Monday, December 21, 2009

Why Al Gore lost the Electoral College Vote.

Al Gore lost the 2000 Presidential Election, because he won California – here’s the math:

NAME--------- (EC) POP2000 -- Pop/EC
CALIFORNIA (54) 33,871,648 -- 627,253

WYOMING (3) 493,782
NORTH DAKOTA (3) 642,200
SOUTH DAKOTA (3) 754,844
MONTANA (3) 902,195
ALASKA (3) 626,932
NEW HAMPSHIRE (4) 1,235,786
IDAHO (4) 1,293,953
NEVADA (4) 1,998,257
NEBRASKA (5) 1,711,263
WEST VIRGINIA (5) 1,808,344
UTAH (5) 2,233,169
ARKANSAS (6) 2,673,400
KANSAS (6) 2,688,418
Sum of 13 EC Votes = Calif. = 54 Pop=19,062,543 Pop/EC = 353,010
Population Difference EC= 0 Pop=(14,809,105) Pop/EC =(274,243)

Therefore, Al Gore had to convince 50% of Californians (or 16,935,824 voters) to vote for him, while G. W. Bush only had to convince 9,531,272 citizens in the thirteen states listed in this table, to vote for him; a difference of 7,404,552 voters. Imagine how different things would have been if only 1% of that difference - or 74,046 - had voted in Florida.

QUESTION: How did this system, which has worked so well for almost 200 years, become so totally distorted?

ANSWER: Congressional meddling and unintended consequences - consider the following:

The Electoral College, as most school children learn, is defined in Article I, section II, Part 3 of the US Constitution, and provides that voters in each State cast their votes for “electors” who are pledged to elect a Presidential Candidate. The Electors subsequently meet and vote to elect the President and Vice President. The number of Electors is equal to the number of Congress (members of Senate plus the House of Representatives) from each State. {Many the goof-ball journalists forget are a few important facts.}. This is the way our Federal System of shared political power was created; to wit:
- the House was to be directly elected by the people (i.e., you and me),
- the Senate was appointed by the States (which was also erroneously changed (in my opinion) by the 17th Amendment), and
- the President was elected as a blend of both methods, culminating in the Electoral College.

KEY POINT: Membership in the House of Representatives was originally to have been proportional to a “head count” of 30,000 (primarily white men while later provisions and constitutional amendments created universal suffrage for all citizens). In order to compute the number of Congressional Districts in each State, a Decennial Census was required. HOWEVER, regardless of the population, each State MUST HAVE at lease one member in the House Currently, only ALASKA, DELAWARE, MONTANA, NORTH DAKOTA, SOUTH DAKOTA, and VERMONT have a single House Representative (who is elected on a statewide basis). Tax Bills must originate in the House, and "No Taxation without Representation".

This means that the number of members in the House of Representatives grew based on an expanding American population from 59 members in 1789, to 435 members by the 1920 census.

Thinking that they were "geniuses", in 1929 the number of House Seats was fixed at 435 members with PL 62-5. The Congress also resorted to using the “method of equal proportion” to allocate the available seats based on the Census data and thus only 385 seat (435 - 50 states) are available for allocation. This produces a distortion (also known as a “statistically standard deviation”) between the number of seats and the population within each State that they represent. Consider the data presented above:

NAME------------- EC ---- POP 2000 --- Pop/EC
CALIFORNIA ------54 --- 33,871,648 --- 627,253
ARKANSAS ---------6 ---- 2,673,400 --- 445,567
You will note a swing in EC representation of +140% (WOW!!!) Therefore it takes more voters in California than it does in Arkansas in order to obtain the same number of electoral votes – thus Gore’s win in California was achieved at the cost of "wasted votes".

KEY POINT: The problem is that the population of the United States has continued to grow: from 1.8 Million in 1789, to 13 Million in 1929, and to 249 Million in 1990. Thus each House seat represents a disproportionate share of the expanding population; and the apparent imbalance between the “popular vote” and the number of Elector College vote is the unintended result.

It is ironic that Alexander Hamilton identified this issue, in his proposition that State Governments be abolished in favor of a true National Government - Hamilton didn't win that fight, but his analysis - while about 200 years too early - seems to be spot on.

