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Massachusetts, Michigan, Pennsylvania, Arkansas, Delaware
October 12 –
A property-tax-hating state pays the price
ALTHEIMER,
Delaware is a lean, mean, low-taxing machine
Thursday, October 12, 2006
BY STEVE CHAMBERS
Star-Ledger Staff
Frank, who left
She and her husband, Herbert, sold their
"We're able to spend a lot more, go visit the kids in
That's the way things are in
There is no sales tax. Property taxes are among the lowest in the nation. Even the income tax -- which tops out at 5.95 percent on those making over $60,000 -- isn't considered exceedingly onerous.
"Every state is a product of where it's been and its interest groups," said House Majority Leader Wayne Smith, a Republican who noted the lack of collective bargaining by state employees in explaining the low rates.
"We have some advantages being further south and not jammed between two mega-urban areas," he added. "It's more like the South when it comes to folks' ethos and outlook. It helps you keep government in check."
Keeping government in check -- or, at a minimum, reducing its cost -- has become a hot-button issue for
Over the past two months, Star-Ledger reporters visited five states with lower property taxes than
The state budget in
Still, elected officials and tax experts said,
"You cannot live anywhere in the nation and pay less for government services," said Robert Stickels, administrator of
DRAMATIC CHANGE
Things in
In the 1970s, the state had a top income-tax rate of 19.5 percent, which was driving away businesses and residents in droves. The state's bond rating was junk.
Wealthy businessman Pete du Pont declared the state virtually bankrupt after he was elected governor in 1976, but over the next eight years he ushered in a number of reforms.
A nonpartisan committee backed by experts started holding annual public meetings on revenue projections that became the basis for streamlined state budgets. Laws were enacted allowing lawmakers to spend just 98 percent of those projected revenues, with the balance going into a rainy day fund. State spending was frozen for eight years.
And income taxes were slashed in half over du Pont's two terms, with subsequent cuts reducing it by half again.
"We cut the taxes in half, and yet income tax revenues went up by 300 percent," du Pont said in a recent interview. "People ask, 'How could that be?' Well, the state started growing again."
State officials used the additional revenue --
With only three counties and 50 towns -- much of
County government provides very little in the way of services beyond building libraries, sewer and water lines, but assesses huge impact fees on new development to pay for it.
Asked whether that bothers builders in his booming county, Stickels said it doesn't.
"They say, 'Tell us what the costs are, give us a hearing and don't make us wait,'" he said. "We adjust our fees every year, and we run this place like a business."
LEVEL OF SERVICES
While local and county administrators pride themselves on low tax rates, they point out that the level of services can't rival that in places like
There are no curbs or sidewalks in many of the developments going up on former cornfields. And there is a general reticence to introduce government programs.
Still, those same officials argue services are more than adequate, and residents seem to agree.
In the capital city of Dover, 60 percent of residents surveyed this year agreed or strongly agreed that they were satisfied with the services their tax dollars bought, and that came the year after the first tax increase in a decade. The poll, part of a national survey, was conducted by the National Research Center of Boulder, Colo.
In booming
"The parks are beautiful, and the schools are very good," said Gretchen Mahar, 37, as she helped one of her three young children scoot up a jungle-gym ladder. "We're very happy here."
Some residents around
Still, given the structure of government, residents interviewed said they don't expect life to change dramatically.
Joe and June Stemmle, who left Howell, N.J., five years ago for a sprawling senior development outside Middletown, said their property tax bill of $716.35 is less than 10 percent of what they paid in New Jersey.
"By the time things get up to
"Did I really feel like moving?" added neighbor Paul D. Wiedemann, who moved from Clinton Township, N.J., three years ago and figures he's saving $25,000 a year in taxes. "Not really. But
Steve Chambers may be reached at schambers@starledger.com
Where schools don't get a dime from local residents without asking
Wednesday, October 11, 2006
BY DEBORAH HOWLETT
Star-Ledger Staff
Because of an aggressive property tax reform enacted in the 1990s, the administration here, as in other parts of the state, has had to cinch its belt tightly and ask parents to pitch in. The
While few taxpayers complain about their property taxes being slashed, some across the state are expressing creeping concern that the educational system may ultimately suffer.
