Tuesday, December 05, 2006

Property Tax Problem? What Property Tax Problem?

Why Reliance On New York's STAR Program, And Plans To Raise The Exemption, Do Little To Remedy The Underlying Causes of High Property Taxes

A Guest Blog, from our friends across the river at bluejersey.net, offers food for thought on tax credits, exemptions, and so-called property tax rebates.

Something for the folks in Albany -- and taxpayers throughout New York -- to think about, as plans to increase STAR exemptions across the board by at least 30% work their way from the campaign trail to legislative committees and the governor's mansion.

STAR may treat the symptoms, or merely mask them, but in reality, it does little to stabilize the ailing patient, let alone to work a cure.
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Why The 20% Property Tax Credit is Wrongheaded
The (New Jersey) legislature recently proposed a set percentage (around 20 percent) property tax "credit" to replace the NJ Saver accounts. This is, to my mind, a loser of an idea that does little or nothing to repair our damaged government funding system.

Imagine two towns. Town A provides basic services at an efficient rate and keeps its property taxes down. Town B provides some unnecessary services with bloated staff and purchasing policies and allows its property taxes to rise. Town A's residents get a smaller property tax credit than Town B's residents solely because their town is managed well. Talk about punishing the behavior you want to encourage!

This is another in a long line of efforts to save taxpayers' money by shifting revenue and funding streams. It started with the income tax and gambling in Atlantic City, and continues to this day. Yes, there are a few minor proposed tweaks to the structure of our state, but the majority of what came out of Trenton last week is simply shifting funding from local property taxes to sales and income taxes.

The fact is that New Jersey doesn't have a property tax problem, but a disorganization problem that is costing us in all our taxes. We are not going to provide relief for the high cost of government simply by shifting funding lines for municipalities and schools. The issue is not the funding mechanisms, but the management.

I'm not saying that all our towns and schools are mismanaged, or that most of the people in charge are poor managers. The fact is that many elected and appointed managers are excellent and do an amazing job in terrifically difficult circumstances.

The problem is the structure, and the work they are mandated to perform by state law and constitution.

For instance, it makes no sense to have every municipality collecting and distributing property taxes. Municipalities are usually the smallest taxing entity with the smallest budgets, yet for some reason they have to send out the tax bills and distribute the money to schools, fire districts, economic districts, counties, etc. This creates amazing redundancy -- every town needs a tax collector and people to manage the books -- and added costs. Move this function to the county, which have the largest property tax collections and cover the most landowners, and you will save money.

Another example is that every school district is responsible for special education, regardless of the level of care required. If a student is best suited to attend school in Colorado, the local school district has to pay tuition, travel and other expenses solely because the parents moved to that district and regardless of the ability of the community to pay. Move all special education management and funding above the student average to a county- or state-wide overseer and you will see redundancies reduced and expenses fall.

These are just two instances where most of the extra cost is due to a misplacement of the function. There are scores more. We need to determine exactly what we want to do at each level of government and fund those functions accordingly.

Wholly localized services like recreation, police, garbage pick-up, recycling, animal control, etc. can easily be funded on local property taxes.

Regional services like most courts, cross-border roads, certain economic development, larger parks, etc. can be funded on regionalized taxes.

And societal and state-wide services like highways, schools, environmental protection, universities, public health planning, etc. can be funded at a state (or national) level.

Currently many governmental functions in New Jersey are being performed and funded at the wrong levels, and it is costing us dearly. Just like a for-profit corporation in financial straits engages in a full review of all the work they do in order to reorganize, New Jersey needs a comprehensive review of all functions and who performs them.

The time has come to admit that our state's governments -- from volunteer fire districts to the Statehouse -- have grown out of control from lack of pruning, and need to be totally revamped if we are going to make it less expensive for the residents of New Jersey.

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