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Wednesday, June 19, 2024


Why Not Tax Condos-6-28-2006

By Rick Racela

Have you ever heard a taxpayer say to a governing body, “Don’t pave my street”…”reduce the number of trash collections”…”Don’t spray for mosquitoes”…or “Reduce the number of police patrols in my neighborhood”…
Thus far no one has been interested in hearing suggestions from this 78-year-old former Republican senator and former chairman of the Joint Appropriations Committee.
However, since I noted in today’s paper that the Governor and the Legislature have reached an impasse in their attempt to balance the budget and bring peace to “Happy Valley,” I wanted to share my thoughts.
I noted in recent weeks where a senator proposed to reduce the sale tax by one percent and, at the same time, expand the current sales tax to cover attorneys fees, accountants fees, limousine services, etc.
That suggestion would increase the existing deficit of approximately $4 billion by an additional billion. It represents one percent of the sales tax revenues. That would be like asking the favorite entry in the Kentucky Derby to run two laps while the rest of the field runs one.
Unlike many other purchases, these services are necessities and not luxuries and if imposed, would undoubtedly be passed on to the consumers, one hundred percent of whom are New Jersey residents.
No one retains an attorney in connection with a divorce, adoption, collection, personal injury claim, settlement of an estate, or a criminal defense if they could possibly avoid it.
By the same token, no one retains the services of an accountant for tax advice or to file state or federal tax returns if they could avoid it without the risk of being delinquent, missing a valid deduction, or failing to report a reportable item of income.
On the other hand, a one percent increase in the sales tax, without expanding the items to be covered, could be “avoided,” if not reduced by consumers withholding a particular purchase completely or, at least, by reducing the tax by purchasing a Chevy rather than a Lexus.
According to the governor’s estimate, a one percent increase in the sales tax would generate approximately $1 one billion which could be paid by our residents at a discount somewhere between 20 percent and 30 percent, Or $200 million to $300 million.
It is my recollection from past experience that our transient neighbors from New York, Pennsylvania, Delaware, Maryland, and other states would share that burden with us, resulting in the discount to our taxpayers.
Back in the spring of 2003 my last year in the Senate, which was split 20-20, I met with leadership and the Treasurer to discuss revisiting the interpretation of the application of the sales tax to include condominium rentals. That would involve an existing tax, not the imposition of a new tax.
We are all familiar with the disappearance from the tax roles of at least 1,000 motel rental units over the past year in the Wildwoods alone when as many as 10, 20, and 40-unit motels have been replaced by four, six, or eight-unit condominiums.
Not only have we lost the income generated by rentals of those thousand units, but also the impact has been compounded by our unwillingness to tax the surviving competitors, i.e., the condominium.
For what it’s worth I share these thoughts with you and your readers in the hope that someone may find the suggestions worthy of discussion and share their reactions with our governor and our legislators.
Cafiero of North Wildwood, retired from the State Senate in January 2004.

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