"We're trying to bridge the gap in what the state provides," said Bloomfield Hills Superintendent Steven Gaynor, who plans to expand the booster club into a foundation, much like the ones that universities use to tap alumni and other donors, to raise money for other after-school activities.
Twelve years after
Lawmakers hold up their reforms as a model of aggressive action. And some point out that the reforms have imposed a more equitable funding formula, reducing the gap between rich and poor districts.
The genesis for the change was a citizens revolt in a small northern town in 1993. Voters in Kalkaska, population 2,000, chose to close public schools rather than increase property taxes. At the time, the state had the seventh highest property taxes in the nation, according to one study.
Fearing a statewide tax rebellion was in the making, lawmakers responded with a radical solution: They abolished property taxes as a source of school funding. Then they asked voters to choose a new way to pay, by increasing either the state's income tax or the sales tax.
In a statewide referendum, residents chose a 2-cent hike in the state's 4-cent sales tax, plus a 50-cent increase in the cigarette tax. In exchange they won strict limits on property tax increases, pegged to the rate of inflation.
The net result: a 45 percent reduction in property taxes.
"I wouldn't say that people are necessarily happier about property taxes, but it was a major issue and it is much less so now," said Tom Clay of the Michigan Citizens Research Council, which studies the workings of state government. "The air has been taken out of it."
'INVENTIVE' SCHOOLING
While some districts complain about being financially pinched, there have been few claims that the quality of education has been dramatically affected. In fact, there is evidence, through test scores and graduation rates, that schools have improved statewide.
Certainly financing is more equitable. The gap between the 10 wealthiest and 10 poorest districts in the state has been cut in half, state records show.
Even so, some are concerned that the strict limits on property taxes, in combination with the flagging state economy, will begin to drag on schools in a way private fundraising won't cure.
In Bloomfield Hills, Gaynor said he has become "inventive" in dealing with his $106million budget. To reduce costs, class sizes have been cut by 10 percent, Gaynor said, and the classes that don't attract enough students are canceled.
He hopes to raise $2 million annually through private fundraising to free up money for academic programs, which he said have suffered because budget increases have not kept pace with rising costs.
"Every single school district has made reductions in programs," Gaynor said. "The fat disappeared a long time ago."
Educators have mounted a push to rectify the situation, but a ballot issue to be voted on next month -- one that would guarantee annual school-funding increases linked to inflation and force the state to pick up a greater share of teacher pensions -- is highly controversial.
Critics include a powerful coalition of police, firefighters, local officials, business owners, home builders and anti-tax groups, who argue the initiative would force huge cuts elsewhere and drive taxes skyward.
"There is nothing in this initiative that says the money has to go into the classroom or for things parents think of as educational support," said Todd Cook of the Lansing Chamber of Commerce. "A lot of it would go into benefit packages for teachers, and there would be no accountability."
The coalition's Web site is a little more blunt, referring to the education initiative as a "money grab."
Larry Merrill, executive director of the Michigan Townships Association, said the state already spends more per pupil than the national average and that teacher salaries are among the nation's highest. He said the proposed change would cost an estimated $565million to $700million in the first year alone -- a budget-busting figure not linked to any new tax initiatives and sure to cause cuts elsewhere.
Education funding -- particularly, the question of how much is enough -- plays out differently in various parts of
Bloomfield Hills, with 4,000 residents, is noted for its million-dollar homes on private lakes only 14 miles from the center of
But Katie Wiese, who moved to Bloomfield Hills just so her kids could attend the schools, said there has been a decline in the diversity of available classes and in extracurricular activities, and even in the bus service. That has forced parents to become far more involved financially.
"We're lucky, we have resources," said Wiese, president of the district's Parent Teacher Organization. "That's not true everywhere."
DROP IN THE BUCKET
Jake Clark is a child of the property tax revolt.
The 17-year-old Lahser High senior was starting kindergarten when legislators were debating property tax reform. If their revamping of school finances hurt his education, it doesn't show.
A member of the student council and honor society, Jake has applied to the international business programs at Northwestern and
He is also a three-sport athlete: football, hockey and baseball.
His mother, Nancy, estimates the family will shell out at least $1,000 this school year for Jake to compete. "It's expensive to run these programs," said Nancy Clark, who is also the booster club president. "We have a lot of parental involvement. You don't have to do it, it's just something most of us do."
