by Thomas G. Dallessio AICP/PP, Vice President and New Jersey Director
Like a simmering pot about to blow its lid, real changes in the property tax system are looking increasingly likely in the Tri-State region, because residents are about to blow their tops out of anger over with what they feel are overly high taxes on their homes.
The challenge for thoughtful citizens and policy professionals is to convert this anger into a realistic debate over how property taxes could be comprehensively reformed. This means discussing the system's larger implications for land use, equity and efficiency, rather than simply a yes/no yelling match about whether property taxes are too high. It's the difference between providing property tax relief, and providing property tax reform.
There's no question that tinkering with any part of the property tax system is difficult, because one is dealing with the financing that underpins local government, and which comes directly out of citizens' sensitive pocketbooks. It's like trying to re-wire a house while having to leave all the lights on and the oven burning. That's probably the reason why so many attempts at reform have consisted of reports from high-profile commissions, virtually all of which still sit on shelves awaiting action.
Nevertheless some change seems inevitable. In Long Island, outright revolt may have been temporarily delayed as more school budgets were approved in 2006 after two years in which more than a third were rejected. But the underlying causes remain, and Suffolk County Executive Steve Levy has joined the chorus of those criticizing the unwillingness of officials to cut costs. Recently, voters in New Jersey's key suburbs -- Hunterdon, Middlesex, Morris, Somerset and Union counties -- where much of the state's growth has occurred over the last decade, rejected a majority of school budgets, a sure sign that property taxes are too high, or at least that voters are not feeling satisfied with how they are spent.
Despite the vitriol of partisan politics, this year's gubernatorial elections in New York and Connecticut provide an opportunity to raise questions regarding the future of the property tax system, as well as the potential for improving our communities through comprehensive and coordinated fiscal and land use planning on all levels of government. In Connecticut, for example, tax reform and smart growth are among the predominant issues of the two democratic challengers for governor, while incumbent Governor M. Jodi Rell made some initial recommendations in her February budget address. The trick is for both candidates and their questioners to engage in a realistic debate about how the system could be changed, and to avoid simplistic labels or catchy slogans.
New Jersey's gubernatorial campaign last year and the election of Governor Jon Corzine have already made change in the property tax system likely there. After approving the State budget next month, New Jersey elected officials are likely to consider specific legislation or constitutional amendments for property tax reform. Governor Corzine has repeated his campaign pledge to address both relief and reform, and continues to talk about the need for a Constitutional Convention to enact fundamental reform. In addition, Senate President Codey and Assembly Speaker Roberts separately announced efforts to take a fresh look at the property tax system to find ways to reduce costs and increase efficiencies.
What the debate has lacked thus far is a framework for comparing proposals and considering how to improve land use planning and our quality of life. A new study just released by Regional Plan Association in partnership with the Lincoln Institute of Land Policy attempts to fill this void by comparing the potential impact of a range of revenue-neutral school property tax reforms across a set of established criteria. Fundamental Property Tax Reform II: A Guide to Evaluating Proposals was developed to spur the New Jersey debate, but it provides a framework for serious consideration in New York and Connecticut, too. Focusing on land use and social equity as well as efficiency and fiscal health criteria, RPA is looking to inform officials and the public on ways to address runaway property taxes while improving our communities.
In particular, any real property tax reform must promote consistency with state land use and development goals. While New York lacks a comprehensive development plan, and Connecticut's plan is less advanced than New Jersey's, it is important for all three states to work towards a fiscal system that empowers towns to encourage redevelopment and protect open space. Other land use and social equity criteria include housing affordability and educational equity. All are crucial to the economic prosperity of the state and the well-being of our communities.
In addition, true property tax reform should take into account efficiency and fiscal health criteria. Would a proposal that substitutes the income tax for a portion of the property tax provide greater flexibility and local autonomy than the current system, or could it reduce the fiscal discipline and the stability of local and State revenues? Would substituting some or all of local property taxes with a statewide property tax have any advantages? Would a proposal favored by many economists, taxing buildings at a lower rate than land, get a serious hearing from citizens and elected officials? The latter technique was applied in Pittsburgh and select other places, and could be an idea to spur development in urban areas or brownfields while reducing new construction in greenfields or areas with natural resource limitations.
