SLERP 1988 Chapter 8 PtA

A Public Forum On New Jersey Property Tax

Chapter VIII Summary of Commission Recommendations Part A

Extract From New Jersey State and Land Expenditure Revenue Policy (SLERP) Commission Report
(The document maybe found in the New Jersey State Library in Trenton, New Jersey file number: 974.90 f491 1988d c 2)
July 1988

VIII. SUMMARY OF COMMISSION RECOMMENDATIONS Part A

These individual recommendations are part of a comprehensive program to create a balance in New Jerseys state and local government structure, reduce the reliance on local taxes, and level the playing fields upon which residents, taxpayers, and communities compete. The expenditure recommendations will result in an immediate improvement in the balance between local responsibilities and local resources and in the quality of services delivered to the state's residents. The revenue recommendations will make the state tax system fairer and more re- sponsive to the present and future economy of the state, while raising the revenues needed to reduce the reliance on local taxes. Finally, several recommendations ensure that New Jersey remains a dynamic, desirable place in which to live and work with a healthy fiscal system. The page number shown after each recommendation Indicates the location of the text discussion. Many of these recommendations will be expanded upon in supplemental reports to be issued soon by the Commission.

Note:

For ease of locating reading, this web site organized recommendations into a table with references. This segment maybe found on report pages 109-120. Figure 12 - State Taxes Current and Proposed, Table 13 - Summary of Major Expenditure Proposals and Table 14 - Summary of Major Revenue Proposals, which are imbedded in the report in the list of recommendations, have been placed at the beginning of the Table of Recommendations.)

Table 13

SUMMARY OF MAJOR EXPENDITURE PROPOSALS
Additional State Costs (in millions)

Expenditures Costs Cum Total

A. Education Flnance Reform
1) Current-year funding 181 181

2) Minimum budgets and certification 32 213

3) Compensatory aid 71 284

4) Debt service 84 368

5) Phase out of minimum teachers' salary program 25 393

B. Intergovernmental Structure Reforms

1) Public assistance

a) State assumption of AFDC, GA and SSI benefits costs 86 479

b) Eliminate county benefit equalization aid (15) 464

c) Initiate county administration cost equalization aid 9 473

2) Judicial unification 151 624

3) Patients in mental institutions

a) Mentally ill facilities 45 669

b) Facilities for mentally retarded 60 729

4) prosecutors 66 795

5) Full funding for county colleges 20 815

C. State Aid

1) Guaranteed tax base municipal aid 351 1166

2) Payments in lieu of taxes 10 1176

Source: Compiled by Commission Staff and the Bureau of Government Research. Rutgers University.

Table 14

SUMMARY OF MAJOR REVENUE PROPOSALS
Changes in State Revenues(in millions)

Revenue Changes: Change In
Revenues Cum
Total

A. Sales/Use and Excise Taxes

1) Admissions 36 36

2) Disposable paper products 32 68

3) Soap products 27 95

4) Non-prescription drugs 38 133

5) Alcoholic beverages

a) Increase wholesale excise tax to 7.8% 6 139

b) On-premises consumption 155 294

6) Cable television 29 323

7) Telephone equipment 37 360

8) Tobacco

a) Sales tax on cigarettes 70 430

b) Extend excise tax to all tobacco products 20 450

B. Gross Income Tax

1) Repeal Ford property tax deduction 170 620

2) Repeal Homestead Rebate Program 305 925

3) Repeal Homestead tenant credit 56 981

4) Repeal college exemption 6 987

5) Phase out deductions for age 62 and over 6 993

6) Change in tax rate structure 268 1,261

7) Consumption tax offset (108) 1,153

8) Property tax circuit breaker

a) Homeowners (169) 984

b) Tenants (97) 887

C. Public Utilities Taxes

1) Telecommunications

a) Six percent gross receipts tax on all services 213 1,100

b) Extend corporate business tax to all providers 65 1,165

c) Repeal franchise tax on utilities (57) 1,108

d) Repeal excise tax on utilities (15) 1,093

2) Energy utilities (impact of change to be revenue neutral)

D. Corporation Business Tax

1) Extend to savings and loans Institutions 76 1,169

2) Repeal business personal property tax (21) 1,148

E. Miscellaneous Taxes

1) Repeal savings Institution tax (26) 1,122

2) Eliminate insurance premiums tax on health insurance premiums (10) 1,112

3) Repeal earmarking of financial business tax revenues 18 1,130

4) Repeal earmarking of insurance franchise tax revenues 20 1,150

Note: ( ) = decrease in state revenues.
Source.. Compiled by Commission Staff and New Jersey Division of Taxation

SLERP 1988 Comm Recs

1988 SLERP Commission Recomendations Section 1

No. 1988 SLERP Commission Recomendation Page No. Ref.

