For modification -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. Opposed -- None. The opinion of the court was delivered by Weintraub, C.J.
This case involves the constitutionality of Chapter 51 of the Laws of 1960, an act relating to the taxation of real and personal property for the use of local government.*fn1 Plaintiff, a taxpayer, sought a declaration that the statute or portions thereof are unconstitutional. On cross-motions for judgment the trial court held the statute valid except in two respects to which we will later refer. 69 N.J. Super. 27 (Law Div. 1961). We certified the ensuing appeal and cross-appeal before the Appellate Division acted upon them.
Chapter 51 provides that all real property subject to assessment and taxation for local use shall be assessed according to "the same standard of value, which shall be the true value," but that the assessment shall be expressed in terms of the "taxable value." The "taxable value" is defined as that "percentage" of true value which each county board of taxation may establish for the taxing districts within the county (section 1; N.J.S.A. 54:4-2.25). The percentage must be a multiple of 10 and may be no lower than 20 or higher than 100 (section 2; N.J.S.A. 54:4-2.26), and the percentage shall be 50 if the county board fails to fix a different one (section 3; N.J.S.A. 54:4-2.27).
Art. VIII, § I, par. 1 of the Constitution of 1947 reads:
"Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value; and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district."
Plaintiff assails the provision under which different percentages of true value may be used and urges that only a single, state-wide percentage can satisfy the mandates that (1) property shall be assessed "under general laws and by uniform rules," and (2) real property taxed for local use shall be assessed according to "the same standard of value."
The requirement for "general laws" and "uniform rules" first appeared in the tax clause, Art. IV, § VII, par. 12, added to the Constitution of 1844 by amendment in 1875. In Switz v. Middletown Township, 23 N.J. 580, 594 (1957), we said:
"* * * The direction for the assessment of property 'under general laws, and by uniform rules, according to its true value,' the standard laid down in the 1875 amendment to the 1844 Constitution, 'requires, and is fulfilled by such regulations as should impose the same percentage of its actual value upon all the taxable property in the township for township purposes, in the county for county purposes, and in the state for state purposes.' Stratton v. Collins, 43 N.J.L. 562 (Sup. Ct. 1881), Dixon, J. See State Board of Assessors v. Central R. Co., 48 N.J.L. 146, 307 (E. & A. 1886). Dixon, J."
The Constitution of 1947 continued the same basic mandate and to the same end, i.e., equality in the distribution of the burden of government among the owners of taxable real property. The Constitution of 1947, however, made certain changes. The one immediately pertinent is the substitution of "the same standard of value" for the term "true value" which the 1875 amendment specified
as the basis for assessment. We shall later refer to proceedings of the Constitutional Convention of 1947 from which it plainly appears that "true" value was abandoned because it was thought to restrict the Legislature to a single, inescapable concept of "value." The term "the same standard of value" was designed to permit flexibility in the approach to the valuation of property. At the same time, to avoid discriminatory treatment, the Constitution of 1947 requires that whatever "standard of value" is legislated, that "same" standard shall be applied to all real property taxable for local government (i.e., municipal, county, or regional school districts).
Thus equality in the distribution of the burden of local government upon taxable real property is the basic goal. The "general" character of the laws and the "uniform" nature of the rules, as well as the singleness of the "standard of value," are intended, not as exquisite abstractions of form, but rather as meaningful limitations to achieve equality of result. The thought is that things equal to each other in the context of the local real-property tax involved shall be treated equally.
Chapter 51 meets the constitutional mandates. Under it, all taxable real property must be valued upon the same standard or concept of value, i.e., "true value." All taxable real property within a given municipality and county must be "assessed" for taxation upon the same percentage of the common standard of value. Thus, all real properties, subject to the local tax, share equally in the cost of the local government concerned, whether the assessment ratio is 20 or 30 or 50 or 90 percent of the common standard. Although plaintiff argues to the contrary, we think it mathematically certain that the taxpayers of County A are not affected one whit by the circumstance that the percentage of true value employed as to them differs from the percentage used in County B. Hence we can find no infraction of the basic principle of equality which the Constitution ordained.
But plaintiff contends that if she is wrong in her claim that the taxpayers within a given county are dealt with unequally in the levy of taxes for local purposes, yet inequality would ensue if a tax were levied upon all real property for State purposes, as conceivably the State might some day have to do to meet its obligations under bond issues. The argument assumes that such a State tax would be assessed wholly within the framework of Chapter 51, without provision for equalization of the aggregates as among the counties. The short answer is that Chapter 51 does not levy a tax for State use, and if the hypothetical tax should hereafter be imposed, such constitutional difficulty as may be involved would beset the statute for the State tax and not Chapter 51.
