Should Taxes Factor into Government-Mandated Business Shutdowns?: Simon Property Group’s Tax Challenge to Two NJ Cities

Where’s our tax cut? As N.J. mayor tried to shut city, mall owner pushed steep tax break.

That’s the headline of an NJ.com news report by S.P. Sullivan, published on the front page of the New Jersey Star-Ledger. Sullivan reports:

As the mayor of one of New Jersey’s largest cities was scrambling to curb the spread of novel coronavirus earlier this month, the largest operator of malls in the United States had another idea.

“What’s your plan to shut down the mall?” asked [Elizabeth] Mayor Chris Bollwage, referring to the Mills at Jersey Gardens, one of the dozen Simon shopping centers in New Jersey.

“What’s your plan to cut my taxes?" replied Mike Romstad, an executive vice president at the company, according to Bollwage’s account.

Bollwage, in an interview with NJ Advance Media this week, said he considered it a “threat.” A Simon spokeswoman said company officials “categorically deny making a verbal threat to the mayor.” However, she did not deny that the request for tax cuts was made, and Simon less than a week later sent a letter seeking millions of dollars in immediate tax relief.

Jersey City, Mayor Steven Fulop faced the same resistance from the Mall operator, Simon Property Group.* Fulop even sent police to Simon’s Jersey City Mall to enforce the shutdown.

The article provides a back-and-forth between the mayors and Simon executives. For his part, Mayor Bollwage thundered:

“I’m dealing every day with how to protect the city from a virus and how to get the hospitals the necessary equipment, as well as protecting emergency medical services,” Bollwage said in an interview.

“All they cared about was how much taxes they were going to save.”

Simon officials were not shy in responding to Sullivan’s report. For example, Ali Slocum, a vice president for communications at the company, said:

“We call on all local and state officials to recognize the tremendous contribution our center makes to the community in terms of job creation, small business growth and infrastructure and we expect fair and equitable treatment with respect to taxation."

This raises an interesting question of justice: Is it fair for governments to continue demanding taxes at the same rate from businesses deprived of revenues it needs to pay its taxes because of shutdowns imposed by that very government? After all, Bollwage’s snarky ““All [Simon] cared about was how much taxes they were going to save” can just as easily be turned around into “All [Bollwage] cared about was how much taxes his city was going to collect.”

Politicians love to lecture us on the “virtue” of “shared sacrifice.” Yet, they seem to think that their services are somehow so important as to put themselves above sharing in the sacrifices. But in this pandemic, which I agree qualifies as a genuine national health emergency, some, such as the mayors of Elizabeth and Jersey City, are oblivious to the genuine hardships they are imposing on private business and the millions of Americans who are being forced out of their jobs and livelihoods as it relates to their city’s respective taxes.

It remains to be seen whether the government shutdowns across the country are warranted or an over-reaction--and, indeed, whether they are even constitutional. And perhaps the timing of Simon’s tax challenge is not good. Perhaps the company should have waited until after the crisis to mount it’s challenge. But I believe Simon’s challenge is right and courageous. 

The issue here is local property taxes. Property taxes are not like other taxes. Unlike income and sales taxes, which automatically decline when economic activity declines, property taxes are there no matter what. In normal times, the circumstances of the property owner, such as a homeowner's loss of a job or a decline in the sales of a business, it’s to be expected that the property taxes must still be paid. But what about a situation where the taxing authority itself is imposing the job loss and decline in commerce for the business, such as during the current coronavirus pandemic? 

My view at this time is that Simon is correct to fight back. And in doing so, it fights for justice for all property owners--workers and businesses alike--who are seeing their economic health crushed by the government’s own orders. If private citizens are to be forcibly sacrificed for the cause of containing the pandemic, however justifiable the shutdowns are deemed ultimately to have been, it is only fair that property taxes for those paying the price should be commensurately reduced. 

Simon’s tax challenge is just and important. We could call it a matter of social justice.

* (Star-Ledger Editor’s note: After this story was published on NJ.com and in The Star-Ledger, Simon officials provided a response. Read it here.)

Related Reading:

Simon Malls responds to ‘Where’s Our Tax Cut?’ article published this weekend by The Star-Ledger & NJ.com--NJ.com

The Double Standard of Corporate Tax Cut Opponents

Why Pick On ‘Rich Corporations’, Benefactors of the Middle Class?