EXPENDITURES RECOMMENDATIONS:

The goals of the Commission's expenditure recommendations are first, to improve the delivery of essential public services; and second, to improve the balance between local service responsibilities and the resources available to finance those services. Recommendations for expenditure reforms are proposed in the areas of local school finance, intergovernmental structure and state aid to municipalities.

LOCAL SCHOOL FINANCES:

The Commission is convinced that significant improvements in educational performance will not occur until we reduce spending disparities among school districts. Our recommendations will reduce disparities among districts and improve student performance, improve the quality of physical facilities, continue teaching as an attractive profession, and address the need for early childhood education.

Current-Year Funding:
(1) Current Expense Equalization Aid should be paid as a percentage of the current year's budget. (p. 55)

(2) The budget cap formula should be changed to provide for a 6 percent annual growth, plus or minus an inflation factor based on the annual growth in state equalized valuation (see also Appendix A). (p. 55)

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Minimum Budgets and Certification:
(3) School districts which fall to meet specified standards regarding performance, breadth of program offerings, and capital facilities should be required to budget at least at the average per-pupil level for all other districts which do meet those standards. (p. 55)

Compensatory Education Aid:
(4) Compensatory Education Aid should be calculated by counting each element of the testing program on which a student is deficient and multiplying by the full additional cost factor of 0.18 and the prior year's state average adjusted Net Cumnt Expense Budget (NCEB). (p. 56)

Debt Service:
(5) Funding of Debt Service Aid should be placed on a current-year basis. (p. 56)

(6) The formula for Debt Service Aid should be revised to provide for a higher state share and, upon certification of need by the state, for full state funding of aH debt service requirements in school districts having less than 25 percent of the guaranteed valuation (see also Appendix B). (p. 56)

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Teachers' Salaries:
(7) Full state funding of the teachers' minimum salary program should be phased out gradually between 1 988-89 and 1992-93, with local school district costs for the program becoming a portion of the NCEB on which Current Expense Equalization Aid is paid. (p. 56)

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(8) A comprehensive survey of starting professional salaries should be authorized on a continuing basis and consideration should be given to teachers' minimum salaries in relation to other starting professional salaries (p. 56). Early Childhood Education. (9) Full-day kindergarten programs and one year of pre- kindergarten should be encouraged In every elementary school district, with enrollment to be on a voluntary basis and the costs to be subsidized through Current Expense Equalization Aid on a current-year basis. (p. 56)

Early Childhood Education:
(9) Full-day kindergarten programs and one year of pre-kindergarten should be encouraged In every elementary school district, with enrollment to be on a voluntary basis and the costs to be subsidized through Current Expense Equalization Aid on a current-year basis. (p. 56)

INTERGOVERNMENTAL STRUCTURAL REFORMS

The Commission's intergovernmental structural reforms define the proper role for the state and local governments in delivering and financing several important services including the courts, public assistance, institutions for the mentally ill and developmentally disabled, the office of the prosecutor and county colleges.

Public Assistance:
(10) The state should assume the full costs of benefits for all recipients of Aid to Families with Dependent Children, Supplemental Security Income, and General Assistance, including the munici- pal share of hospital costs for recipients of General Assistance where applicable. With state assumption of these benefit costs, the existing Welfare Equalization Aid program will be eliminated. (p. 56)

(11) The administration of General Assistance should become a county function, thereby consolidating the administration of public assistance programs at the county level. In addition, the Department of Human Services should explore administrative solutions to the potential duplication of services between its Division of Youth and Family Services and the County Welfare Agencies. (p. 56)

(12) The state should implement an aid program to offset county administrative costs for public assistance in excess of the statewide average cost per capita. This program must be accom- panied by greater accountability for management efficiency and error reduction on the part of counties. (p. 57)

(13) The present public assistance system should be restructured to reduce long-term dependency by providing incentives and support services to encourage recipients to become more self sufficient. The objectives of the Realizing Economic Achievement (REACH) program embody many of the necessary reforms,including additional day care services, medical coverage, education, and job training. (p. 57)

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(14) Income and other information filed by a taxpayer to determine eligibility for public assistance, special programs, or tax preferences should be consolidated to eliminate the filing of duplicate information for each program. (p. 57)

Judicial Unification:
(15) The state should assume the full financial and administrative responsibility for the trial court system. (p. 57)