We must return to the original basis and intent of the US Constitution by making membership in the US House of Representatives DIRECTLY PROPORTIONAL to the population of each States. This can be easily achieved by allowing the population of the smallest populated State (i.e., WYOMING with only 493,782 citizens) to be the Population Divisor used to allocate representation.

Consider (based on 2000 Census Data), when dividend into the Total U.S. Population of 280,849,847 by the “least populated State Divisor” of 493,782 would equal 569 members of the US House of Representatives, or an increase of 134 seats. When you take a moment to consider that over the past 100 years, this is an average of 13 seats per Decennial Census period – does it seem to be unreasonable?

EXAMPLE: If this methodology had been in place during the 2000 Election Cycle, then the results of the previous example would have been:
State ---------------------2000 EC -- Corrected EC -- Incr./Decrease
California ------------------- 54 --------- 71 ----------------- +17
Group of 13 States (above) - 54 --------- 65 ---------------- +11
Net Change +6 for Gore

When this methodology is extended to the entire country, Gore would have won the Electoral College by 9 votes - still a close election, but much more proportional to the popular vote. Funny how the world turns, eh? I wonder if Alex Hamilton is having a good laugh.

When suggested informally, the primary objections to this plan have been:
(a) more members of Congress will increase the cost of government, and
(b) the House Chamber is too small to seat the addition of any new members.

To first objection, I would answer that representation is the price of our democracy, and that it is better served by increasing the accountability of our government through proportional representation, rather than concentrating power in the hands of a small, "elitist club".

The second objection is more tangible. History indicates that the US Capital Building was previously enlarged (to its present size) in the middle 1800’s and that construction even continued during the Civil War (as a statement of unity and commitment to the future of the Nation). How can we say that the American Spirit is limited to the size of a building? While enlarging the House Chamber will doubtlessly spoil the overall geometric symmetry of the building, expending the east end of the House Chamber along the south face will preserve the architectural aesthetic of the frontal western facade. Given the gravity of this proposal, I would strongly (also) recommend planning enough space for more than 1,000 House Members which will allow for reasonable growth into the 22nd Century (our next 200 years!!!).

Conclusion: I urge you to amend PL 62-5 to return to a more proportional membership of the US House of Representatives. This issue is VERY IMPORTANT to smaller States (like NEW JERSEY) which are losing population and therefore our proportional influence over Federal Government, lease we become subservient to the larger States, as it was during the Articles of Confederation in the later 1780's.


READERS NOTE: I'm away for the Holidays;
I wish for everyone a Joyful, and Healthy 2010 - Bon annee por vous!

Health, Wealth and Happiness (Gesundheit, Wohlstand und Zufriedenheit)
[Sante', Richesse et Bonheur] {Salud, Riqueza y Felicidad}

Wednesday, December 16, 2009

The Uniform Primary Election Act

After the 2000 Presidential Election had been concluded, I began to consider and try to identify the failings of our Primary Elections; with the intent to improve the responsiveness of the election process to all of our citizens. Among the concerns which were voiced again in that election cycle, were the twin matters that (1) the eventual party nominee emerged far too early in the process to provide for a sufficiently spirited debate of the issues from any challenger, and (2) the High Electoral College (EC) States are bunched too closely together.

Were the United States composed of “national” or a “parliamentary” government, such concerns would be mute. However, because we are a “Federal” government, our electoral systems, policies and practices must address the regional geographical and demographics needs of our nation. Accordingly, the time is now upon us to develop and enact, by all States and Voting Federal Territories which conduct Primary Elections, something with I’ll refer to as: The Uniform Primary Election Act (UPEA) which shall contain the following provisions:

1st - Establish Eight (8) Primary Regions: Based upon the (then most current) 1990 census data, as applied to the number of votes assigned by the Electoral College

A) Establish 8 Voting Regions - The average size of each “voting region” would be approximately 54 Electoral Votes each.

B) Identify 8 of our largest “Key States” (currently: New York, Illinois, Texas, Washington, California, Florida, Ohio, and Pennsylvania) which as a group comprise a total of 205 Electoral Votes or 47% of the total 435 available.

C) Group together: one Key State and summation of other states and territories falling within the same general, geographical region (Related States); such that each region is of the approximate same number of Electoral Votes (See the Example which is contained within Appendix “A”)

D) The Regional Grouping facilitates more effective use of media and staffing resources.

