise Atlantic City will continue its death spiral. As more casinos fail (except for the Revel, which has tax abatements), the city will collect less in taxes. Without big spending cuts, the city must raise taxes even more, and force more of the surviving casinos and other businesses to fail.  Which will cause even more tax hikes.

The same thing is going on in Cape May County. During the casino and real estate boom, lots of out-of-towners bought big vacation homes at grossly inflated prices. County and local governments then used taxes from those vacation homes to give big pay hikes, hire more people, and borrow more money to buy more things.  Local politicians didn’t care since most of the new spending was paid for with taxes from people who didn’t vote.

But now Cape May County will also be in a death spiral, unless there are quick, drastic cuts in spending. As more out-of-towners unload their vacation homes, values go down. And if taxes keep going up, even more out-of-towners will sell, causing even lower property values and higher taxes next year.

Its chief financial officer said these drops in property values were “unprecedented;” that property values in Cape May County had “hit bottom” and are about to “turn around.”

But those of us who know that only liberty brings prosperity and that taxation without representation is tyranny know that this is only the beginning.

Somers Point attorney Seth Grossman appears on 92.1FM 8-9 a.m. Saturday. For information see www.libertyandprosperity.org, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call (609) 927-7333. Breakfast discussions are held 9:30-10:30 a.m. every Saturday at the Shore Diner on Fire and Tilton roads in