Assemblyman Thompson responds

Save Our Homes and Our Future
To: John Hendirckson

From: Assemblyman Samuel D. Thompson, Ph.D.


I have reviewed the e-mail you sent out regarding our conversation this morning. I find that you have distorted or misstated a number of my positions and presented a very one-sided presentation of the discussion.

If you have any sense of fairness, I would request that you forward my response that follows to the recipients of your missive.

You state you had two main points, both of which you indicate I disagreed with. Your first point was, “conflating state and local spending problems which have driven up property taxes with dealing with the fairness aspect of how education, municipalities and counties are funded is the wrong approach”….because “property taxes are inherently unfair because they do not take into account ones’ ability to pay.” You add I was not able to justify that they are a fair and just tax.

You should recall in my opening comment to you I stated in response to the message you had left with my staff that I do not consider the property tax to be an equitable and fair tax.

I began drafting my response as a point by point refutation of various comments and assertions contained in your e-mail but instead have decided to give my summary of our discussion and leave it to you and the readers to draw their own conclusions.

I began our conversation by responding to a question you had left with my staff. I do not consider the property tax to be equitable and fair. I did not state but would add; neither are the State Sales and Use Tax which is the States’ second largest generator of revenue projected at $6.7 billion in FY06. I did disagree you can not separate state and local spending concerns from the fairness aspect of how local entitles are funded. Spending determines how much revenue must be obtained which has a direct bearing on revenue source options.

It is your opinion reducing property taxes (which I support) to reduce the inequity is not satisfactory – they must be totally eliminated because of their unfairness. It is interesting to note you do not call for the elimination of sales tax which has the same inequity. You argued this could be accomplished by an increase in the income tax which could be simultaneously modified so low income people (less than $25,000) would pay no income tax.

I responded that the increases required to totally eliminate property taxes would have to be so massive, middle income people would be driven out of the State. To buttress my argument, projected Gross Income Tax receipts for FY06 have been projected to be $10.6 billion. The latest figures I have available indicate total property tax collections statewide in FY05 were in excess of $19 billion. Consequently, totally eliminating property taxes through increasing income taxes would require tripling all current income tax rates even without considering eliminating income tax for lower income individuals.

As for your assertion that Trenton would never increase income taxes annually even if it was the only way to meet the demands for local spending, I wouldn’t recommend you place any wagers on that (we disagreed on this point). For your position to be correct, local spending (schools and government) would have to never increase or some other tax would have to be raised. You should also note if local authorities do not have to impose or collect any taxes but instead merely decide how much they want to spend, there would be zero incentive for them to hold down their spending.

If after reading the foregoing, you should say, well maybe we shouldn’t fund totally eliminating property taxes just from income taxes but instead spread it over several revenue sources. Total projected State revenue from its’ three major sources – Income Taxes ($10.6b); Sales and Use ($6.7B) and Corporate ($2.8B), totals $20.1B. Thus, it would require doubling the rate for all three taxes to supplant the property tax totally.

You ask where is the justice when your neighbor pays the same property tax as you while making 4-5 times your income? I will not attempt to justify this situation but you also must recognize that while he is paying the same property tax as you, he is probably already paying more than 4-5 times as much income tax as you since he is in a higher income bracket. If he bought his identical house a year or two ago and you purchased yours 30 years ago, he might also argue that it is unfair you only paid $60,000 for your house and he had to pay $360,000. He might also argue it is consequently unfair that he now has these very large mortgage payments and you have little or none.

You described discussing the fact that eliminating the property taxes would mean raising taxes in other areas as raising a red herring. This discussion may be a red herring to you but I can assure you it is not a red herring to the populace as a whole. There will be winners and losers in any proposal put forward to either reduce or eliminate property taxes. Ultimately the plan will have to be approved by the voters in a statewide referendum. It will pass or fail depending on whether or not a majority of voters believe they will be better off if the proposal is adopted. This decision will be determined by their assessment of both how much they will save on property taxes and how much additional they will pay in new tax increases. The two figures are inseparable.

I will restate my agreement that property taxes are not equitable and fair. But this statement applies equally to sales tax and any other tax or fee that is not income based be it motor vehicle fees, gasoline tax, marriage license, court fees, etc., etc.

I agree we must take action to significantly diminish the impact of property taxes and for the past several years have voted numerous times for a measure to move forward on this issue only to have the Democrat Majority table the motion.

Finally, in the closing portion of your correspondence, you speak of the need to get rid of legislators who “begin with a defeatist attitude”.

John, if you feel I do not represent your interests, I have not problem if you choose to work for my defeat. However, if you are labeling me as having a “defeatist attitude” because I disagree with you on the approach to an issue and therefore will not work towards that end, then I resent that very much.

Sincerely,
Samuel D. Thompson, Ph.D.
Assemblyman
13th Legislative District