NOTE: it would be possible for a candidate to campaign in ONLY the Key State of each Region, or ONLY in the Related States of each region, depending upon the level of campaign resources.

2nd Geographical Occurrence:
Regional Primaries should be held in order, so as to allow the maximum amount of candidate exposure, while minimizing the administrative effort needed. Naturally the results of the early regional activates will influence the votes in regions who later in the process, however the grouping of the Electoral Votes in blocks will maintain the viability of each region, and thus the voters interest in the process.

It is important to consider that Region 4 contains the widest geographical dispersion and the most number of State Primaries (17), thus it needs to be scheduled later in the process, so that its voters can obtain the benefits of media exposure which is generated in the preceding regions. A proposed schedule is contained within Appendix “B”

By combining and coordinating our nation’s primary election process into a uniform statute, the UPEA will:
- save money, by allowing candidates to focus their limited resources
- save time, by consolidating the election process
- insure that all citizen’s have the ability to influence the election process


Appendix “A” Description of Regional Primary Regions based upon Electoral College (EC) Election Values (a)

Region Large State (EC); % of Region Other States and Territories Total EC
(b) (c ) (T)
1(d) NY (31) 57% CN, ME, MA, NH*, RI, VT 54
2 IL (20) 34% IO, MI, MN, WS 58
3 TX (30) 54% AK, LA, MS, OK 56
4(e) WA (9) 17% AL, AS, AZ, CO, GU(t), HA, ID,
UT, WY 53
5(f) CA (52) 96% NV 54
6 FL (23) 40% AL, GA, MS, NC, PR(t), SC, VI(t) 58
7 OH (19) 40% IN, KY, TN, WV 47
8 PA (21) 38% DE, DC(t), MD, NJ, VA 55
TOTAL (205) 47% 435 100%


a. EC = # of Electoral College distribution following the 1990 Census

b. Each region contains approximately the same number of electoral votes are
the other regions.

c. Each region is dominate by a “large state” who’s Electoral Advantage is wholly or
partially offset by the sum of Electoral votes contained within the other states of
the region (except Region 5 - see “f” below).

d. Region 1 contains the historical New Hampshire “First in the National Primary”.
In order the preserve New Hampshire’s tradition of being the “First in the National
Primary”; this Act should be designed as to permit the NH primary voting to begin
at 07:30 Hr.( ½ hour earlier than all other states in Region #1), and all other states
in this region shall be required to close their election polling booths at 20:30 Hr.
( ½ later than NH); thus preserving this quaint, historical custom

e. Region 4 contains the widest geographical dispersion and the most number of State
Primaries (17), thus it needs to be scheduled later in the process, so that voters in
these States can obtain the benefits of media exposure which is generated in the
preceding regions.

f. Region 5 is dominated by California.

Appendix “B” Election Occurrence of Primary Regional Rotation

Month 1st Tuesday of the Month 3rd Tuesday of the Month EC Count Dispersion
February 1 (*) 6 112 26%
March 7 4 (e) 212 49%
April 8 3 232 74%
May 2 5 (f) 435 100%

Tuesday, December 8, 2009


I think that most people accept the idea that State and County Government Services have been created to support the people of the State of New Jersey. We also understand that Not-For-Profit Organizations (NPO) are created in order to conduct socially desirable activities, for the benefit of the People of New Jersey, which are generally beyond the traditional functions of Government.

It is also economically beneficial and administratively prudent to cluster governmental units proximate to one another. Having widely scattered offices would doubtless increase the cost of governmental operations. It would also verge on a physical impossibility to require that governmental operating units be proportionally located within both the State and variously Counties of the State so that their costs would be equally shared by each municipality. Hence they tend to be located within the municipal borders of (what I call) a “Host Community”.

Naturally, governmental service units and NPOs occupied buildings, which if not owned by said organizations, would be considered to be a ‘ratable unit’ subject to real estate taxation by the Municipal Governmental Unit (City, Township, Boro, etc.) within which said building is located. Currently, government and NPOs occupied buildings are exempt from all state and local taxation in order to reduce the overall cost of operations – leaving more funding to support programs and activities.