Maintenance of Patients in State Mental Institutions:
(16) The state should eliminate the present system whereby counties are forced to subsidize the care of Indigent county residents who are patients in state institutions for the mentally ill and the developmentally disabled. (p. 57)

Prosecutors:
(17) The state should assume the full financial and administrative responsibility for the Prosecuto?s Office. (p. 57)

County Colleges:
(18) The state should fulfill its statutory obligation to provide financial support for the county colleges. (p. 58)

STATE AID TO MUNICIPALITIES
The resources available to municipalities are generally not adequate to meet their expenditure responsibilities. The problem is particularly significant for many poorjurisdictions, which also tend to face above-average needs. Local option non-property taxes would not adequately address the problem and may have adverse consequences for economic development in many jurisdictions. The Commission's recommendations will guarantee that each municipality has an adequate revenue base to finance essential services.

Guaranteed Tax Base for Municipalities:
(19) The state should guarantee that each municipality has an adequate property tax base to meet its residents' demands for essential services. State aid will compensate municipalities for the difference between the revenue they can raise from taxing their actual property tax base and the revenue that would be raised from taxing the guaranteed base. (p. 5?)

To assure that no municipality receives less aid than it currently receives, the present level and distribution of revenues from the Gross Receipts and Franchise taxes, the Business Personal Property Tax, the Corporation Business Tax on banks, the Flnancial Business Tax, and the Insurance Premiums Tax should be frozen.

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Each municipality would have its aid calculated according to the guaranteed tax base and the frozen programs and would receive whichever amount is greater (see also Appendix C). (p. 57)

All aid received by a municipality under either component of the Municipal Equalization Aid Program should be included in the Municipal Qualified Bond Program.

(20) A municipality should receive revenues equal to the yield of a three percent tax applied to the construction costs for a new generating station, up to a limit of $700 per capita, as an incentive to serve as the host community for the facility. (p. 60)

Payments in Lieu of Taxes:
(21) The formula used to calculate state compensation to municipalities in lieu of property taxes on state-owned real property should be changed to use the municipal general tax rate and the assessed value of the state facility. (p. 60)

(22) The payments-in-licu-of-taxes formula should be funded in full. (p. 60)

(23) The program of payments in lieu of taxes should be extended to cover property leased by the state from a state authority. (p. 60)

POTENTIAL VERSUS ACTUAL PROPERTY TAX REDUCTIONS
The Commission proposes changes that will ensure that the potential property tax reductions resulting from our recommended expenditure reforms will be realized.

Adjustment of the County Levy Cap:
(24) The county tax levy should be reduced for purposes of calculating the cap to ensure that the state assumption of costs currently borne by the county results In a reduction In the property tax levy. (p. 60)

(25) The county cap should be eliminated three years after the enactment of the Commission's recommendations regarding inter- governmental structural reform. (p. 61)

Adjustment of the Municipal Budget Cap:
(26) The state assumption of municipal programs or functions should result in a reduced budget base for calculating per- rnissible spending increases under the municipal budget caps. (p. 61)

(27) Increases in state aid received through the Guaranteed Tax Base formula and through additional payments in lieu of taxes should be included within the municipal cap, in order to achieve the maximum reduction in the reliance on the property tax. (p. 61)

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(28) The municipal cap should be eliminated three years after the enactment of the Commission's recommendations. (p. 61)

No. 1988 SLERP Commission Recomendation Page No. Ref.

REVENUES RECOMMENDATIONS:

The Commission has evaluated each major tax imposed under state law in New Jersey using a set of criteria agreed upon by the Commission and commonly used in public policy analysis. These revenue proposals will improve the efficiency and fairness of the state's tax system and offset the costs to state and local governments of lowering real property taxes.

SALES AND USE TAX

The Commission recommends that the list of transactions covered by the state sales and use tax be expanded. These proposals WIU make the sales tax act simpler, more comprehensive In coverage, more equitable and more neutral with respect to choices made by individual households.

