Skip to content

Money Island NJ: ‘Ground Zero’ for regional climate change response

With the April 15 tax deadline past, today I turned my attention to local New Jersey politics in Money Island New Jersey. My friends and acquaintances know that for many years I’ve been working in support of a sustainable future for my time home community. Today I spent time speaking with our political consultant, our Mayor Bob Campbell and a staff member of Senator Jeff Van Drew.

My efforts to work with local government began in 2004.  Since then, I’ve wound up buying a commercial property for a planned crab shedding business, negotiating the purchase of the bankrupt marina and I’ve spent countless hours attempting to negotiate the tensions that inherently come with rising tides. In short, we’ve accomplished very little in the past decade.



In the 1970s this rural hamlet on the Delaware Bay was devastated by storms and continued to lose ground and houses to erosion year after year. By the 2000’s most of the original homes and part of the roadways had washed away. Residents activated government to take action. Rebuilding projects were approved on paper but never actually executed. Since then several local communities were bought out by the state to be converted to open space (Thompson’s Beach, Port Mahon, Sea Beeze, Baypoint). It appears that Money Island is next in line but the economics and attitudes are different here than in the other communities.

The widely supported regional economic recovery plan is posted at Money Island plays prominently in the region’s recovery plan despite the fact that we are so small. We have become a media focal point and testing grounds for NJ’s sea level rise response. Millions of dollars have been spent in surrounding communities but nothing has happened yet at Money Island.

An independent study on our recovery prospects is posted at . The report is prepared by Natural Lands Trust and funded by the EPA.

Local news items and commentaries are posted on my web site “Money Island News” at

Status Update

Based on the discussions today, these are my conclusions of the most likely outcome:

LOCAL DIFFERENCES OF OPINION – Tensions among neighbors and government officials will remain high for the foreseeable future and I will attempt to deal with this through open and honest communication. I represent some people that want to sell and move inland, others that want to stay. Some people will be upset by whatever action I may take. I will strive to be even-handed and communicate all information evenly and respect each person’s individual decisions.

POLITICAL DIFFERENCES OF OPINION – We continue to suffer from a lack of consensus and lack of leadership on climate change response issues at the highest levels of government. There is nothing we can do about this locally so I will not dwell on it.

LIKELY OUTCOME FOR MONEY ISLAND HOMES – Some of the residents will sell their properties to the state. Others will not sell but it will be increasingly expensive to maintain a residence here. Property values will continue to decline in response to flooding, difficulty of getting building permits and increased levels of taxation. Tax rates as a percentage of realizable property value may be among the highest in the country (perhaps 15% by the end of the decade). Those who can afford to stay will modify lifestyles and use evolving technologies to avoid being consumed by rising tides. The average time frame for actual completion of sale to the state is three years.

LIKELY OUTCOME FOR MONEY ISLAND MARINA – The overall financial viability of the marina remains uncertain and depends more on long term factors that we cannot control (like the rebound of fish stocks). The current fish management plan that favors unharvested juvenile striped bass is preventing the rebound of other species. The marina is unlikely to continue to continue to be a landowner. It simply is not financially possible under the current income/expense structure. Like many other New Jersey marinas, the land will likely be owned by the state or some other land trust and the marina will lease the property. The time frame for sale of the marina real estate is 2 to 3 years.

LIKELY OUTCOME FOR AQUACULTURE AND COMMERCIAL FISHERIES – There is no indication that any significant change is likely. There will be no expansion, contraction or policy shift other than dictated by annual stock assessment reports. The current biases and environmental policies will remain for the foreseeable future.

I am available to anyone who wishes to discuss any of these issues.

Why most people do not invest

“few people do other things financial advisers recommend, like waiting until they’re 70 to take Social Security, opening 529 college savings plans and making good use of Roth IRAs, he says. The real problem is income stagnation and “a widening gap between the affluent, who can afford to save and invest for retirement, and everyone else, who just can’t.” – Howard Gold in Marketwatch, quoted by WSJ

Why middle-income tax planning is dead

Bloomberg and Wall Street Journal ran articles this week that compile and analyze federal income tax data. These articles were meant for use as an exposé of policy tax policy. I skipped the social policy discussion entirely and I looked at the data from the perspective of a small solo CPA’s income tax service.

