COMMITTEE ON TAXATION AND FINANCE
RECORD OF PROCEEDINGS
STATE OF NEW JERSEY CONSTITUTIONAL CONVENTION OF 1947
COMMITTEE ON TAXATION AND FINANCE
Tuesday, July 1, 1947
(Morning session)
CITY OF NEW BRUNSWICKTax Exempt PropertyBreakdown of Rutgers’ Exempt Property for 1945:
does not adopt legal classification of property for tax purposes, then illegal or extra-legal classification will prevail so long as property is taxed under the uniformity rule. I believe that our State’s experience in taxation for the past century supports the above opinion. Until 1945 our tax structure included the taxation of intangibles at the same rates as prevailed for realty and tangible personalty. In 1945 our Legislature passed ‘The Corporation Business Tax Act of 1945,’ which act provided for the repeal of the former tax on intangibles and substituted a franchise tax levied upon the net worth of each corporation at reasonable low rates, despite the fact that our present Constitution includes the uniformity rule.
It has frequently been argued that our uniformity clause operates to prevent the State from enacting a graduated income tax with exemptions. Although we do not advocate a state income tax, the time may come when our Legislature may consider such a tax.
Property Classification: It should be noted that a number of states, after unsuccessful attempts over a long period of years to enforce the assessment of taxes uniformly as required by their old constitutions, have developed a logical scheme of property classification. As far back as 1907, the Conference of the National Tax Association passed the following resolution, ‘Resolved, that all State Constitutions requiring the same taxation of all property, or otherwise imposing restrictions upon the reasonable classification of property should be amended by the repeal of such restrictive provisions.’
The general property tax that is now in effect under our old Constitution is fundamentally defective in that it assumes that property per se possesses ability to pay, while it ignores the factor of property income. In order to correct inequalities in taxation of the past, and to provide for a just and simple system of state and local taxation, I respectfully recommend that you repeal the existing tax clause and that you adopt in the revised Constitution the following tax clause, ‘Property shall be valued for taxes under general laws and by uniform rules according to its equitable relation to other properties of like kind.’
Benefits of Property Classification: Classification of property seeks to solve the problem of adjusting the tax burden to varying capacity to pay taxes as between different classes of property. Instead of applying the uniformity rules to all properties, equality is limited to the same class of properties. Classification comes much closer to ‘taxation according to ability to pay’ than does our present uniformity rule which requires equality of treatment for unlike properties. The essence of classification is the differentiation in effective rates of taxation between various classes of property. Of course, we must recognize that property classification should be accompanied by adequate and efficient administration.
In providing for the classification of property for purposes of taxation, justice will be accorded those classes of taxpayers whose property has been unduly taxed by excessive tax rates of the past.
Intergovernmental Relations: The need for federal and state cooperation in the field of taxation is an urgent one. As we develop further national policies in the field of taxation, our State will find itself hampered by antiquated provisions on that subject, such as the uniformity clause.
The Federal and State Governments overlap each other constantly in the field of taxation. Too frequently has there been a duplication of taxation and too frequently has there been conflict between State Governments and the Federal Government because we have usually thought in terms of units of government, federal, state or local, rather than in terms of the services or the functions of government.
I respectfully submit that our revised Constitution should include ‘permissive clauses’ authorizing the Legislature to adopt legislation of such type when it is found desirable by the Legislature. I quote from Article XI on ‘Intergovernmental Relations,’ sec. 1100 of the ‘Model State Constitution’ as adopted by the National Municipal League: ‘Nothing in this constitution shall be construed in such manner as to impair the consti-
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