To demonstrate the usefulness of this approach, RPA evaluated five ideas for reform. While these by no means exhaust the range of potential reforms, they include several proposals for fundamental change and are sufficiently varied to demonstrate that the criteria can be used to compare very different concepts. For example, varying property tax rates by areas in the State Plan scored high in flexibility and consistency with the Plan, but low regarding local autonomy. A statewide or countywide property tax rate scored lower than proposals to substitute a portion of the property tax with an increase in the state income tax, but it also focused attention on how consolidating school districts at the county level could be combined with other ideas to achieve financial savings and promote a sustainable system. And a split rate taxation system, where buildings and improvements are taxed at a lower rate than land, was found to score high in many categories, including State Plan consistency, housing affordability, flexibility and local autonomy, but implementation may be problematic.
Of course, with any of these ideas, the devil is in the details, and the best reform may require a combination of these concepts.
At a public forum last Tuesday sponsored by the New Jersey Coalition for the Public Good at the College of New Jersey, panelists explored different options for property tax reform and the broader impact those options will have on our communities and the region. While it was fascinating to hear from panelists as diverse as Former Governor Florio and Senate Republican Leader Leonard Lance, it was evident from the program that there is no common definition of "reform" and even further divergence on how to measure success. Housing advocate Alan Mallach pointed to the need for land use reform, while former AARP President Marilyn Askin spoke to the need for greater efficiencies at the local level. RPA's report provides elected officials and the public with an understandable and usable framework for measuring property tax reform proposals against different agendas.
It has often been said that wherever the nation is headed, New Jersey will get there first. Be it brownfields remediation, ultimate build-out of the State or urban school reform, it seems that New Jersey by virtue of its size, location and composition, is forced to address critical issues before other states. Wouldn't it be refreshing if this time we see a long-term solution that can benefit the tri-state region and the rest of the country?
Like a simmering pot about to blow its lid, real changes in the property tax system are looking increasingly likely in the Tri-State region, because residents are about to blow their tops out of anger over with what they feel are overly high taxes on their homes.
The challenge for thoughtful citizens and policy professionals is to convert this anger into a realistic debate over how property taxes could be comprehensively reformed. This means discussing the system's larger implications for land use, equity and efficiency, rather than simply a yes/no yelling match about whether property taxes are too high. It's the difference between providing property tax relief, and providing property tax reform.
There's no question that tinkering with any part of the property tax system is difficult, because one is dealing with the financing that underpins local government, and which comes directly out of citizens' sensitive pocketbooks. It's like trying to re-wire a house while having to leave all the lights on and the oven burning. That's probably the reason why so many attempts at reform have consisted of reports from high-profile commissions, virtually all of which still sit on shelves awaiting action.
Nevertheless some change seems inevitable. In Long Island, outright revolt may have been temporarily delayed as more school budgets were approved in 2006 after two years in which more than a third were rejected. But the underlying causes remain, and Suffolk County Executive Steve Levy has joined the chorus of those criticizing the unwillingness of officials to cut costs. Recently, voters in New Jersey's key suburbs -- Hunterdon, Middlesex, Morris, Somerset and Union counties -- where much of the state's growth has occurred over the last decade, rejected a majority of school budgets, a sure sign that property taxes are too high, or at least that voters are not feeling satisfied with how they are spent.
Despite the vitriol of partisan politics, this year's gubernatorial elections in New York and Connecticut provide an opportunity to raise questions regarding the future of the property tax system, as well as the potential for improving our communities through comprehensive and coordinated fiscal and land use planning on all levels of government. In Connecticut, for example, tax reform and smart growth are among the predominant issues of the two democratic challengers for governor, while incumbent Governor M. Jodi Rell made some initial recommendations in her February budget address. The trick is for both candidates and their questioners to engage in a realistic debate about how the system could be changed, and to avoid simplistic labels or catchy slogans.
