Governor open to idea of municipal sales taxes

Governor open to idea of municipal sales taxes
4 fiscal-reform panels emerge

Tuesday, August 01, 2006

Gov. Jon Corzine said yesterday he may support allowing municipalities to impose their own sales taxes to help control property taxes.

During a wide-ranging news conference about his ambitious property tax reform agenda, the governor also said he may consider letting an independent commission pick which school districts or municipalities are prime candidates for combined services.

"I think it is an idea worthy of exploration," he said.

Corzine expanded the list of ideas he feels deserve consideration as the Legislature announced the membership of four bipartisan joint committees, each of which will examine a key area in coming months. The subjects of their study will be public school funding; government consolidation and shared services; public worker benefit reforms; and constitutional reform/citizens convention on property taxes.

The constitutional reform committee is scheduled to convene Friday, the others next week.

In a speech Friday to both houses of the Legislature, Corzine said one way of easing property taxes may be to let municipalities impose new fees.

"If local citizens choose other revenue sources to lessen their property tax burden, then who are we in Trenton to tell them they don't have the right to an alternative course?" he said. He specifically mentioned only the possibility of municipal impact fees, which would help offset the cost of services caused by new development.

Yesterday, the governor added local sales taxes to the mix, pointing out that most states allow the practice. A chart by the national Sales Tax Institute in Chicago indicates 35 states, including Pennsylvania and New York, permit municipalities or counties to impose their own sales taxes.

A Quinnipiac University poll in 1998 found two-thirds of New Jersey voters opposed to the idea of more alternative local taxes.

Currently, New Jersey's 566 municipalities have few options to pay for local budgets other than by raising property taxes. Some have taken advantage of a 2003 law allowing a 3 percent municipal occupancy fee on hotels and motels.

William Dressel, executive director of the New Jersey State League of Municipalities, said his group has long favored giving towns the option of imposing their own sales taxes. One reason property taxes are lower in other states is not just one tax is being relied upon.

While the governor said the option of local sales taxes is worth a look, he said he is more leery of local income taxes.

"I don't think we're going to go there," said Corzine, who frequently has expressed concern about further state income tax increases due to its potential economic impact.

Corzine also had recommended dedicating $250 million of a recent state sales tax increase to a fund that provides financial incentives for municipalities or school districts to consolidate or share services. He said use of an independent panel modeled after the federal military base-closing commission to identify the prime candidates for those incentives could be a viable option, though he added he is "not yet advocating" that approach.

Dressel said the league is "unalterably opposed to that whole philosophy, because it effectively removes the public from the process." Local mergers or service sharing should be decided by local voters, not a statewide agency, because they are most affected by the decision, he said.

As lawmakers prepare for a major push for reform, Corzine cautioned voters not to expect too much too soon.

He wants to convert current rebates into direct tax credits by next year, but he said further savings will take years.

"People shouldn't be looking for instant gratification," Corzine said.

The governor said he hopes his reform package will prevent total property tax collections from topping $22 billion by 2010. Last year, they reached $19.6 billion. With no reforms, the governor said he believes they would reach $26 billion within four years.

Republicans said the governor should be aiming higher. They said they hope state officials quickly cut property tax bills by as much as $3,000 to $5,000, depending on the current burden. Last year's bills averaged nearly $6,000.

"If people in my town don't see a 3,000 to 4,000-dollar decrease, they are going to go ballistic," said Assemblyman Joseph Malone (R-Burlington), who was named a member of the shared-services committee.

Corzine said the Republican goal was "a great idea" but "not realistic."

"I couldn't for the life of me figure out how you're going to get from $3,000 to $5,000 anytime in the first year," he said.

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