The problem rests with the past (and on going) explosive growth of Government and NPO Groups; as they carryout their prescribed functions for the overall betterment of society, at the expense and detriment to the economic well being of their Host Communities. “Clustering” government operating units produces an economic burden to the aforementioned Host Municipal Governmental Unit, by:

(1) Utilizing municipal services (Police, Fire, EMT, Environmental Protection, Municipal Administration Services, Building Code, etc.) without appropriate compensation (through Real Estate Taxation or other occupancy fees). POINT: In fairness, many State and County governments do provide “compensation” to their host communities – however such payments (in cash or kind) are not legally required and are subject to political influence, as well as not always being inadequate for the level of municipal service consumed or ratables lost.

(2) Depriving said “host community” of a commercially viable ‘ratable unit’ were such a unit subject to real estate taxation by the said Host Government (for example: consider the effect of State and County operations on the tax base of Municipal Governments of: Trenton, Mount Holly and Woodbury)

(3) The “free ride” on municipal service also acts like a subsidy to the non-Host Communities; because these communities are spared the added expense of governmental operations, while enjoying all of the resulting benefits of government services.

(4) Without the imposition of any additional marginal costs; State and County Governments (as well as NPOs) are free to grow and propagate without limitation, which creates an economic “crowding out” effect within the Host Community (much the same way a swamp moss kills a tree by smothering its leaves).


Given New Jersey’s propensity for “Home Rule”, the number and scope of existing State and County Governmental Operations (as well as those of NPOs) - it seems only reasonable that a Real estate Tax Rate should be applied to these (previously tax exempt) units. The additional tax revenue would easy the burden on the Host Community, while allocating the cost of government and NPO services more fairly among a larger (consumer / client / tax) base.

The problem then becomes a matter of allocation, since the Host Community would receive ALL of the additional revenue and the additional expense would be borne SOLELY by the NPO or Governmental Unit. The matter of allocation fairness could (in my opinion) be solved as follows:

FIRST - The Secretary of the Treasury of the State of New Jersey shall be empowered to develop a Statewide Real Estate SERVICE Rate of Taxation (based upon the stated value of all previously tax exempt property by County) which shall be applied to all: State, Country and NPO charted or doing business within the State. This tax shall be known as the SERVICE TAX RATE (and Service Property), and be freely published and distributed to all Municipal Governments.

SECOND – Service Tax Rate shall be shall be recalculated once every five (5) years, based on the rate of increase in the Cost of Living Index, as verse a periodic reassessment appraisal – which is not practical for special purpose buildings (like a Correctional Center).

THIRD - Each Municipal Unit shall be required to identify each State Government Services Unit, County Government Services Unit, and Not-For-Profit Organizations (hereafter Service Units) and determine a value for each property within its border. Service Property values shall be based upon the most recent contract sales price of the property, as recorded in the deed which resulted from the purchase agreement, or the value of the Bond Issue or Capital Expense Appropriation which was used to fund the property’s original construction. Such valuations shall not be subject to any periodic reassessment, because of the single, unique functionally of the buildings in question, except that any modifications which shall be significant to require building code inspection or zoning variance shall be treated as adjustments to the value of said property. All newly constructed buildings or acquired properties shall be registered with the appropriate taxing unit having jurisdiction or such parcel, on an on going basis.

FOURTH - A property valuation calculation shall be required to be prepared by each Municipal Unit and distributed to each Service Property within 90 days of the enactment of the authorizing legislation. In order to mitigate the impact of this new process, the initial assessment shall be phased in proportionally at the rate of 20% / year over a period of five (5) years from the date of enactment.

FIFTH - County Governments shall be empowered to grant a “Request for Reimbursement of Service Tax Assessment” from any NPO within their border which has been assessed, and thus: (a) reduce the cost of operation of the Service Unit and (b) spread this cost (transfer) across the tax population (service community) of the entire county through the County Tax Assessment.

POSTSCRIPT: Naturally some organizations would continue to be “Exempt”, such as Federal Government operations (U.S. Constitutional prohibitions), Churches (under the doctrine of Separation of Church and State) and Public Schools (because they are already part of the Municipal School Board*).


* See my previous BLOG Posting relating to School Funding alternative to Real Estate Taxation.

Monday, November 30, 2009

Alternative Public School Funding

It’s About the Kids.

