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Monday, July 17, 2006

Another Property Tax Relief Shell Game

Now that New Jersey’s budget troubles have temporarily been resolved by raising state taxes, Democrats in Trenton are moving along with their ideas for property tax reform. They hope to resolve the property tax crisis in the same manner as the budget crisis. Many Democrats are backing a plan calling for the state to hold a constitutional convention, elected solely for the purpose of raising state taxes to reduce property taxes.

Today, it has some heavyweight backers, including Gov. Jon Corzine, Assembly Speaker Joe Roberts (who actually got the Assembly to approve it last session), the League of Municipalities, the League of Women Voters, the AARP, the Black Ministers Council and environmental groups.

The convention's plan would have to be revenue-neutral, neither raising nor lowering the total tax take. It simply would redistribute the burden so that property owners wouldn't bear such a disproportionate share. Once completed, the plan would go to the voters for a yes or no verdict.
To buy into this solution you have to believe property taxpayers and state taxpayers are nearly mutually exclusive groups, which of course they’re not. And you also have to believe you’d be happier if your total tax bill remained the same, just as long as your property tax bill was temporarily less.

The fact Democrats are concerned that people will catch on to their latest tax hiking scheme should be a major tip-off that a constitutional convention is bad news for taxpayers. That's why lawmakers want to hold this plan until an off-election year.

Next year is an election year, with all 120 legislative seats on the line. If candidates were required to share the ballot with a comprehensive, controversial, convention-produced reform proposal -- which doubtless would include higher state taxes to offset local property taxes -- they would be compelled to take a position on it.
On the other hand the state’s legislature could actually do their job instead of passing their responsibilities off to another group – wasting even more time and tax dollars in the process. State government gave New Jerseyans the state income tax for the sole purpose of reducing property taxes. Before Democrats concoct any “new solutions” they should fix their “old solution” for the property tax crisis in New Jersey. They can begin with these issues:

New Jersey spends 57 percent more per public student than the national average.

New Jersey’s 31 Abbott* school districts spend 30 percent more per student as compared to the rest of state. Average per-pupil spending in New Jersey school districts is $11,056. Abbott districts average $14,287.

The 31 Abbott* school districts will receive over 56% of property tax relief (state aid) for public schools in 2007 and yet make up only 25 percent of New Jersey’s public school enrollment.

The 31 Abbott* municipalities receive the bulk of all state municipal aid which also reduces local property taxes.

Don’t let New Jersey politicians trick you with yet another shell game that raises state taxes to hopefully reduce your property taxes. It hasn’t worked yet and it never will. The only solution to New Jersey’s property tax crisis is through cost containment and an equitable distribution of state property tax relief funds from existing tax rates and revenue sources.

* Thirty-one of the state’s 566 municipalities are designated as “Abbott” for the purposes of “property tax relief” related to education aid and “needy” for the purposes of “property tax relief” related to all other municipal aid.


At 1:15 PM, Anonymous patrick thompson said...

As always, fair and responsible taxation is progressive taxation. You make more moey ---you have more money -- you pay more money.

Stop expecting less fortunate residential property owners to pick up our share. We make more money. We should pay more taxes.

Do you prefer these less fortunate property owners are forced to move out of NJ?

This is cynical and classist.

Patrick Thompson
Hightstown NJ

At 9:32 PM, Blogger Enlighten said...


You write: “As always, fair and responsible taxation is progressive taxation. You make more money ---you have more money -- you pay more money.” What does this comment have to do with our post? We weren’t addressing the progressive nature of the state’s income tax and didn’t suggest it be changed. As a matter of fact we suggested keeping existing tax rates, which are of course progressive. But, since you brought it up, a flat tax also produces “you make more money ---you have more money -- you pay more money”.

You write:“Stop expecting less fortunate residential property owners to pick up our share. We make more money. We should pay more taxes.” We have no such expectations or desire. But perhaps we don’t understand what you mean by “our share” and “we should pay more taxes” - aren’t we already doing that?

Let’s say for the sake of the argument we live in West Orange, have an income of $100,000 and a have retired neighbor making $50,000. Our house and our neighbor’s have the same property tax valuation. Our town receives $1,078 per homeowner in property tax relief from the state, producing a net property tax bill of $10,000 for us and for our neighbor. The average cost per student in West Orange is $10,980 but, we don’t mind even though we don’t have children and never did.

Our retired neighbor pays $875 in state income taxes for the “property tax relief fund” and we pay $5,250 into the fund. Our neighbor is eligible for a senior citizen property tax rebate of $1,320. We aren’t eligible for a rebate.

So our neighbor pays a net total tax of $9,555 and we pay a total of $15,250. We’re paying about 60 percent more in taxes than our neighbor.

But that’s still a big nut for our neighbor and he’s upset. He happens to complain to an old work buddy from Newark about property taxes and finds out his friend has not had his school taxes raised since 1998. He also learns his friend is getting the same senior rebate and pays nowhere close to what he’s paying in property taxes. He and his friend both have the same income and have lived in their respective houses for the same length of time.

Our neighbor does a little checking and finds out the average cost per student in Newark is $15,796 and property tax relief (state aid) per homeowner is $23,737. Now our neighbor is really upset. He calls us up and I answer the phone (you were out attending an activist meeting and I was writing this response to your comment).

Our neighbor tells me he doesn’t think Newark needs to spend $5,000 more per school kid, 44 percent more than West Orange. I agree. He tells me the only reason Newark is spending so much more is because of all that extra property tax relief their getting. I agree. He says, he thinks it would be fair if Newark received enough property tax relief so that their kids and our kids had the same cost for an education. I agree. He’s says Newark would still receive much more property tax relief than West Orange, but wouldn’t it be more equitable? I agree.

Our neighbor thinks about it for a second and then says, if state property tax relief were distributed equitably, he might see a property tax reduction. I agree. He asks, then why did Trenton allow this to happen? How are they going to fix this? I’m being driven out of my home! What do you think Trenton should do? I say, we’ll I’m with you neighbor. I think all levels of government should rein in spending and control costs. I also think a more equitable distribution of property tax relief along the lines you mentioned is important.

Our neighbor asks, what does Patrick think? I say, as far as I can tell Patrick thinks the state should raise income taxes. He asks, why? I say, because he thinks we aren’t paying our fair share. He says, who’s this “we” he’s talking about? I say I’m not sure, but according to Rutgers economists James Hughes and Joseph Seneca state income tax rates would have to at least be doubled all the way down to the $50,000 tax bracket in order to cut property taxes in half. However, they do warn at the rate property taxes have been increasing since 2002, we’ll be back to the same property taxes in few years. They don’t recommend it.

Our neighbor asks, then why does Patrick think the state should increase state income taxes? I say because Patrick thinks it would be is cynical and “classist” not to raise them. He asks, what the heck does he mean? I say, I don’t know, but I’ll ask him if he ever comes back.

At 5:38 PM, Anonymous Raul said...

I have a neighbor who is renting and pay no property tax ,but has three kids in school he makes about 125,000.00 a year but since he pays NO property tax he has a free ride his rent is 720 per Mo .so if income tax were raised he too would be taxed to help pay for the schools .


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