I offer this commentary from New Jersey Policy Perspective, which arrived via e-mail today, in its entirety and unedited because it is worth reading. I really have little to add.
Whatever it was, it wasn’t tax reform
Maybe the best way to look at the “tax relief” package recently adopted by the Legislature is as the last act of the 2005 campaign, rather than the solution for New Jersey’s over-reliance on local property taxes to pay for government services and educating children.
Such a context makes it a bit easier to understand, and to accept on its own terms while recognizing that this is far from the reform New Jersey needs.
Candidate Jon Corzine ran for Governor with a promise to reduce property taxes, in response to his opponent’s having put forward a plan. In his first year in office, Governor Corzine made it clear that more had to be done to get the state’s finances in order before he could deliver on property taxes. In year two, he and the Legislature will be able to tell most New Jersey households that 20 percent will be knocked off their property taxes. Basing the amount of relief on income makes sense, and for most people we’re talking about a rather meaningful amount of money, at least for as long as the funding source holds up.
But now it’s time to get serious.
The special legislative session that produced 98 recommendations and laid the groundwork for the 20 percent reduction covered a lot of ground. There were flashes of vision and courage when it came to confronting the problems New Jersey inherently perpetuates by dividing itself into so many municipalities and school districts-an 18th century system ill-suited to today’s needs. Unfortunately, some of the boldest proposals (like a pilot program creating a countywide school district) wound up on the cutting room floor in the scramble to find enough votes for the tax relief.
What never seemed to make it into the mix-and needs to be there-is a long overdue, comprehensive look at New Jersey’s tax system. Only when that takes place will we find the way out of highest-in-the-nation property taxes. Often due to political concerns based on perception, not reality, and enflamed by misunderstandings and misrepresentations, key elements necessary for solving New Jersey’s tax mess are not being considered. The state income tax is a good example.
Much has been said about the top rate of New Jersey’s income tax being among the highest in the nation. But rarely is it pointed out that less than one percent of households make enough money to have to pay that rate. In fact, most in New Jersey don’t even pay the rate just below the top rate. Sort all of this out and you find that most New Jerseyans pay lower income tax than if they lived in New York State and much, much lower than if they lived in New York City. Most in New Jersey also pay less than if they lived in Pennsylvania.
The point here isn’t that any taxes in New Jersey are too low. It is, rather, to show there is much to be gained by considering the entire New Jersey tax system and looking for ways to put it in better balance. The income tax is much more closely tied than the property tax to one’s ability to pay. Your income goes down, so does your income tax, but that’s not true with property taxes. The value of your house can rise while income stays the same or falls, and you get a bigger tax bill though you are in no way better able to pay it.
During the debate in Trenton, some folks contended that it makes no sense to lower one tax by raising another. What actually makes no sense is that statement. Raising a fair tax to lower an unfair tax is a very good idea. If Trenton did nothing else that would be progress.
When we get beyond slogans and sound bites, New Jersey is left with this reality: we collect more from local property taxes than from the state sales and income taxes combined. It’s also true that the lower your income is in New Jersey the higher percentage of it you pay in the form of sales, income and property taxes combined. Real reform of the tax system would put all of this on the table. And it would also accept the fact that as bad as New Jersey’s tax system is (and it is) it is really a symptom of the larger problem: 566 municipalities and 613 school districts-an archaic, unsustainable structure more reminiscent of the Ottoman Empire than a 21st century state.
Real reform means looking not just at how much New Jersey spends, but where we spend it and who we call on to pay it. An honest assessment of tax burdens that squarely confronts who pays how much, and in which taxes, would point the way out of the morass. It would recognize the value of raising and spending more of our resources at the state and even county level and less locally. It’s the sort of thing that a tax convention made up of citizens would have no trouble contemplating but which elected politicians keep avoiding.
Whether you want to spend half as much as the state spends now, or twice as much, New Jersey needs a fair, adequate way to raise the money. We don’t have it now and we aren’t much closer to it than we were a month ago.
South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
Hank Kalet 