The New Jersey State Constitution Article VIII; Section IV REQUIRES public funding for the Instructional, Administrative and Capital Maintenance of all Public Education (ages 5-18); but does not specify How Public Money is to be raised or used for this purpose. The existing system of Local Property Taxes levied specifically to fund Home Rule for free, public education from Kindergarten thru 12th Grade is hopelessly broken because of the demographics of the population density and property values are not homogeneous throughout the State (hence the identification of the “Abbott Districts” are those communities with Real Estate Tax "ratable properties" which are insufficient to fund their own schools). Therefore - in my opinion (for what its worth) - a radical new approach is required, rather than just tinkering with a broken system, to wit:

The establishment of an EDUCATIONAL TRUST FUND

which will addresses all of these issue (and more) by:

(1) Providing a ongoing and stable source of Primary Educational Funding

(2) Equally funding all students on a per grade level (eliminating the need for Abbott Districts, and all other “pet project” funding initiatives)

(3) Provides safeguards for Capital Funding and Facilities Maintenance

(4) Eliminates the burdensome Real Estate Tax AND

(5) Retains Home Rule over the administration of local education; and allows for additional local funding contributions with voter approval while also facilitating Consolidation where appropriate.

Does this sound to good to be true? Read On......

A short History of Real Estate Taxation.

Land (Real Estate) has traditionally been the most prized asset throughout recorded history, and was once all owned by a KING. In order to control large territories, the King allocated his land among his Vassals (See Feudalism) who paid him a "rental". When lands passed into the hands of non vassals (common folks like you and me), the King lost the ability to obtain LAND DUES, and so a TAX on the privileged of owning the land was assessed, based upon the value of the land (as verse its “economic use”) to wit, our modern day real estate tax laws.

Historic Advantages of Real Estate Taxation are:

(a) the Historical Precedent (this is the way “we” have always done it) and was based upon The “Ohio Model” (promoted by President Thomas Jefferson) used as a basis for funding Public Education,

(b) Principal Asset of large dollar amount, with low volume of transactions makes it easy to administer (and the best part is: owners can afford to pay taxes, if they can afford to buy land), and

(c) Land Records are Easy to Trace because they are activated by registration of deed - Land can’t be hidden or concealed (as with cash, personal property or Swiss bank accounts), and the valuation is reasonably assured (i.e., based on Fair Market Value at time of last sale, plus a periodic “reassessment”).

While Real Estate Taxation offers the benefits (as discussed above) these are a few problems (many of which reading will recognize here in New Jersey):

(a) Land is no longer the Principal Asset for generating income, because modern commerce tends to be a function of the use of “financial capital” and “intellectual property” and mobility of tenants facilitates economic relocation,

(b) the lack of mobility restricts use and the resulting loss of landlords and tenants (and their associated economic activities) reduces value of land (i.e. Urban Centers verse Suburban Districts – Do the Abbott Districts contain any high Real Estate Values? Not usually), and

(c) geographical restriction creates disparity in valuations and substantially identical land parcels can receive different values depending upon their locations.

THE NEW MODEL - Prerequisites Assumptions:

#1 – We must acceptance of the BASIC PREMISE that Taxation upon Real Estate Valuation for proposes of Funding Public Schools within the State of New Jersey is no longer a viable methodology - it is a broken model, to be replaced not "tinkered with" (chewing gum and duct tape) in terms of exemptions, allowance, and rebates.

#2 - While studies will be required to determine reasonable calculations, the Instructional, Administrative and Capital Maintenance (a) per Student Cost and (b) per Grade Level can be reasonably be determined, and projected.

#3 - We must also use of diverse sources of taxation will provide a more stable source of funding, rather than a single funding source (i.e. Real Estate Taxation); in order to smooth out economic fluctuations.

#4 - Because some school districts are no longer viable stand-along entities; consolidation of school districts and or the ability of neighboring districts to share common services should be encouraged and facilitated, rather than impeded.


