Wednesday, February 11, 1(81

Hie Herald and The Lantern

Page 21

Another Look at the Property Tax

background policy analysis report recently prepared for the governor by staff of the Dept, of Community Af-

. The Commission is given ^2 months to complete its assignment — a formidable task, particularly in an

By N.J.T.A. New Jersey’s local property tax is coming under fire again. The largest revenue producer in the overall statelocal Ux system. — a statewide producer of $3.8 button in 1980 and the maa ical revenue source for icipalities, school districts and countries — it produces about three times what the state realizes from either the Sales tax or the personal income tax. Even though over half of the combined funds state budget of $5.1 billion in this fiscal 1981 yeaf constitutes, state aid — money returned to local units or used to finance programs which otherwise would be paid from local property taxes — property taxes and tax bills are again mounting at near pre-1977 rates of increase. Double digit inflation can be blamed for a large part of the rise. Imposition of the state ' personal income tax as principal revenue of the 1976 tax reform program was designed to shift reliance onUhe property . tax in the overall tax system. The tax resulted in reducing the property tax. proportion of total taxes from slightly over 60 per cent to under 50 per cent. The selection of an income tax with two relatively low rates make it almost a flat rate tax. The revenue it produced could not begin to achieve the obiective of the 1972 Cahill Tax Study Committee — reduction of the property tax proportion in the overall system to around one-third. Dedication ‘of the income tax to property tax relief or offset results in all but th cost os administration (and amounts taxpayers check off for gubernatorial campaign financing) being redistributed to local units ir the form of aid or direct payment to homeowners. (The rebate payments totaling around $260 million aren’t usually included in reported local property tax data). * Growth of revenues whcih finance the State General Fund such as sales, motor fuels, corporation, motor vehicle fees and various other excises, is less than the growth of spending in the fund. The Governor in his 1981 annual message indicated the current financial situation presents the choice of continued service reductions or revision of the tax

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-structure to bring the revenue llevel closer to the rate of cwt increases. He suggested\beginning the debate over- whether the state should seek additional property tax relief by increasing income tax revenues through a more progressive rate.structure.

The legislature’s present response is to authorize a <ax study. Instead of treating a permanent tax policy commissipn, the legislature is creating a Property Tax Study Commission. The 15-member group, will have as its major mission evaluation and

study of the current methods of financing local government and inquiry into the feasibility and practicability of alternative^ methods of allocating the costs of such financing. The commission will have available at the outset a comprehensive

“The governor , indicated the current financial situation present'the choice of continued service reductions or revision of the tax structure...” fairs — "Proposed Solu- election year, lions To Local Fiscal — N.J^T.A, is the TrentonResource Disparities in the based New Jersey Tax State of New Jersey.” payers Assn,

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