(29) The state should repeal the present exemptions for admissions charges a) to boxing, sparring, or wrestling matches or exhibitions and b) to facilities for sporting and entertainment activities in which the patron Is to be a participant. (p. 63)

(30) The state should repeal the sales tax exemption for purchases of disposable paper products. (p. 63)

(31) The state should repeal the sales tax exemption for purchases of soap products and cleaners for household use. (p. 63)

(32) The state should repeal the sales tax exemption for purchases of over-the-counter drugs. (p. 63)

(33) The state should repeal the sales tax exemption for purchases of alcoholic beverages for on-premises consumption. (p. 63)

(34) The sales tax should be applied to the purchase of cable tele- vision service. (p. 63)

(35) The present exemption for sales of telephone and telegraph equipment should be repealed, except for purchases made by providers of telecommunications services. (p. 63)

(36) The sales tax exemption for purchases of cigarettes should be repealed. (p. 63)

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(37) The use tax should be applied to room occupancy, restaurant meals, and amusement charges which are provided gratis. (p. 63)

(38) The sales tax on advertising services should be repealed. (p. 64)

(39) The purchase of building materials to be used to construct state-financed housing should be exempt from the sales tax, regardless of who makes the purchase. This exemption should be codified in the Sales and Use Tax Act. (p. 64)

(40) The existing statutory language of the sales tax exemption for equipment used in the manufacturing process should be clari- fied by. a) expanding the exemption to include the sales of supplies for use or consumption directly and primarily in the production of tangible personal property by manufacturing, processing, assembling or refining, and b) extending the exemption to machinery which is used to produce production equipment parts or other features of the production machinery itself Further, the one year minimum useful life requirement for exemption of parts and the exception for tools and supplies used in connection with the production machinery, equipment or apparatus should be repealed. (p. 64)

SELECTIVE SALES OR EXCISE TAXES:

The Commission proposals for what are frequently referred to as sin taxes will result in similar tax treatment for similar commodities.

(41) The Alcoholic Beverages Wholesale Sales Tax rate should be increased from 7.3 percent to 7.8 percent to restore its original relationship to the sales tax. (p. 64)

(42) The cigarette excise tax should be extended to all tobacco products and imposed at the wholesale level. (p. 64)

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(43) A unit-based excise tax should be imposed on the possession or sale of controlled substances. (p. 64)

(44) The Departments of Treasury and Transportation should further review and make recommendations regarding the imposition of a weight-distance tax on heavy trucks for highway use. (p. 64)

GROSS INCOME TAX:

The Commission's recommendations for the gross income tax wfil ensure that the taxpayer's burden is based on an ability to pay and that taxpayers in similar circumstances are treated similarly. The Commission proposals will broaden the base for the gross income tax, change the rate structure and Increase the progressivity of the state's overall tax system.

(45) The Homestead Rebate, Homestead Tax Relief Act (Ford Act), and Homestead Tenant Credit should be repealed. (p. 69)

(46) The state should implement a refundable targeted property tax circuit breaker for homeowners and tenants, according to which a) homeowners with incomes under $50,000 would re- ceive a rebate based upon the percentage of their income paid in property taxes; b) tenants would receive a refundable credit which would be phased out between $40,000 and $50,000 of gross income. (p. 67)

(47) The additional personal exemption for dependent college students should be repealed. (p. 67)

(48) There should be a phase-out of deductions for retirement income for taxpayers aged 62 and over whose incomes exceed $50,000. (p. 67)

(49) The rate structure should be changed, so that the rates are: 2 percent on income less than $20,000; 2.5 percent on income between $20,000 and $50,000; 4 percent on income between $50,000 and $ 1 00,000; and 4.5 percent on income in excess of $100,000. (p. 66)

(50) The state should implement a means-tested refundable credit against gross income tax liability to offset consumption taxes (i.e., sales, excise, and utility) paid by households with cash income below $20,000. (p. 65)

(51) The treatment of Keogh Plan contributions should conform to the federal tax system. (p. 67)

(52) Individuals who are not covered by an employer qualified retirement plan should be permitted to deduct contributions they make towards their retirement. Specifically, a) deductions of contributions made under Section 401(k) of the Internal Revenue Code should be allowed only if no other retirement plan is available to the taxpayer, b) this treatment of Section 401 (k) plans should be extended to Section 403(b) plans, which cover employees of non-profit corporations; and c) the treatment of contributions to Individual Retirement Accounts should more closely confortn to the federal tax system. (p. 67)

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(53) The state should repeal the regular exemption which may be claimed on a child's tax form when the child is also claimed as a dependent on a parent's income tax return. (p. 67)

(54) The state should review the Reciprocal Personal Income Tax Agreement between the Commonwealth of Pennsylvania and the State of New Jersey to determine the present effects of the agreement. (p. 67)

PUBLIC UTILITY TAXES:

The Commission proposals for reforming public utility taxes will result in a more uniform tax treatment for all providers of telecommunication services and A energy providers as well.
Telecommunications Utilities

