Posted by the Asbury Park Press on 07/25/06

BY TOM HESTER JR.
THE ASSOCIATED PRESS

TRENTON — This week could be the start of something big for New Jerseyans plagued by the nation's highest property taxes.

Or it could be the start of another failed effort to cut the state's heavy reliance on the hated tax.

The outcome remains to be seen, but here's what New Jerseyans might want to look for as their lawmakers try to take the first real steps toward reforming property taxes in about 30 years.

Q: Why are property taxes a problem?

A: The state relies almost exclusively on property taxes to fund local governments and schools. While property taxes account for about 50 percent of the taxes collected in the state, they account for only about 30 percent of taxes collected nationally, so New Jersey's reliance on them is out of whack.

Q: How much do I pay in property taxes?

A: That depends on the value of your property and how much money your county, municipality and school district — and in some places a fire district — need to fund annual operations. School taxes account for most of the property taxes that are collected. The average New Jersey property owner pays about $6,000 in property taxes annually, which is twice the national average.

Q: That seems like a lot, but what difference does it make? Aren't all taxes the same?

A: Income taxes are based on how much someone earns, so many consider them the fairest tax. Sales taxes are based on what people decide to buy, so some consider them somewhat fair. But property taxes are a heavier burden to lower- and middle-income property owners. For instance, state households earning the lowest 20 percent see 9.2 percent of their income spent on property taxes, while households earning the highest 20 percent pay just 3.6 percent of their income toward property taxes.

Q: So what's going to happen this week?

A: On Thursday, legislative committees will convene special hearings on a proposal to ask voters in November whether to dedicate $600 million earned from a new sales tax increase to property tax reform.

On Friday, Gov. Corzine is scheduled to speak to the full Legislature on what property tax reform he thinks should be considered in the coming weeks.

Q: That $600 million sounds like a lot of money. How much will it cut my property taxes?

A: In most contexts $600 million is a ton of cash, but $20 billion in property taxes is collected annually in New Jersey, so it won't mean that much. The state would have to cut total property taxes by $6 billion to meet the national average.

Corzine has said he wants to cut statewide property taxes by 20 percent, which would mean cutting them by $4 billion statewide.

Q: What will happen after Corzine's speech?

A: The Senate and Assembly will form four joint committees that will meet through the upcoming months to consider public school funding, public employee pension reforms, government consolidation and shared services, and constitutional tax issues.

Q: What can that accomplish?

A: Because most property taxes go toward schools, changing how the state funds schools could prove key. Among the ideas expected to be discussed is how the state continues to provide funding for poor, urban school districts.

Public employee pensions account for a large chunk of local spending. So increasing the retirement age, changing how pensions are calculated, or forcing employees to pay more for health care could help.

New Jersey has 21 county and 566 municipal governments, 616 school districts and 186 fire districts, all of which collect property taxes. Many believe enticing those entities to consolidate or share services could save millions, though no one has done a major study to prove that. Corzine has already begun promoting consolidation and shared services.

Q: What about this constitutional convention I've heard about?

A: It's still alive, and will be considered by one of the four joint committees, largely as a Plan B should lawmakers fail to enact major reforms.

The convention idea has twice passed the Assembly, but has never been considered by the Senate. Essentially, it's based upon the belief that lawmakers are so frozen by political fears that they can never revamp the state's tax system, so the job must be left to citizen delegates who would devise a reform plan and present it to the voters for final approval.