EDITORIAL Proposed legislation would create a new homestead rebate program.
A Hudson County Assemblyman has proposed a way to cut property taxes for middle-income residents.
The problem, as the leadership of both political parties in the state see it, is that the proposed cut would come with an increase in the state income tax.
The legislation sponsored by Assemblyman Louis Manzo, a Democrat, would create a new homestead rebate program equal to about 50 percent of the amount taxpayers pay in school property taxes and would offset the rebate with a new income-tax surcharge. The surcharge would be assessed to taxpayers progressively, with higher-income taxpayers paying more than middle- and lower-income taxpayers.
According to news reports, the legislation would mean that New Jersey taxpayers would receive $5.1 billion back from the state to offset their school tax payments. The income tax surcharge would net $3.7 billion in revenue. The rest would be offset by the cancellation of the current rebate program, which distributed $1.4 billion to taxpayers in 2004.
We’re not ready to endorse the plan, but we do believe it deserves to be discussed. We have been calling for changes to the way the state pays for its schools for years and we have called for some kind of dedicated state school income tax to replace the current system.
Property taxes, while not exactly regressive, do not take into account the actual ability of taxpayers to pay. Kendall Park seniors who choose to stay in their houses, for instance, end up with huge tax bills due to the inflation in home values even though they are living on pensions and Social Security.
Then there are the residents of towns like Jamesburg. The borough has far less property wealth per homeowner than Cranbury, which has a huge warehouse district, and too often ends up being forced to decide between after-school programs and higher taxes.
And property taxes tend to encourage bad planning, as towns chase large industrial developments without regard to their impact on neighborhoods. Ask residents along Davidsons Mill Road in South Brunswick if they’re willing to live near another warehouse in exchange for the property tax revenue it would bring to the township. It’s a question they shouldn’t have to be asked.
The Manzo bill could address these issues, but does not appear to take into account the funding disparity that still exists between the poor urban schools and the richer, suburban ones. That may have to be handled on the spending side of the ledger.
Legislative leaders from both parties seem unwilling to act on the Manzo legislation anything that sniffs of an income tax hike tends to send politicians running scared.
Instead, Democrats Richard Codey, the state Senate speaker and acting governor, and Assembly Speaker Alberto Spires are pushing a constitutional convention. While that may, in the long run, produce the kind of tax reform that is needed in the state, there are no guarantees.
The Manzo legislation would at least put the income tax on the table and get the ball rolling.