(55) The public utility taxes on telecommunications utilities should be changed to: a) impose a 6 percent gross receipts tax on all telecommunications companies; b) impose the corporation business tax on all providers of telecommunications services, including regulated utilities; c) repeal the existing franchise tax on regulated utilities; d) repeal the existing state excise tax on regulated utilities; and, c) repeal local property taxes on the personal property of regulated utilities. (p. 65)

Energy Utilities:

(56) The public utility taxes on energy utilities should be changed by, a) repealing the existing gross receipts, franchise, and excise taxes on gas and electric utilities; b) imposing the corporation business tax on gas and electric utilities; and, c) applying a gross receipts tax to sales of electricity, gas, oil and other fuels at a rate to preserve the yield from the current set of taxes. (p. 65)

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Next, link to:
1988 SLERP Chapter VIII Summary of Commission Recommendations Part B

Or, Return to Table of Contents.
1988 SLERP Summary Report Table of Contents

			Expenditures	Costs	Cum Total
A.			Education Flnance Reform
	1)		Current-year funding	181	181
	2)		Minimum budgets and certification	32	213
	3)		Compensatory aid	71	284
	4)		Debt service	84	368
	5)		Phase out of minimum teachers' salary program	25	393
B.			Intergovernmental Structure Reforms
	1)		Public assistance
		a)	State assumption of AFDC, GA and SSI benefits costs	86	479
		b)	Eliminate county benefit equalization aid	(15)	464
		c)	Initiate county administration cost equalization aid	9	473
	2)		Judicial unification	151	624
	3)		Patients in mental institutions
		a)	Mentally ill facilities	45	669
		b)	Facilities for mentally retarded	60	729
	4)		prosecutors	66	795
	5)		Full funding for county colleges	20	815
C.			State Aid
	1)		Guaranteed tax base municipal aid	351	1166
	2)		Payments in lieu of taxes	10	1176

			Revenue Changes:	Change In Revenues	Cum Total
A.			Sales/Use and Excise Taxes
	1)		Admissions	36	36
	2)		Disposable paper products	32	68
	3)		Soap products	27	95
	4)		Non-prescription drugs	38	133
	5)		Alcoholic beverages
		a)	Increase wholesale excise tax to 7.8%	6	139
		b)	On-premises consumption	155	294
	6)		Cable television	29	323
	7)		Telephone equipment	37	360
	8)		Tobacco
		a)	Sales tax on cigarettes	70	430
		b)	Extend excise tax to all tobacco products	20	450
B.			Gross Income Tax
	1)		Repeal Ford property tax deduction	170	620
	2)		Repeal Homestead Rebate Program	305	925
	3)		Repeal Homestead tenant credit	56	981
	4)		Repeal college exemption	6	987
	5)		Phase out deductions for age 62 and over	6	993
	6)		Change in tax rate structure	268	1,261
	7)		Consumption tax offset	(108)	1,153
	8)		Property tax circuit breaker
		a)	Homeowners	(169)	984
		b)	Tenants	(97)	887
C.			Public Utilities Taxes
	1)		Telecommunications
		a)	Six percent gross receipts tax on all services	213	1,100
		b)	Extend corporate business tax to all providers	65	1,165
		c)	Repeal franchise tax on utilities	(57)	1,108
		d)	Repeal excise tax on utilities	(15)	1,093
	2)		Energy utilities (impact of change to be revenue neutral)
D.			Corporation Business Tax
	1)		Extend to savings and loans Institutions	76	1,169
	2)		Repeal business personal property tax	(21)	1,148
E.			Miscellaneous Taxes
	1)		Repeal savings Institution tax	(26)	1,122
	2)		Eliminate insurance premiums tax on health insurance premiums	(10)	1,112
	3)		Repeal earmarking of financial business tax revenues	18	1,130
	4)		Repeal earmarking of insurance franchise tax revenues	20	1,150