Abolish and Repeal all Real Estate Taxation Laws and or Regulations which exist for proposes of Funding Public Schools within the State of New Jersey and concurrently establish an EDUCATIONAL TRUST FUND (hereafter the “Trust”) under Article VIII; Section IV for the Instructional, Administrative and Capital Maintenance of all Public Education (ages 5-18) [and mandated preschool activities as have been determined by the NJ Supreme Court] within the State of New Jersey. With respect to the Trust:

1) The Governor shall nominate (with the advice and consent of the State Senate – see Senate Rules) Five (5) Independent Trustees who shall each serve for staggered 5 year terms, such that one Trustee shall be replaced or re-nominated every year.

2) The State Legislature shall provide that some portion of funds from State Revenues from: Personal Income Taxes*, Corporate Business Taxes*, Sales and Use Tax* be apportions and transferred to the Trustees (THEREFORE, ALL FUNDS PREVIOUSLY ALLOCATED TO THE “REAL ESTATE REBATE PROGRAM” ARE HEREBY RELEASED - see "seed capital" below). * this may require tax increases, which will be tolerable if the overall level of taxation remains less than or equal to the current aggregate dollar amounts.

3) The Trustees shall annually determine, and project the Instructional, Administrative and Capital Maintenance on a “per Student Cost per Grade Level” for each Grade Level from Kindergarten thru 12th Grade (High School), as mandated by law. {Shouldn't students in Camden, Cranberry or Cape May receive the same level of instructional funding? Wasn't this the point of the Abbott Decision?}

4) Each School District, as is currently required (and as certified by the State Secretary of Education), shall report their student enrollment to the Department of Education and to the Trustees on a periodic basis.

5) The Trustees shall periodically (monthly or bi-weekly) pay over to each School District, funds for Instructional & Administrative per student per grade level; to each district.

6) “Seed Capital” (to be 20% of the projected five (5) year average Budget of the Trust) shall be appropriated by the State Legislature as the Corpus of the Trust.

7) The Trustees shall annually project the funding / disbursement requirements of the Trust for the succeeding School Year and shall formally advise the State Secretary of Education of any additional funding which they deem shall be required; any projected deficit funding requirements such funding will be appropriated by the State Legislature.

8) Capital funds shall be accumulated (based on student population data previously reported) and held for each School District; such funds shall be dispersed in accordance with the previously approved multi-year capital funding plan. {How often - in the past decade - were facilities maintenance projects "postponed" in order to fund current operations?} TO BE DETERMINED - the ability of the Trustees to issue Bonds to build current schools based upon expected Capital Funding Allocations.

9) School Districts which, upon the appropriate submission of their Student Census Data, and the resulting Funding which shall be provided under this Plan, wish to appropriate additional funding may make such requests directly to the Municipal Authority within which the School District resided; however the Municipal Authority shall not be required to provide any additional funding.

10) School Districts which conclude that they will not be able to meet the educational mandates of the State Department of Education within the funding provided under this Plan, may elect to combine their educational activities (Schools or Specific Grade Levels) with those of activities of Neighboring School Districts (see Regionalization).

11) Severability: If any portion of this Agreement shall be held to be invalid or unenforceable for any reason, then the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited by the Court Order.

12) This TRUST AGREEMENT shall be subject to amendment or revocation in the 4th year following its inception, and every 4th year thereafter, by Act of the New Jersey State Legislature which shall be made by an affirmative 2/3rd vote of the Senate and the Assembly and Signed by the Governor; unless formally instructed to be amended or revoked at any time by an order of the Supreme Court of the State of New Jersey.

13) This Trust shall terminate, cease to operate, shall pay over all remaining funds and transfer such records and documents as may exist to the care, custody and control of the Secretary of Education of the State of New Jersey, or as may be designated by the New Jersey State Legislature, on the 1st business day 100 years from the date that the Corpus of the Trust shall have been transfer and accepted by the Trustees, unless otherwise amended (See - NJ Law Against Perpetuities).

New Jersey was a founding partner in the American Experiment, so now is the time for all New Jersey Citizens to work together to bring New Jersey Education into the 21st Century – It’s About The Kids!

Tuesday, November 24, 2009

How to legally tax the Internet by extending the Use Tax.

Background – The Unique Properties of the Internet

1. The Internet is a pervasive technology, which by its very nature, is both all encompassing and “borderless”.

2. The protocols of the Internet are designed to be fluid, transparent, and anonymous so that they may easy facilitate the transfer of information (including commercial transactions) between any connected end user (client).

