A Public Forum On New Jersey Property Tax
This extract From New Jersey State and Land Expenditure Revenue Policy (SLERP) Commission Report
was prepared by the Public Forum on Property Tax Commission in July 2001, to provide an online reference for the public.
(The full commission report maybe found in the New Jersey State Library in Trenton, New Jersey file number: 974.90 f491 1988d c 2)
July 1988
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Summary Final Report
Chairman Bruce G. Coe
Vice Chairman David F. Bradford
Exec. Director Henry A. Coleman
State of New Jersey STATE AND LOCAL EXPENDITURE AND To: The Honorable Thomas H. Kean, Governor, and Honorable, Members of the New Jersey Senate and General Assembly The New Jersey State and Local Expenditure and Revenue Policy Commission is pleased to transmit to you, herewith, its Final Report pursuant to P.L. 1984, c. 213, approved Decernber 17, 1984. The Final Report 1) provides a framework for analysing New Jersey fiscal policies, 2) examines the current conditions and trends within the state's public sector, 3) analyzes the dynamics of major state expenditure programs, 4) identifies the major fiscal problems and issues confronting New Jersey, 5) outlines the Commission's recommendations for creating a better fiscal balance within the state, 6) presents proposals for safeguarding the benefits that will result from our recommended reforms, and 7) provides illustrations of how our recommendations will effect individual households and municipalities. The Commission focused on the two major fiscal problems that confront New Jersey. First, the state's fiscal system relies too heavily on local government to provide services. Second, the burdens of the state's tax system are not fairly distributed based on the ability to pay. The Commission had several objectives in conducting its work including 1) ensuring that local resources are sufficient to finance local government expenditure responsibilities, 2) achieving a better balance between state and local taxes and a more equitable distribution of tax burdens, 3) improving the quality of education services, 4) sorting out the proper roles and responsibilities between the state and localities, and 5) enhancing the economic competitiveness of the state. The recommendations contained in our Final Report are part of a comprehensive program to create a balance in New Jersey's fiscal system. The expenditure reforms will require local governments to reduce property tax burdens by $1.2 billion. The revenue reforms will
make the state's tax system fairer and more responsive to the needs of our economy, while generating revenues sufficient to finance essential state and local semces. Since it was not the Commission's intention to increase the overall size of New Jerseys public sector, our program of reforms is revenue neutral. In other words, total state and local tax burdens In New Jersey will not be increased as a result of these reforms. This report reflects the consensus of the members of the Commission. We have benefited greatly from public hearings and round-table discussions involving a broad range of the New Jersey community. We offer our thanks to those individuals and organizations that have contributed so significantly to our efforts. This Final Report is respectfully submitted by the members of the New Jersey State and Local Expenditure and Revenue Policy Commission. Bruce G. Coe Chairman Extract From New Jersey State and Land Expenditure Revenue Policy (SLERP) Commission Report July 1988 Note: This web access was instituted to provide public access to this important document on public policy. This web site provides the text, graphs and charts from the Summary NJ-SLERP Commission Report of July 1988. Report Chapters
REVENUE POLICY COMMISSION
2 QUAKERBRIDGE PLAZA CN 206
TRENTON, NEW JERSEY 08625
(609) 588-3875
July 8, 1988
(The document maybe found in the New Jersey State Library in Trenton, New Jersey file number: 974.90 f491 1988d c 2)
This web access was instituted to provide public access to this important document on public policy.