No.	1988 SLERP Commission Recomendation	Page No. Ref.
	EXPENDITURES RECOMMENDATIONS:
	The goals of the Commission's expenditure recommendations are first, to improve the delivery of essential public services; and second, to improve the balance between local service responsibilities and the resources available to finance those services. Recommendations for expenditure reforms are proposed in the areas of local school finance, intergovernmental structure and state aid to municipalities.
	LOCAL SCHOOL FINANCES:
	The Commission is convinced that significant improvements in educational performance will not occur until we reduce spending disparities among school districts. Our recommendations will reduce disparities among districts and improve student performance, improve the quality of physical facilities, continue teaching as an attractive profession, and address the need for early childhood education.
	Current-Year Funding:
(1)	Current Expense Equalization Aid should be paid as a percentage of the current year's budget.	(p. 55)
(2)	The budget cap formula should be changed to provide for a 6 percent annual growth, plus or minus an inflation factor based on the annual growth in state equalized valuation (see also Appendix A).	(p. 55)
Pg109
	Minimum Budgets and Certification:
(3)	School districts which fall to meet specified standards regarding performance, breadth of program offerings, and capital facilities should be required to budget at least at the average per-pupil level for all other districts which do meet those standards.	(p. 55)
	Compensatory Education Aid:
(4)	Compensatory Education Aid should be calculated by counting each element of the testing program on which a student is deficient and multiplying by the full additional cost factor of 0.18 and the prior year's state average adjusted Net Cumnt Expense Budget (NCEB).	(p. 56)
	Debt Service:
(5)	Funding of Debt Service Aid should be placed on a current-year basis.	(p. 56)
(6)	The formula for Debt Service Aid should be revised to provide for a higher state share and, upon certification of need by the state, for full state funding of aH debt service requirements in school districts having less than 25 percent of the guaranteed valuation (see also Appendix B).	(p. 56)
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	Teachers' Salaries:
(7)	Full state funding of the teachers' minimum salary program should be phased out gradually between 1 988-89 and 1992-93, with local school district costs for the program becoming a portion of the NCEB on which Current Expense Equalization Aid is paid.	(p. 56)
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(8)	A comprehensive survey of starting professional salaries should be authorized on a continuing basis and consideration should be given to teachers' minimum salaries in relation to other starting professional salaries (p. 56). Early Childhood Education. (9) Full-day kindergarten programs and one year of pre- kindergarten should be encouraged In every elementary school district, with enrollment to be on a voluntary basis and the costs to be subsidized through Current Expense Equalization Aid on a current-year basis.	(p. 56)
	Early Childhood Education:
(9)	Full-day kindergarten programs and one year of pre-kindergarten should be encouraged In every elementary school district, with enrollment to be on a voluntary basis and the costs to be subsidized through Current Expense Equalization Aid on a current-year basis.	(p. 56)
	INTERGOVERNMENTAL STRUCTURAL REFORMS
	The Commission's intergovernmental structural reforms define the proper role for the state and local governments in delivering and financing several important services including the courts, public assistance, institutions for the mentally ill and developmentally disabled, the office of the prosecutor and county colleges.
	Public Assistance:
(10)	The state should assume the full costs of benefits for all recipients of Aid to Families with Dependent Children, Supplemental Security Income, and General Assistance, including the munici- pal share of hospital costs for recipients of General Assistance where applicable. With state assumption of these benefit costs, the existing Welfare Equalization Aid program will be eliminated.	(p. 56)
(11)	The administration of General Assistance should become a county function, thereby consolidating the administration of public assistance programs at the county level. In addition, the Department of Human Services should explore administrative solutions to the potential duplication of services between its Division of Youth and Family Services and the County Welfare Agencies.	(p. 56)
(12)	The state should implement an aid program to offset county administrative costs for public assistance in excess of the statewide average cost per capita. This program must be accom- panied by greater accountability for management efficiency and error reduction on the part of counties.	(p. 57)