3. The ability of any government to regulate the content or transactions over the Internet is practically impossible because of the inherent nature of the technology to mask or otherwise evade regulator surveillance.

4. The Internet however can be (and in some countries is) controlled through the regulation of ACCESS by Client (end users) and Internet Service Providers (ISPs) which represent the “terminal points” of any Internet Transmission - i.e., In order to access the Internet from within New Jersey, the typical end user would dial the local NJ access telephone number of their ISP. The fact that the end use may be accessing the ISP from a location, other that one physically within the State of New Jersey, using long distance, or other level of technology, is irrelevant.

Understanding: Sales and Use Tax

1. States commonly assess a transactional Use Tax based on specific sales (or rentals) which occur within their borders, without regarded to the location of the ultimate consumption of the purchased product or service. When this tax is assessed (and paid) at the Point of Sale, it is commonly known as a "Sales Tax” - something with which most people are familiar.

2. Purchasers are generally required to pay a Use Tax on purchase transactions occurring outside of its borders and then when the goods are repatriated into another State for ultimate consumption - i.e., a book purchased in Philadelphia or New York City, which is then brought back into and used (read) within New Jersey, would be subject to Use Tax; as verse a book purchased and used within New Jersey would have been assess a Sales Tax. The fact that such out of state transactions are virtually (until now) untraceable; has made such efforts impractical.

3. NEXUS – this is the legal term which is used to define if a business or person has a “taxable presents” within a State. Businesses determined to “have Nexus” to New Jersey are thereby required to collect appropriate Taxes and Fees; while business without New Jersey Nexus are exempt from these regulations and laws.

4. KEY POINT - Obviously, businesses which are physically domiciled in New Jersey (i.e., Local) are “competitively disadvantaged” when competing with out-of-state vendors who are not obligated to collect NJ Sales Tax (i.e. Internet Commerce or Catalog Sales). The State of Delaware publicly states that consumers should shop there in order to avoid the payment of any Sales Taxes - although they fail to discuss the consumer's obligation to pay their own State's Use Tax.

Understanding Internet Commerce:

1. Given that Internet Commerce occurs at an indeterminate location rather than a specific point of sale (i.e., the local grocery store), THIRD PARTY PAYMENT confirmation (i.e., Credit Cards ) is generally used to effect these transactions.

2. Credit Cards may only be issued by Banks (and other "Financial Institutions") which have registered with a State’s Department of Banking and are in compliance with a given State’s banking regulations. That the Bank does not actually have to have a “branch office” within a state or that the actual processing the Credit Card account takes place outside the given State is irrelevant once the Bank is “registered” to transact business by the Department of Banking.

3. Financial Institutions are most likely to register with a State Department of Banking, so that in the event that they (the Bank) need to enforce collection (against you the credit cardholder) they will have the "Legal Standing" to make their lien and collect any outstanding account balance. The process of registering gives the bank "NEXUS" within that State.

4. The Name, Address and Taxpayer Identification Number are all information which is already collected in the process of issuing a Credit Card.

5. Credit Card Issues apply their transaction against known vendors (or member). These Vendors are identified by the nature of the product or service which they provide and this information is readily accessible; as well as any Sales Tax collected.


Since Congress has forbidden any State from "Taxing the Internet", how could any State's "Sales and Use Tax" be legally extended and applied to the Internet?

SOLUTION: Expand the Existing New Jersey Sales and Use Tax Regulations as follows:

1. Require all Credit Card Issuers licensed by the Department of Banking to provide to the Department of the Treasury, Division of Revenue and also to each Credit Card holder: a summary of all Non New Jersey Credit Card purchases (see example) for an annual report of activity (i.e. 1/Oct through 30/Sept - so as not to interfere with year end tax processing). This summary shall be broken down by State, and Status of the Vendor. Given the amount of additional revenue this proposal would accrue to the State, the Treasury make wish to allow a “processing credit” (based on the number of cardholders) to each Credit Card Issuer, which would off-set their cost of compliance with this regulation.

2. The “out of State” purchases shall indicate the amount of USE TAX (currently 7%) which may have been previously assessed against all stated purchases with were consumed or brought into New Jersey. Some States have entered into a "reciprocity agreements" where in they agree to allow a credit from the Sales Tax assessed on Out-of-State purchases, to be netted against their own State's Sales Tax.