Section Page Executive Summary xiii I. Introduction 1 __A. Strategy of the Future 1 __B. Organization of the Report 4 II. Current Conditions and Trends 7 __A. New Jersey's Economy 7 __B. Overview of the state's public sector 11 _____1. New Jersey government structure 12 _____2. State budget - where the money goes 14 _____3. Municipal and county budgets - where the money goes .. 17 III. Dynamics of State Spending 19 __A. Aid to Local Schools 19* __B. Aid to municipalities and counties 20 __C. Medicaid 21 __D. Public assistance 23 __E. Lifeline and pharmaceutical assistance 24 __F. Homestead rebates 24 __G. Higher education 26 __H. Mental health and developmental disabilities 27 __I. Transportation 28 __J. Law and public safety 29 __K. Corrections 30 __L. Youth and family services 30 __M. State employee benefits 31 __N. Fixed costs 32 __O. Pay as-you-go 33 __P. Personnel 33 IV. Major Problems and Issues 37 __A. Reliance on local governments and local taxes 37 _____1. Local school finances 38 _____2. Allocation of service responsibilities 40 ________a. Public assistance 41 ________b. Courts 42 ________c. Prosecutors 43 ________d. Mental institutions 44 ________e. County colleges 44 _____3. Allocation of state aid to Municipalities 45 __B. Impact of tax system on households and firms 45 _____1. Who pays New Jersey taxes 45 ________a. Consumption taxes 46 ____________i. General sales tax 46 ___________ii. Selected excise taxes 46 __________iii. public utility taxes 46 ________b. Property Taxes 46 ________c. Gross Income Taxes 50 ________d. Business Taxes 51 ____________i. Corporation business taxes 51 ___________ii. Public utility taxes 51 __________iii. Savings institution taxes 51 _____2. Effect of New Jersey taxes on economic development 51 ________a. Interstate comparisons 51 ________b. Effect of Intrastate differences in Property Taxes 53 V. Creating the Balance: Commission Recommendations 55 __A. Expenditure Reform: three approaches to reduce reliance on local governments.. 55 _____1. Local school finances 55 _____2. Allocation of service responsibilities 56 ________a. Public assistance 56 ________b. Courts 57 ________c. Prosecutors 57 ________d. Mental institutions 57 ________e. County colleges 58 ________f. Transition period concerns regarding workers 58 _____3. State aid to municipalities 58 ________a. Guaranteed tax base for municipalities 58 ________b. Siting future utility installations 60 ________c. Payment in lieu of taxes 60 _____4. Potentional versus actual property tax reductions 60 __B. Revenue reforms 61 _____1. Revenue evalution criteria 61 _____2. Consumption taxes 62 ________a. Changes in general and excise taxes 63 ________b. Public utility taxes 64 ________c. Consumption tax offset 65 _____3. Gross income taxes 66 ________a. Base broadening 67 ________b. Rate structure changes 67 ________c. Property Tax Circuit Breaker 67 _____4. Businees taxes 70 ________a. Corporation business tax 70 ________b. Savings institution tax 70 ________c. Insurance premiums tax 70 ________d. Financial business tax 70 ________e. Business personal property Tax 70 _____5. Miscellaneous taxes 71 ________a. Estate and inheritance taxes 71 ________b. Local option taxes 71 ____________i. Newark payroll tax 71 ___________ii. ATlantic City luxury tax 71 _____6. Property tax 71 ________a. Assessment 72 ________b. Alternatives considered 73 ________c. Property tax on new construction 74 ________d. Farmland assessment tax 77 VI. Safeguarding the benefits of the new system 81 __A. Economic development strategies 81 __B. Budget process reforms 83 _____1. Contingency funds 83 _____2. Tax expenditure budget 84 _____3. Dedicating revenues 84 _____4. Fiscal notes for major legislation 85 _____5. Payments for state mandates 85 _____6. Non-fiscal assistance to localities 86 _____7. Permanent tax policy commission 86 _____8. Permanent pension commission 87 VII. Impacts and Conclusions 89 __A. Impact on selected communities 89 __B. Impact on selected households 96 VIII. Summary of Commission Recommendations 109
Letter and Appendix Title Page A. Proposed school district budget cap formula 129 B. Proposed formula for state debt service 130 C. Municipal equalization aid program 131 D. Conclusions and recommendations of the Property Tax Assessment Study Commission 135 E. Methodology for estimating the impact of commission recommendations on households 139 F. List of commission designees and staff 141 Minority Report (permanent pension commission) 143
Number and Table Title Page 1. New Jersey's Governmental Units, 1985 12 2. Major Programs in the New Jersey State Budget, 1908-1988 15 3. State Personned 35 4. Public Assistance in New Jersey 41 5. 1986 Property Tax Burden by Income Class - Homeowners 49 6. The Commission Proposed Offset for Consumption Taxes 65 7. The Commission Proposed Gross Income Tax Rates 66 8. The Commission Proposed Circuit Breakers 69 9. Illustrative Property Tax Rates on New Construction 76 10. Impacted of Commission Recommendations on Selected Cities 96 11. Estimated Average Impact of Commission's Proposals on Homeowners....... 99 12. Impacted of Commission Proposals on Six Households 106 13. Summary of Commissions Major Expenditure Proposals 111 14. Summary of Commissions Major Revenue Proposals 116
Number and Figure Title Page 1. New Jersey's Population 7 2. Per Capita Personal Income: New Jersey and United States 8 3. New Jersey's Unemploymennt Rate 9 4. New Business Starts in New Jersey 10 5. Housing Starts: New Jersey and United States 11 6. New Jersey State Budget: Where the Money Goes 13 7. New Jersey State Revenues 14 8. Property Taxes as Percent of State and Local Taxes 47 9. Homeowner Property Tax Burdens in New Jersey 50 10. Impacted of Commission Recommendations in Major Urban Jurisdictions 95 11. Average Impact of the Commission's Proposals by Homeowner Income Class 97 12. New Jersey State Taxes Current and Proposed 110
Appendices:
1988 SLERP Commission Report Appendices