(13)	The present public assistance system should be restructured to reduce long-term dependency by providing incentives and support services to encourage recipients to become more self sufficient. The objectives of the Realizing Economic Achievement (REACH) program embody many of the necessary reforms,including additional day care services, medical coverage, education, and job training.	(p. 57)
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(14)	Income and other information filed by a taxpayer to determine eligibility for public assistance, special programs, or tax preferences should be consolidated to eliminate the filing of duplicate information for each program.	(p. 57)
	Judicial Unification:
(15)	The state should assume the full financial and administrative responsibility for the trial court system.	(p. 57)
	Maintenance of Patients in State Mental Institutions:
(16)	The state should eliminate the present system whereby counties are forced to subsidize the care of Indigent county residents who are patients in state institutions for the mentally ill and the developmentally disabled.	(p. 57)
	Prosecutors:
(17)	The state should assume the full financial and administrative responsibility for the Prosecuto?s Office.	(p. 57)
	County Colleges:
(18)	The state should fulfill its statutory obligation to provide financial support for the county colleges.	(p. 58)
	STATE AID TO MUNICIPALITIES
	The resources available to municipalities are generally not adequate to meet their expenditure responsibilities. The problem is particularly significant for many poorjurisdictions, which also tend to face above-average needs. Local option non-property taxes would not adequately address the problem and may have adverse consequences for economic development in many jurisdictions. The Commission's recommendations will guarantee that each municipality has an adequate revenue base to finance essential services.
	Guaranteed Tax Base for Municipalities:
(19)	The state should guarantee that each municipality has an adequate property tax base to meet its residents' demands for essential services. State aid will compensate municipalities for the difference between the revenue they can raise from taxing their actual property tax base and the revenue that would be raised from taxing the guaranteed base.	(p. 5?)
	To assure that no municipality receives less aid than it currently receives, the present level and distribution of revenues from the Gross Receipts and Franchise taxes, the Business Personal Property Tax, the Corporation Business Tax on banks, the Flnancial Business Tax, and the Insurance Premiums Tax should be frozen.
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	Each municipality would have its aid calculated according to the guaranteed tax base and the frozen programs and would receive whichever amount is greater (see also Appendix C).	(p. 57)
	All aid received by a municipality under either component of the Municipal Equalization Aid Program should be included in the Municipal Qualified Bond Program.
(20)	A municipality should receive revenues equal to the yield of a three percent tax applied to the construction costs for a new generating station, up to a limit of $700 per capita, as an incentive to serve as the host community for the facility.	(p. 60)
	Payments in Lieu of Taxes:
(21)	The formula used to calculate state compensation to municipalities in lieu of property taxes on state-owned real property should be changed to use the municipal general tax rate and the assessed value of the state facility.	(p. 60)
(22)	The payments-in-licu-of-taxes formula should be funded in full.	(p. 60)
(23)	The program of payments in lieu of taxes should be extended to cover property leased by the state from a state authority.	(p. 60)
	POTENTIAL VERSUS ACTUAL PROPERTY TAX REDUCTIONS
	The Commission proposes changes that will ensure that the potential property tax reductions resulting from our recommended expenditure reforms will be realized.
	Adjustment of the County Levy Cap:
(24)	The county tax levy should be reduced for purposes of calculating the cap to ensure that the state assumption of costs currently borne by the county results In a reduction In the property tax levy.	(p. 60)
(25)	The county cap should be eliminated three years after the enactment of the Commission's recommendations regarding inter- governmental structural reform.	(p. 61)
	Adjustment of the Municipal Budget Cap:
(26)	The state assumption of municipal programs or functions should result in a reduced budget base for calculating per- rnissible spending increases under the municipal budget caps.	(p. 61)
(27)	Increases in state aid received through the Guaranteed Tax Base formula and through additional payments in lieu of taxes should be included within the municipal cap, in order to achieve the maximum reduction in the reliance on the property tax.	(p. 61)
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(28)	The municipal cap should be eliminated three years after the enactment of the Commission's recommendations.	(p. 61)