State APPLE $100 @ 5% Tax = $5.00
Home State $100 @ 7% Tax = $7.00
Home State USE TAX due = $2.00 (7.00 due less 5.00 paid to Reciprocal State)

Obviously items which are purchased and consumed out of state are already exempt (i.e., hotel room and meals consumed during a vacation within the State of Florida); whereas a book purchased in Philadelphia, Pennsylvania would be subject to USE TAX if the book was “used” in New Jersey.

3. The amount of qualifying purchases, less any adjustments, shall be include on the New Jersey State Income Tax Return Line Number 41.

Talking Points - This is a lot of $%%##@$^&; you can't do this - It's UNFAIR!

1. Sales and Use Taxation has been thoroughly documented and upheld by State and Federal Courts with respect to its constitutionality.

2. Expanding Use Taxation, as discussed above, would not be subject to the existing Federally imposed prohibitions with respect to Internet Taxation – this expansion would be assessing a Use Tax on the transaction, not on the internet. Making transactions with ALL VENDORS (regardless of physical location) subject to the same set of Sales and Use Taxes to not only "more fair" with respect to the unfair subsidy provided by a "Sales Tax Free State", but it also provides a competitive LEVEL PLAYING FIELD for all local New Jersey Merchants, who are key members of our society.

SUPPORT YOUR LOCAL (fill in the blank)

3. Will the Poor pay more? Generally, consumption taxes are most burdensome to citizens of lower economic status (i.e., poor). However, this proposed change should not be expected to impact with group, because they have little access to either Credit Cards or Internet purchases – as they tend to be “cash based” purchasers. It might also be argued that broadening the tax base is "more fair" and the additional tax revenues are used to support state services.

4. Consumers who wish to avoid the implementation of this proposed expansion of the New Jersey Sales Tax would be obliged to establish credit cards in another State; however it is unlikely that a Credit Card Issuer would permit “out of sale” billing, as this could impede their efforts to collect unpaid account balances and other delinquencies (see previous).

5. Vendors, who have previously registered with the Department of the Treasury, will indicate a New Jersey Billing address on the Credit Card transactions, and thus be exempt from double taxation – since any NJ Sales Tax previous assessed would be indicated on the report.

6. The issue of permitting a credit for “sales tax” already paid to another State at the time of purchase to be used to partially (or fully) offset the “to be assessed” NJ Use Tax Liability; is permitted ONLY if that State has sales tax reciprocity with New Jersey, as previously discussed.

MY PARTING SHOT: The Elephant in the room ...

Another potentially beneficial (if unintended) consequence of this legislation will be that Internet Gambling would now be subject to Sale Tax, thus providing both an additional source of revenue as well as indirectly supporting and expanding local New Jersey Gaming interests (i.e., Lottery Tickets, Bingo, and Atlantic City Casinos).

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“… Nothing is more uncertain, than to effect change – for those who will benefit from the proposal do not fully comprehend its advantages, while those of the old order know full well what will be their losses...” - Nicholi Machiavelli

The number of new creations, technologies and knowledge within all forms of human endeavor (Art, Science, Commerce, etc.) is a never ending quest for improvement in both efficiencies (productivity arising from doing more with less) and effectiveness (attaining high results for a given amount of effort). In reacting to these changes, American Society over the past 200+ years has adapted and matriculated on a continuing basis, through in a cornucopia of actions and reactions. The act of embracing change signifies that the “body politic” has determined that the former methods of action are no longer viable and acceptable; and accordingly - a new order needs to be implemented.

Yet, despite all of the changes occurring, governmental structures within New Jersey seem frozen in a time-warp of the 19th Century – determined to cling to inefficient, ineffective, and expensive notions of governmental service and administration simply because:

(a) they are (at lease) known quantities,
(b) bestow favor and benefits upon the existing power structure,
(c) the voters don’t seem to care and
(d) alternative practices, procedures, and methodologies have not been publicly discussed and evaluated - YET.....

Given that past solutions can no longer be relied upon, this BLOG is dedicated to simulate a debate and discussion among the citizens of State of New Jersey by offering alternative solutions, in the hope that by working together - we can make New Jersey a great place to live and work.

Make your voice heard - here's my 2 cents, for what its worth.