New Jersey's gubernatorial campaign last year and the election of Governor Jon Corzine have already made change in the property tax system likely there. After approving the State budget next month, New Jersey elected officials are likely to consider specific legislation or constitutional amendments for property tax reform. Governor Corzine has repeated his campaign pledge to address both relief and reform, and continues to talk about the need for a Constitutional Convention to enact fundamental reform. In addition, Senate President Codey and Assembly Speaker Roberts separately announced efforts to take a fresh look at the property tax system to find ways to reduce costs and increase efficiencies.
What the debate has lacked thus far is a framework for comparing proposals and considering how to improve land use planning and our quality of life. A new study just released by Regional Plan Association in partnership with the Lincoln Institute of Land Policy attempts to fill this void by comparing the potential impact of a range of revenue-neutral school property tax reforms across a set of established criteria. Fundamental Property Tax Reform II: A Guide to Evaluating Proposals was developed to spur the New Jersey debate, but it provides a framework for serious consideration in New York and Connecticut, too. Focusing on land use and social equity as well as efficiency and fiscal health criteria, RPA is looking to inform officials and the public on ways to address runaway property taxes while improving our communities.
In particular, any real property tax reform must promote consistency with state land use and development goals. While New York lacks a comprehensive development plan, and Connecticut's plan is less advanced than New Jersey's, it is important for all three states to work towards a fiscal system that empowers towns to encourage redevelopment and protect open space. Other land use and social equity criteria include housing affordability and educational equity. All are crucial to the economic prosperity of the state and the well-being of our communities.
In addition, true property tax reform should take into account efficiency and fiscal health criteria. Would a proposal that substitutes the income tax for a portion of the property tax provide greater flexibility and local autonomy than the current system, or could it reduce the fiscal discipline and the stability of local and State revenues? Would substituting some or all of local property taxes with a statewide property tax have any advantages? Would a proposal favored by many economists, taxing buildings at a lower rate than land, get a serious hearing from citizens and elected officials? The latter technique was applied in Pittsburgh and select other places, and could be an idea to spur development in urban areas or brownfields while reducing new construction in greenfields or areas with natural resource limitations.
To demonstrate the usefulness of this approach, RPA evaluated five ideas for reform. While these by no means exhaust the range of potential reforms, they include several proposals for fundamental change and are sufficiently varied to demonstrate that the criteria can be used to compare very different concepts. For example, varying property tax rates by areas in the State Plan scored high in flexibility and consistency with the Plan, but low regarding local autonomy. A statewide or countywide property tax rate scored lower than proposals to substitute a portion of the property tax with an increase in the state income tax, but it also focused attention on how consolidating school districts at the county level could be combined with other ideas to achieve financial savings and promote a sustainable system. And a split rate taxation system, where buildings and improvements are taxed at a lower rate than land, was found to score high in many categories, including State Plan consistency, housing affordability, flexibility and local autonomy, but implementation may be problematic.
Of course, with any of these ideas, the devil is in the details, and the best reform may require a combination of these concepts.
At a public forum last Tuesday sponsored by the New Jersey Coalition for the Public Good at the College of New Jersey, panelists explored different options for property tax reform and the broader impact those options will have on our communities and the region. While it was fascinating to hear from panelists as diverse as Former Governor Florio and Senate Republican Leader Leonard Lance, it was evident from the program that there is no common definition of "reform" and even further divergence on how to measure success. Housing advocate Alan Mallach pointed to the need for land use reform, while former AARP President Marilyn Askin spoke to the need for greater efficiencies at the local level. RPA's report provides elected officials and the public with an understandable and usable framework for measuring property tax reform proposals against different agendas.
It has often been said that wherever the nation is headed, New Jersey will get there first. Be it brownfields remediation, ultimate build-out of the State or urban school reform, it seems that New Jersey by virtue of its size, location and composition, is forced to address critical issues before other states. Wouldn't it be refreshing if this time we see a long-term solution that can benefit the tri-state region and the rest of the country?
@RegionalPlan