It is interesting for me to note that I left a job with a Wall Street firm 28 years ago because I was tired of helping rich people get richer. I’ve tried to serve an economic cross section of clients. Yet today, as I analyze the data, I conclude that the only viable business model for a CPA tax practice is to serve the wealthy segment in managing their tax burden. All my efforts to appeal to a broad audience with a range of tax and financial planning tools are effectively wiped out by the hard numbers of how our federal income tax system works today.

I have taken significant steps to promote middle-income tax planning. My comments in Money Magazine last fall and my articles on tax planning (like this one) for middle-income people have been popular. But they have not really translated into any business for my practice.

A few take-away points from this week’s news articles combined with my own practical observations:

WHO PAYS INCOME TAX – The top-tier of affluent people pay the majority of income taxes. The richest 20% pay 84% of all federal income taxes.

WHO DOES NOT PAY MUCH INCOME TAX – People making less than $150,000 collectively pay only about 10% of the nation’s total income tax that is collected. Apparently this amount of tax is not painful enough to motivate this segment to pay for professional tax planning services.

MARGINAL AND EFFECTIVE TAX RATES – At incomes below $100,000 almost everyone pays taxes that might be considered reasonable; say 10% to 15% of total gross income. The tax rates for higher income people is much more variable and is more likely to depend on the tax planning and positioning. Effective tax rates of 25% to 28% are common in my new clients prior to tax planning. Marginal tax rates are even higher and this is what really motivates requests for tax planning services.

AUDIT RISK – The only category of taxpayers facing increased audit risk are those with more than $200,000 income. Audit risk increased sharply with the use of common tax planning strategies including side businesses, home office deduction and unreimbursed employee expenses.

A GROWTH MARKET – The number of tax returns with income ove $200,000 grew by 24% in 2014 over the prior year. That may explain why all but one of my new tax clients this year fell into this income category despite my willingness to handle any tax return.

TAX FILERS – About 60 million working Americans file income tax returns. About half of them file a tax return online themselves without a tax professional. But among the top tier of income earners almost all use a tax professional.

All of this leads me to a regretful conclusion that I should abandon my efforts to bring tax planning to middle income clients and that I should focus exclusively on serving more affluent clients. (I can already hear me peers saying “I told you so”).

Financial Planning Considerations When Your Business is Losing Money

This post was inspired by the stories of some of my neighbors and clients in southern New Jersey. Most were struggling with  a weak economy before super storm Sandy hit in late 2012. Those that re-opened over the next few years face continued business losses and the prospect of continued weakening of the local economy for the next decade.

What to do when your business is losing money? Fix the business model or close shop are the obvious answers. But those are not always doable. A family farm, for example, is likely to keep running at a loss for years or decades after it is no longer profitable. There is often no desire to sell the homestead farm and making current income is often not the primary economic driver of the business. Other businesses like marinas or fish processing may expect economic cycles to last much longer than a decade. Predicting the future is part of financial planning, yet it is far from a reliable practice. Business plans must be flexible to accommodate a wide range of unanticipated business outcomes.

The list below, in no particular order, is not meant as an exhaustive discussion but rather just a listing of some issues to consider in financial planning:

1. IRS Hobby Loss rules – Section 183 of the federal income tax code require that businesses be engaged for profit in order to make any losses tax-deductible against other income. Tax planning is required in order to achieve best overall financial results.

2. Safe Harbor rule – the IRS relies on a “safe harbor” rule upon which a business owner can rely. Lean on this for financial planning whenever possible since it is the clearest, cheapest and least risky financial strategy.

3. Conservation easements – limiting rights to future land use saves money now

4. Sale/ Lease back   – perhaps the business should not own the land/buildings that it uses.

5. Grants – government grants to save a business or industry are taxable so plan accordingly

6. Tax shelters – matching high income individuals with otherwise attractive money-losing businesses is the oldest tool in the tax shelter business. Just be sure to do it properly to avoid IRS scrutiny.