No.	1988 SLERP Commission Recomendation	Page No. Ref.
	REVENUES RECOMMENDATIONS:
	The Commission has evaluated each major tax imposed under state law in New Jersey using a set of criteria agreed upon by the Commission and commonly used in public policy analysis. These revenue proposals will improve the efficiency and fairness of the state's tax system and offset the costs to state and local governments of lowering real property taxes.
	SALES AND USE TAX
	The Commission recommends that the list of transactions covered by the state sales and use tax be expanded. These proposals WIU make the sales tax act simpler, more comprehensive In coverage, more equitable and more neutral with respect to choices made by individual households.
(29)	The state should repeal the present exemptions for admissions charges a) to boxing, sparring, or wrestling matches or exhibitions and b) to facilities for sporting and entertainment activities in which the patron Is to be a participant.	(p. 63)
(30)	The state should repeal the sales tax exemption for purchases of disposable paper products.	(p. 63)
(31)	The state should repeal the sales tax exemption for purchases of soap products and cleaners for household use.	(p. 63)
(32)	The state should repeal the sales tax exemption for purchases of over-the-counter drugs.	(p. 63)
(33)	The state should repeal the sales tax exemption for purchases of alcoholic beverages for on-premises consumption.	(p. 63)
(34)	The sales tax should be applied to the purchase of cable tele- vision service.	(p. 63)
(35)	The present exemption for sales of telephone and telegraph equipment should be repealed, except for purchases made by providers of telecommunications services.	(p. 63)
(36)	The sales tax exemption for purchases of cigarettes should be repealed.	(p. 63)
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(37)	The use tax should be applied to room occupancy, restaurant meals, and amusement charges which are provided gratis.	(p. 63)
(38)	The sales tax on advertising services should be repealed.	(p. 64)
(39)	The purchase of building materials to be used to construct state-financed housing should be exempt from the sales tax, regardless of who makes the purchase. This exemption should be codified in the Sales and Use Tax Act.	(p. 64)
(40)	The existing statutory language of the sales tax exemption for equipment used in the manufacturing process should be clari- fied by. a) expanding the exemption to include the sales of supplies for use or consumption directly and primarily in the production of tangible personal property by manufacturing, processing, assembling or refining, and b) extending the exemption to machinery which is used to produce production equipment parts or other features of the production machinery itself Further, the one year minimum useful life requirement for exemption of parts and the exception for tools and supplies used in connection with the production machinery, equipment or apparatus should be repealed.	(p. 64)
	SELECTIVE SALES OR EXCISE TAXES:
	The Commission proposals for what are frequently referred to as sin taxes will result in similar tax treatment for similar commodities.
(41)	The Alcoholic Beverages Wholesale Sales Tax rate should be increased from 7.3 percent to 7.8 percent to restore its original relationship to the sales tax.	(p. 64)
(42)	The cigarette excise tax should be extended to all tobacco products and imposed at the wholesale level.	(p. 64)
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(43)	A unit-based excise tax should be imposed on the possession or sale of controlled substances.	(p. 64)
(44)	The Departments of Treasury and Transportation should further review and make recommendations regarding the imposition of a weight-distance tax on heavy trucks for highway use.	(p. 64)
	GROSS INCOME TAX:
	The Commission's recommendations for the gross income tax wfil ensure that the taxpayer's burden is based on an ability to pay and that taxpayers in similar circumstances are treated similarly. The Commission proposals will broaden the base for the gross income tax, change the rate structure and Increase the progressivity of the state's overall tax system.
(45)	The Homestead Rebate, Homestead Tax Relief Act (Ford Act), and Homestead Tenant Credit should be repealed.	(p. 69)
(46)	The state should implement a refundable targeted property tax circuit breaker for homeowners and tenants, according to which a) homeowners with incomes under $50,000 would re- ceive a rebate based upon the percentage of their income paid in property taxes; b) tenants would receive a refundable credit which would be phased out between $40,000 and $50,000 of gross income.	(p. 67)
(47)	The additional personal exemption for dependent college students should be repealed.	(p. 67)
(48)	There should be a phase-out of deductions for retirement income for taxpayers aged 62 and over whose incomes exceed $50,000.	(p. 67)
(49)	The rate structure should be changed, so that the rates are: 2 percent on income less than $20,000; 2.5 percent on income between $20,000 and $50,000; 4 percent on income between $50,000 and $ 1 00,000; and 4.5 percent on income in excess of $100,000.	(p. 66)
(50)	The state should implement a means-tested refundable credit against gross income tax liability to offset consumption taxes (i.e., sales, excise, and utility) paid by households with cash income below $20,000.	(p. 65)
(51)	The treatment of Keogh Plan contributions should conform to the federal tax system.	(p. 67)
(52)	Individuals who are not covered by an employer qualified retirement plan should be permitted to deduct contributions they make towards their retirement. Specifically, a) deductions of contributions made under Section 401(k) of the Internal Revenue Code should be allowed only if no other retirement plan is available to the taxpayer, b) this treatment of Section 401 (k) plans should be extended to Section 403(b) plans, which cover employees of non-profit corporations; and c) the treatment of contributions to Individual Retirement Accounts should more closely confortn to the federal tax system.	(p. 67)
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(53)	The state should repeal the regular exemption which may be claimed on a child's tax form when the child is also claimed as a dependent on a parent's income tax return.	(p. 67)
(54)	The state should review the Reciprocal Personal Income Tax Agreement between the Commonwealth of Pennsylvania and the State of New Jersey to determine the present effects of the agreement.	(p. 67)
	PUBLIC UTILITY TAXES:
	The Commission proposals for reforming public utility taxes will result in a more uniform tax treatment for all providers of telecommunication services and A energy providers as well.
	Telecommunications Utilities
(55)	The public utility taxes on telecommunications utilities should be changed to: a) impose a 6 percent gross receipts tax on all telecommunications companies; b) impose the corporation business tax on all providers of telecommunications services, including regulated utilities; c) repeal the existing franchise tax on regulated utilities; d) repeal the existing state excise tax on regulated utilities; and, c) repeal local property taxes on the personal property of regulated utilities.	(p. 65)
	Energy Utilities:
(56)	The public utility taxes on energy utilities should be changed by, a) repealing the existing gross receipts, franchise, and excise taxes on gas and electric utilities; b) imposing the corporation business tax on gas and electric utilities; and, c) applying a gross receipts tax to sales of electricity, gas, oil and other fuels at a rate to preserve the yield from the current set of taxes.	(p. 65)
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