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TAX NEWS - 2010

New Jersey tax: NJ Governor Offers Tax Cap Compromise

TRENTON, N.J. -- New Jersey Gov. Chris Christie offered an alternative to the competing plans he and Democrats proposed to slow rising property taxes, while threatening to keep the Legislature in Trenton through the holiday weekend to deal with taxpayers' No. 1 issue.

After ordering lawmakers into special session to consider property tax reform measures, Christie told a joint session of the Assembly and Senate that he would accept a 2.5 percent cap on annual property tax increases but would drop his insistence that it be written into the Constitution.

Christie said he would not sign a 2.9 percent cap bill the Legislature sent him Tuesday because it has too many exemptions. He mockingly referred to that plan as "Swiss cheese."

His plan provides far fewer exemptions. A town, school district or county would require approval from 60 percent of voters to exceed the cap.

"This will reduce property taxes. This will improve our state. This will control runaway local spending," Christie told the Legislature. "This will also bring our citizens some of the relief they so desperately need."

New Jersey has the highest property taxes in the country, averaging nearly $7,300 per household. The property tax rate is often cited as a reason businesses don't locate here, residents leave and seniors can't remain in their homes.

Christie threatened to use his executive powers to keep lawmakers in Trenton over the July 4th holiday weekend, while leaders in the Assembly and Senate said they had their own timetables for considering reforms.

Assembly Speaker Sheila Oliver said 12 members of the Assembly have been assigned to study three dozen ideas for tax relief and that a summer session has already been scheduled. The Senate Budget Committee plans to convene Friday morning to set its summer agenda.

"We don't need the governor to come here and tell us this is a crisis," Assembly Budget Committee Chairman Lou Greenwald said. "We don't need the governor to come and work through the summer. We have already set our schedule. The reality is we have a thoughtful plan in place to have a dialogue."

Greenwald said there's no easy fix to a property tax problem that's been around for 30 years. Ramming reforms through the Legislature over a three-day holiday weekend would be "reckless," he said.

Senate President Stephen Sweeney also said his members planned to work through the summer.

"We can get this right," he said.

That might not be good enough.

Sweeney said he believes Senate fulfilled its constitutional requirement by convening the full membership Thursday and having the budget committee meet Friday. He said an opinion from a legislative lawyer backs him up.

Christie spokesman Michael Drewniak said the governor's lawyers said Christie has the authority to convene the entire Legislature day after day. The governor intends to use that power through the July 4th weekend if necessary, Drewniak said.

Late Thursday, Christie announced that he was ordering the Legislature to meet again at 10 a.m. Saturday.

This would not be the first time New Jersey lawmakers have worked through the summer with the goal of lowering property taxes.

A 2006 summer session produced a series of reform proposals, some of which were enacted four years later — after Christie took office.

A 4 percent property tax cap enacted in 2007 has slowed the rate of tax increases — from 7.2 percent to 3.3 percent last year.

The new Republican governor has been trying for months to do more, prodding lawmakers to approve the constitutional amendment so it could be put before the voters in November. But the Legislature would need to act by next week to get it on this fall's ballot, and Democrats who control the Assembly and Senate have said there's no way Christie's plan would be adopted.

The plan the Legislature passed on Tuesday caps annual property tax increases at 2.9 percent but exempts health care and pension costs, among other things.

Christie said Thursday he would accept a 2.5 percent statutory cap, but only if the exemptions remained narrow: capital projects and debt service would be the only permanent exemption, and there would be a temporary exception for existing collectively bargained employee contracts.

Christie's proposal is modeled on a Massachusetts law that has drawn mixed reviews. Democrats have said the Massachusetts cap was accompanied by an infusion of aid from the state and a provision that allowed towns to impose local taxes, neither of which would happen in New Jersey.

Sweeney said the Massachusetts cap has had unintended consequences such as forcing parents to pay for their children's participation in school sports and residents being billed for street lights.

Lawmakers traditionally break for a summer recess after approving the state budget, but Christie is insisting they deal with the property tax issue.

"Here's what I will not accept: Inaction," Christie said. "We cannot take a vacation when our citizens get no vacation from escalating property taxes."
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