7. Professional representation – If IRS does start ask questions, it may be costly to a business. This is not a “do-it-yourself” area of tax practice. An experienced attorney, CPA or Enrolled Agent are required if you reasonable expect to prevail in an audit.

8. Conversion to non-profit status – this is applicable to businesses, for example, that may be a historic landmark of bygone days but are no longer profitable today. The community may be willing to pay to keep the doors open.

9. Investor basis – businesses with changing ownership (corporations or some LLCs) need to pay attention to the tax implications of transactions that affect the calculation of the business owner’s “basis”. Basis is a concept that is important in tax law, especially when calculating long-term business losses and taxable gains on sale of a property.

10. Risk Management – the reality is that distressed businesses are more likely to suffer calamities. Be aware and plan accordingly.

11. Insulation – make sure that the struggling business does not pull down other unrelated businesses, your personal finances (what’s left of them) or your personal relationships. This is far easier said than done. Professional help may be wise.

12. Buyouts – state governments increasingly recognize that the dramatic physical and economic impact of climate change will make some areas uninhabitable. Nobody likes to talk about it, but property buyouts and/or relocations are happening now and will increase in the future.

13. Debt relief – a distressed business that borrows money through difficult times will have substantial taxable income (but no cash with which to pay applicable taxes) if that debt is later discharged. But the rules vary so be sure to consider the details far in advance of discharge.

A business owner struggling with long-term losses is not likely in the best mental state to make an objective analysis of all of the options. I strongly suggest getting outside professional advice from an adviser who sees the “big picture”.

Fixed Asset Accounts in QuickBooks Online

Here is something I learned about the conversion of fixed asset accounts (like machinery or vehicles) from QuickBooks desktop to QuickBooks Online. (While I am a QuickBooks Online ProAdvisor and currently in the middle of studying for advanced certification, many new issues come up on a daily basis that are not obvious or well-documented. This is just one of many that might be useful to share).

In QuickBooks desktop separate depreciation accounts have to be created. In the past I handled depreciation as a manual operation, usually at tax filing time.

In QuickBooks Online the depreciation option that results in the system automatically being linked to the asset account. This creates a primary asset account , an original cost sub account, and a depreciation sub-account.  By default, the depreciation account is simply called Depreciation. I wish they had called it Accumulated Depreciation which is a term that, IMO, more accurately describes the account in terms that we have used in the past. Perhaps the developers did not which to confuse this with prior accounts called Accumulated Depreciation that were manually created as described above.

So it seems that there are at least three new issues to consider:

1) After conversion, you may have depreciation for a single asset recorded in more than one account. Adjusting journal entries may be useful in some cases, but are not required.

2) The new QB Online system opens the door to asset valuation adjustments outside of the depreciation schedule (for example, if you want to show market value under an IFRS system while your books are kept on a tax basis).

3) The new system will make it easier for businesses to comply with IRS’s new fixed asset accounting rules. Journal entries can be better controlled or limited to one sub-account.

I found this article to be helpful:

Letter in support of agricultural tourism in New Jersey

This is the text (with hyperlinks added) of my letter to the Cape May County Agricultural Development Board regarding New Jersey’s attempt to draw visitors to South Jersey’s farms for recreation and tourism purposes. The matter is covered in this newspaper article. My larger concern is that if local government reacts to a small number of local residents who simply do not wish to see their neighborhood change and uses this selfish concern to block tourism initiatives then the economic future of these farms and perhaps the entire bayshore region may be bleak. If Cape May County blocks this effort by their local winery, I fear that the same attitude will damage the prospects of other farms further up the bayshore.

March 31, 2015

Barbara Ernst

Cape May County Agricultural Development Board

4 Moore Road, DN 309,

Cape May Court House NJ 08210

RE: Public comment on Willow Creek Winery application

Dear Cape May County Agricultural Development Board:

I am writing to express a personal opinion on the matter of Willow Creek Winery’s application to host public events under the state’s pilot program to promote rural entertainment and tourism. I do not have any relationship with Willow Creek Winery or any other parties related to this application but I do work with a number of small agricultural businesses in Cape May, Cumberland and Salem Counties.

