State officials take input on how to reform taxes
Flat income tax, higher rate for businesses among suggestions from public
BY CHRIS GAETANO
Staff Writer

PISCATAWAY - In anticipation of a possible constitutional convention, the state Legislature took public input on ways to rein in the New Jersey's property tax rates.

Held by the Joint Legislative Committee on Constitutional Reform and Citizens Property Tax Constitutional Convention, the session was held at the Rutgers Livingston campus Sept. 21.

The three-hour hearing featured testimony from both large nongovernmental organizations as well as private concerned citizens. The committee requested that only constitutional issues such as uniformity, assessments and exemptions would be heard, and for residents to take up other issues with the appropriate entity.

While all groups present agreed that property taxes in the state are much too high, the question of what to do about it led to wildly divergent opinions. The most repeated arguments included: cutting spending on all levels of the government; passing the SMART bill, which would have the state pay for half of school expenses, leaving the tax code as a statutory, rather than constitutional issue; and merging school districts.

Groups representing New Jersey's business community blamed high property taxes on excessive government spending. They believe cutting superfluous spending, reining in government debt and better enforcement of corruption laws would solve the problem .

"We believe that New Jersey has gotten a reputation for being a costly place to do business," said James Hughes, the dean of the Edward J. Bloustein School of Planning and Public Policy. "This could affect the competitiveness of New Jersey business."

Hughes cited the lack of private-sector jobs in the state, currently 43rd in the nation, as proof that hope lies in the private sector. He, as well as economics professor Joe Seneca, further testified on their opposition to the notion of scrapping the uniformity clause in the Constitution, which would allow commercial properties to be taxed higher than residential ones. This opposition was repeated many times by many other business organizations that testified before the committee.

Another target of many groups' ire was government debt, which they has grown out of control. Many groups suggested a return to debt limitation in the Constitution, as well as assurances of placing any further government borrowing before the voters.

"Since [the end of debt limitation], we have been faced with runaway bonding and runaway debt," said Bagota Mayor Steven Lonegan, who is a member of Americans for Prosperity. Billions of dollars have been invested in "one-time tricks and gimmicks to be paid for by my children and my grandchildren without their approval" to close the deficit each year, Lonegan said.

Several other groups suggested shifting which taxes pay for what, mostly through the use of the SMART bill. The bill, which has been discussed by the Legislature for a number of years, would shift half of educational funding from property taxes, which are regressive, to income taxes, which are progressive.The bill is based on one's ability to pay, and it includes rebates and exemptions for residents in lower tax brackets, the bill's proponents say.

"The SMART bill, though not perfect, represents the kind of tax reform that would shift the burden from property taxes to income taxes for school funding, which would be a fairer system of taxation," said Wendell Steinhauer, secretary treasurer of the New Jersey Education Association.

Steinhauer also warned against codifying property tax reform into the Constitution, noting that California tried the same thing with Proposition 13, and stated that it has been a disaster ever since. He also noted that a statutory change in the tax code would take effect much sooner than a constitutional change, which would take until 2008 or 2009 to begin.

Frank Coury, an East Brunswick resident, proposed funding education through a 5 percent flat income tax, which would get distributed to schools based on need. That tax would give the state nearly $400 billion to work with, he said. The proposal, while new, was met with some skepticism from members of the committee.

"How can we be sure that the state Department of Education will [do the job correct]? It's an interesting concept, but we have to make sure there's a fair division," said Assemblyman Richard Merkt (R-Morris), who also noted that returns from Trenton tend not to be very large.

"My district can't survive on a 12 percent return from the state," said Merkt.

The Assembly intends to hold two more hearings on the matter of property tax reform.