But the booster club money is a drop in the bucket. Bloomfield Hills spends about $12,000 a year per student, according to district financial records. Of that amount, $7,500 comes from the state through "foundation grants." Every school in the state gets a per-pupil grant of between $6,700 and $7,500.
For most districts, the foundation grants make up about 80 percent of their funding. But in
Under the compromise, districts can ask voters annually for approval to levy taxes above state limits. The number of districts with "hold harmless" levies has dwindled to fewer than 50.
As a means of controlling property tax increases, the reforms of 12 years ago also limited the revaluation of properties. Now a property is valued at its purchase price, and that valuation doesn't change until the house is sold.
For instance, the Wieses bought their home in
"It's good for me," she said, "but it doesn't seem fair."
In the end, Wiese acknowledges that reform has lowered property tax bills, but she argues that reductions are beginning to threaten the state's once outstanding public school system and have left districts "fighting over scraps" from the state.
"We've played games with education funding," Wiese said. "What we need to do is make a decision and fully fund public education, not come up with all these schemes."
The revolt that shot down taxes
Proposition passed in 1980 has had big impact on residents' bills
Monday, October 09, 2006
BY STEVE CHAMBERS
Star-Ledger Staff
First, they gave themselves the power to tax business and industry at higher rates than homeowners. Then they imposed an annual cap on local spending.
The 2 1/2 percent cap imposed by Proposition 2 1/2 has had a huge impact on the overall tax structure, slowing growth in property taxes but forcing state officials to step in with billions of dollars in aid to local governments.
The result, in bottom-line numbers, is the average
"There is no magic bullet," said Robert A. Nakosteen, an economics professor at the
Still, Nakosteen and other tax experts in
While
"Property taxes are still too high, but one of the reasons is that voters are voting to override the limit," said Barbara Anderson, whose Citizens for Limited Taxation organized the 1980 campaign that got "Prop 2 1/2" passed. "I never thought taxpayers would tax their neighbors to pay teacher salaries."
And yet they have. This year, about half of the 150 override efforts passed. In places like the affluent
"There is clearly a dedication and a commitment to education in our town that has been reflected in override votes," said Michael H. Harrity, a college professor who serves as Weston's top elected official. "I would add that it is not done lightly."
As a result of its generosity, Weston has maintained one of the best school systems in the state. The average property tax bill is about $12,865 in the bedroom community, where easy highway and train access into
Officials have had to get creative about helping senior citizens who struggle with their tax bills. They've opened up 10 part-time positions in town hall, where taxpayers can work off their debt.
DIFFERENT OUT WEST
Things are different in
The tiny town hall -- an 1892 red-brick structure that shares space with the police department, museum and library -- is closed on Fridays, with salaries based on a 32-hour week. There is no senior center, and parents have to provide school supplies like paper and crayons.
Most voters surveyed said they wouldn't have it any other way.
"The town has had to tighten its belt some," said resident Jerry Guild. "But then again, so have we."
Guild and his wife, Pat, both 77, have never voted for an override and consider themselves strong supporters of Proposition 2 1/2.
Eating a free lunch of grilled hamburgers served by the local Rotary Club one crisp fall day, the Guilds detailed steps they've taken to make ends meet. Despite their advanced age, they gather twigs and branches to fuel a wood-burning stove, and she still substitutes as a teacher several days a week.
"Every year things get leaner," she said, noting their $5,000 annual property tax bill is almost double the town average of $2,943. "Remember, the taxes still go up by 2 1/2 percent each and every year. They never seem to go down."
Mike Widmer, president of the Massachusetts Taxpayers Foundation, said there is no question Proposition 2 1/2 has slowed the growth rate of property taxes. But he sees problems ahead.
A recent study by his nonprofit, nonpartisan group found the state's tax burden as a share of personal income -- a measure that attempts to gauge one's ability to pay -- has dipped far below the national average (charted on a per capita basis, Massachusetts numbers remain high: fourth in the nation for property taxes and eighth when all taxes are considered; New Jersey ranked first and third).
But Widmer said Proposition 2 1/2 has remained feasible only because inflation stayed low throughout its history. Now, with energy and health costs on the rise and taxpayer anger swelling, he predicts a showdown.