I trust that you are aware of the overall vulnerability of the region’s small rural businesses. The local economy has not yet recovered from Sandy-related setbacks and now the threat of further declining economy in Atlantic City region threatens to keep the region in a state of recession for years to come. A study released last summer by the U.S. Conference of Mayors and HIS Global Insight predicts that for the rest of this decade the Atlantic City/Hammonton/South Jersey rural region will have one of the slowest economic growth rates of the entire United States. In short, many of our small local agricultural businesses are teetering on the verge of extinction under this climate of financial stress.

Meanwhile local organizations like the South Jersey Bayshore Coalition, BaySave, and the Cumberland County Delaware Bayshore Long Term Recovery Group are desperately working to come up with a sustainability plan for these rural businesses. Entertainment and tourism has been identified as one of the most promising strategies. As part of this sustainability planning, outside marketing and business development experts from various agencies have offered advice. I’ve been fortunate to hear some of the tourism and economic development presentations and ideas summarized in the 2014 Cumberland County Delaware Bayshore Recovery Plan. One dominant theme of these projects is the need to develop reasons to bring more people outdoors to enjoy our region’s natural resources. The experts advise us to embrace the rough and natural state of our properties to find ways to offer food, lodging and entertainment to attract more visitors to the region. One recent presenter from the NJ Department of Community Affairs advised us to stop worrying that the visitor experience may not be ‘polished’ per modern standards, but to just to get out there and start inviting visitors to our rural properties “as is”.

For this effort to work, we need government’s cooperation. The usual regulations on traffic, parking, physical facilities, etc. are not appropriate during this early stage pilot program. It would be a mistake, in my opinion, for government to react to the imagined concerns of a small minority of neighbors over too much traffic and visitors that such tourism efforts may generate.

In summary, there is no factual basis to fear too many visitors on our regions farms. I urge you to support Willow Creek Winery’s plans and attempts at leadership of the region’s recovery plan.


Tony Novak

agricultural development board

10 good reasons why I might choose not to vote

Popular voting in a self-governing society recognizes the core principle of electing not to vote in appropriate circumstances. The election to abstain from voting is arguably the most valuable tool we have to preserve the integrity, value and meaning of the voting process. Here are ten good reasons that I may choose to not vote:

  1. I have a conflict of interest or am under undue influence. One candidate is my brother-in-law and my firm does business with the other candidate.
  2. I’m not knowledgeable on the issue and other voters are better qualified to make the decision. Delegation of voting responsibility is a powerful tool.
  3. My work requires impartiality. (I used to feel this way when my writing more directly covered political issues related to health care reform).
  4. I am engaged in an act of peaceful civil protest. Sometimes not voting conveys a loud and clear political message.
  5. I do not consider myself a stakeholder in the particular issue. Some I feel that the issues just don’t involve me and so even if I do legally have a right to vote, it makes more sense not to vote. The important point in this argument is that it is my internal perception, rather than the factual circumstances as evaluated by a third-party, that determines whether I should or should not vote.
  6. I don’t like any of the candidates or choices and could not in good conscience cast a vote for any of them.
  7.  I just don’t care. Lack of motivation make the effort necessary to vote is a valuable and practical sign that perhaps I should not be voting at all.
  8. I haven’t yet decided. Just because it happens to be election day does not automatically mean that my mind has completed the internal processes necessary to make an appropriate vote.
  9. It might be perceived that I have a conflict of interest. I don’t really, but I don’t want to create a false impression that I voted based on nepotism or some other unsuitable basis. In this case, I am justified in abstaining from the vote in order to protect my own reputation from examination and the perception of fairness of the overall process.
  10. The question is out-of-order in procedural process or time. Just because other people have placed an issue up before me to cast my vote on a given day does not mean that it is appropriate for me to do so if there are other unresolved issues preceding the vote. This seems to happen surprisingly often as a political strategy in local government elections.

Recent suggestions about a mandatory voting requirement in the United States insults my intelligence and would hope that other voters would be equally incensed. Mandatory voting represents a disregard for the voting process and a significant step backward in the evolution of a self-determining society.


Get every new post delivered to your Inbox.

Join 384 other followers