Former state Sen. William E. Schulter talked taxes at recent Hopewell Valley League of Women Voters session
By John Tredrea
Property taxes "are the biggest problem in New Jersey," said former state Sen. William E. Schulter at a Sept. 19 forum hosted by the League of Women Voters of Hopewell Valley at Central High School.
"We have to do something about it," he said. "To change property taxes, you have to change the laws in Trenton." The best way to do that, he said, is through a Constitutional Convention on property tax reform.
Those who missed Sen. Schluter’s discussion about tax relief can catch his comments on cable TV. The hour-long presentation will be broadcast on Comcast Channel 95 at 5:30 p.m. on Sundays, Oct. 1 and 8; Tuesdays, Oct. 3 and 10; and Thursdays, Oct. 5 and 12.
A longtime Pennington resident who began his career in elective office with two terms on the Pennington Borough Council followed by more than 20 years in the state Assembly and Senate, Mr. Schluter has campaigned for years for property tax reform. He co-chairs Citizens for the Public Good.
"They’re regressive," he said of property taxes. He said that, in terms of annual income, Garden State residents in the bottom fifth of the scale spend two and half times as much of their income on property taxes as those in the state’s top fifth.
Mr. Schluter maintains that income taxes have similarly favored the wealthy and that replacing some property tax revenue with income tax revenue is an option that needs to be considered.
"Income taxes should be on the table when considering property tax reform," he said. "Income taxes have favored the very wealthy. They are not paying their fair share considering what their income increases have been."
The former senator said Gov. Jon Corzine was absolutely right when he said significant property tax reform cannot be achieved merely by reducing government spending or consolidation of local government entities.
"Cutting government spending is important, but you must have significant reform on the revenue side (i.e., tax collection side) as well," Mr. Schluter said at the forum, attended by about 40 Valley residents and officials. "Cutting spending won’t solve this problem sufficiently."
Sales taxes, like income taxes, are a revenue source that must be taken into account when investigating property tax reform, Mr. Schluter said. He noted that, although New Jersey’s sales tax rate of 7 percent is among the highest in the nation, "we are 11th nationwide in sales taxes on a per capita basis." This is because, he said, some states tax items and services including food in some cases that New Jersey does not.
Also needing to be considered in property tax reform, Mr. Schluter said, is the state law that requires all property owners commercial as well as residential to pay the same tax rate. Increasing the commercial rate could save residents money, especially if their rate were reduced at the same time the commercial rate were increased. "Uniform statewide property assessing should also be on the table," Mr. Schluter said.
Indeed, this year’s property revaluation in Hopewell Township has sparked an uproar of complaints from residents who say their new assessed values are too high and/or that the assessor did not study their residence adequately.
Mr. Schluter said the onerous property tax burden in New Jersey $6,000 per year per residence is the statewide average, the highest in the country is "forcing seniors to leave their homes. Young people can’t afford to live here. There is net exodus of the indigenous population out of New Jersey."
Nationwide, property taxes account for 30 percent of all taxes collected. In New Jersey, it’s 44 percent. "And property taxes are going up 7 percent a year in this state," Mr. Schluter added. In New Jersey, 98 percent of local government services are paid for with property tax revenues, compared to 73 percent nationwide he said.
For years, a major obstacle to property tax reform "has been the attitude of legislators in Trenton," who think the real source of the problem is spendthrift local governments and school boards, Mr. Schluter said. "There’s been a lot of demagoguery. Some legislators have signed a no-new-tax pledge, so they can’t replace property taxes with another tax."
Mr. Schluter said property tax reform should be aimed primarily "at owner-occupied residences. The pain is in places like Hopewell Valley, in the suburbs, in middle class homes."
School costs are big factor, he said. "You get no state aid increases here," he said. "Cities do. Eighty-five percent of Newark’s school costs are paid by the state."
In Hopewell Valley, school officials have stated that over 98 percent of the regional school district’s costs are paid by local taxes. Like similar districts around the state, the Valley stopped getting state aid increases years ago. During that same time frame, enrollments in many districts with flat state aid have increased. Hopewell Valley is in this category.
Another idea worth considering and used in some other states is what is known as "circuit breakers," Mr. Schluter said. "This means that taxes can only be so high a percentage of your income," he said. "When you reach that percentage, you don’t have to pay any more." He noted that, in other states, local governments are not responsible for as many services as local governments in New Jersey. "For example, you could have a statewide property tax for schools," he said.
The upshot of this daunting overall status quo, Mr. Schluter said, is that only a "comprehensive program of property tax reform" can bring meaningful change. "That’s the advantage of a Constitutional Convention. You could produce a full package of reform, the bitter with the sweet."
Enabling legislation for a Constitutional Convention on property tax reform has been passed twice by the state Assembly, but the Senate passed it neither time. Mr. Schluter said that, under the draft passed by the Assembly, which he favors, "a Constitutional Convention would be empowered to do statutory as well as constitutional changes. You don’t want to constitutionalize your tax code. That would give you too little flexibility."
Mr. Schluter wants to see a statewide ballot question on a Constitutional Convention in the November 2007 general election. The question would specify what the duties and agenda of the convention would be. If the voters approve it, the convention could be held the next spring, he said. Delegates to the convention would be elected by the public, under the draft legislation passed by the Assembly. Likewise, proposed property tax reform plan produced by the convention would be subject to public approval.
"The people are ready to do this!" Mr. Schluter declared.