Placing more of the burden on industrial properties -- something the New Jersey Constitution bans -- brought an additional $1 billion into
"Over the next decade, we're going to see the toughest test for Prop 2 1/2 to date," he said. "I sense mounting public frustration with the property tax burden, and costs are rising faster than inflation. It's a volatile mix."
ANGER DESPITE THE CAP
At the Dalton Restaurant, a diner along the state highway that serves as the town's main drag, Daniel and Patricia O'Hanley counted themselves among the frustrated.
"We've always voted 'No,'" said Daniel, a retired mill worker with Crane & Co., a local company that produces the paper
The Guilds, O'Hanleys and other tax conservatives in
The town narrowly missed a deadline for adding to the ballot a debt-exclusion measure -- another loophole that allows exemptions for one-time capital projects. Town officials want to refurbish an abandoned school, turning it into a new library and senior center, but the cost has ballooned upwards of $13 million.
Residents Jim and Catherine Rivers, both 72, support the project and have long been concerned that fellow taxpayers are being shortsighted.
While voting for overrides hasn't been the popular position -- Catherine said her friends don't raise the subject to avoid arguments -- the couple is hopeful the senior center will get built.
"The thing to think about is how much you are willing to pay for services you want and need," she said. "If your taxes go up $100, would that be too much? People seem to find the money for things they want. Cigarettes are $5 a pack, but people still smoke."
"You don't need to look beyond
Town Manager Ken Walto and Thomas Szczepaniak, a trucker who is the town's top elected official, agree. But they say it's not always easy to run a town filled with tax skeptics.
"Taxpayers don't want to see services cut back, but they don't want to be taxed more than they already are," Walto said. "It's getting tougher every year to balance the budget."
You've got a friendlier formula for homeowners in Pennsylvania
Tuesday, October 10, 2006
BY DEBORAH HOWLETT AND DUNSTAN McNICHOL
Star-Ledger Staff
DOYLESTOWN, Pa. -- Pennsylvania's gubernatorial campaign is under way, and the television commercials spilling across the Delaware River will have a familiar ring to New Jersey residents.
The big issue? Property taxes.
For the past half-century, lawmakers in
Nonetheless,
Property taxes across the
For example, Christina Nisbet owns a three-bedroom Cape Cod on a one-acre lot in a well-to-do neighborhood in this
"We live in almost carbon copies of each other," said Nisbet, a real estate agent.
The
Some Pennsylvanians warn New Jerseyans who are thinking of moving that they will not find as much relief in eastern
"You can jump the
Tax experts on both sides of the river, however, say even the higher-taxed
SHARING THE DISTRICT
One reason is the cost of education. In
In Doylestown, for example, a single district -- the
Across the river in
The per-student cost for Central Bucks is $11,822. In
In fact, the Central Bucks district educates nearly the same number of children as all 29
"When you have a student/teacher ratio of 13 to 1, it means there are specialists working with the kids," said Lynn Maher, a spokeswoman for the New Jersey Education Association. "And that improves the quality of education."
Both school districts are highly rated. Nisbet, who has children in fourth grade and kindergarten in the Central Bucks district, says she "is thrilled" with the school system.
"Central Bucks has a reputation for being a stellar school district," she said. "I sell real estate, for crying out loud, and people are coming here because they want to get into the school district."
"It's just gotten too expensive to support them," Zaleski said. "We want the state to take control of public education. How well you're educated depends on where you live, and a child can't help that, so why should a child be penalized?"
'TAX ANYTHING' LAW
One of the most controversial issues facing New Jersey lawmakers in the special session is whether other taxes should go up to allow property taxes to go down. In
In Doylestown, the 1 percent earned income tax adds an average of $815 per household in municipal government taxes for residents. The more residents make, the more they pay: Those with family incomes of $150,000, for example, pay an extra $1,500.
Such taxes are allowed under an old statute dubbed the "Tax Anything" law. Supporters say by reducing property taxes, local income taxes help senior citizens and those on fixed incomes. The new reforms seek even more local income taxes to shift the burden away from property taxes.
The Nisbets, who asked that their income not be disclosed, say their combined local income and property tax payments are still substantially less than the property taxes paid by the Currans of Clinton. Without the payroll tax, the Nisbets' property tax bill would rise by about $490. They pay more than that through the local income tax, but Chris Nisbet said she is content with the trade-off.
"I'm okay with that," she said. "I believe we all should pay our taxes."