In a somewhat similar vein, plaintiff points out that municipal borrowing capacity is geared to the aggregates of local assessed valuations, N.J.S. 40A:2-6, 42, with the result that borrowing capacity will depend upon the percentage of true value which may prevail in the county in which a municipality is situate. Again, the answer is that the difficulty, if there be any, relates, not to Chapter 51, but to the statutes that lean upon it.
Finally, inequality is claimed to be inevitable with respect to the veterans' exemption provided by Art. VIII, § I, par. 3 of the Constitution. That provision exempts veterans "from taxation on real and personal property to an aggregate assessed valuation not exceeding five hundred dollars." The argument is that Chapter 51 makes the value of the exemption vary with the different percentages of the standard of value used by the counties. This is an inaccurate view of the Constitution and Chapter 51. The Constitution provides that the exemption shall not be "altered." The Legislature can neither enhance nor reduce the worth of the exemption. It cannot, by the use, let us say, of 10% of the standard of value, enlarge the exemption to $5,000, nor by the use of 200%, cut it to $250. If the Legislature provides for taxation on a percentage
other than 100% of value, then the first $500 of value is excluded from the true value of a veteran's property and the remainder is subjected to the percentage which the statute prescribes. Thus if a veteran's property is worth $10,000, the sum of $500 is first deducted, leaving $9,500 to be treated in the same way as the property of a nonveteran. Nothing in Chapter 51 speaks to the contrary. Hence the value of the exemption remains constant throughout the State, notwithstanding differences in the percentages as among the several counties.
Plaintiff claims support in the proceedings of the Constitutional Convention of 1947 (Vol. I, pp. 767-85, 833-42). We do not believe any of the delegates talked about the issue now before us. Basically, two thoughts were there explored. One, as we have already said, was that the existing requirement for "true" value was too restrictive and as well the source of inequities because of varying local views as to what constitutes "true" value. The critics believed the Legislature should be free to select another standard of valuation. The other subject was the power to classify real property, there being specific references to the Railroad Tax Law of 1941 (c. 291), N.J.S.A. 54:29A-1 et seq., under which railroad property was taxed for local purposes at a fixed rate of $3. It was agreed that such classification of real property was barred by the provision the Convention adopted, although some felt strongly that the Legislature should have a free hand.
In the course of the discussion, Mr. Cavicchia, a delegate, raised the question whether the proposed tax clause called for "a uniform state-wide standard of value as fixed by the Legislature or whether it permits of varying standards of value among the taxing districts" (p. 782; italics added), whereupon Mr. Van Alstyne expressed his view that the provision for "uniform rules" would require the same
standard of value throughout (p. 782). Later the subject again arose in the discussion of a change which had been made to meet the objection of Mr. Cavicchia in which Mr. Clapp had joined. It was explained that their criticism
"* * * stemmed from their fear that the original language would give autonomy to the respective taxing districts so far as the standard of value which was to regulate the assessment of property was concerned, and that in districts in which second-class railroad property might be found, such as Paterson, Elizabeth, Jersey City, Weehawken, West New York, etc., you might find different standards of value being set up by which the assessment of such property was to be made. To remove any doubt as to the limitation, so that there would be uniformity throughout the various taxing districts in which second-class railroad property may be found, and to insure that the same standard of value would be applied in all of those respective taxing districts, this change was made." (p. 836; italics added)
Thus the discussion did not relate to the problem before us. Rather the subject was equality in the distribution of the cost of local government, and to that end it was decided that the standard of value, i.e., the basis upon which the value of taxable property is determined, should be the same throughout. No one had in mind the question whether different percentages of the same standard of value might be used in different counties where such use would not lead to inequality in the sharing of the burden. The stress throughout upon the theme of equality is evident from the "Summary and Address to the People of New Jersey by the Constitutional Convention of 1947," the delegates' report to the people, adopted by the Convention "to present the basic facts about the proposed new State Constitution," which contains (Vol. II, p. 1322):
" The Old 'True Value' Standard for Assessment is Dropped
This provision of the old Constitution has been strongly criticized because of the variability in its interpretation by the local assessors. The clause requiring assessment 'under general laws and by uniform rules' has been retained because it assures equality of treatment of taxpayers and permits legislative flexibility.
Under the new tax clause it will be necessary to revise the present law which taxes second-class railroad property at a special rate lower than the general local property rates. 'All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value; and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district.'
The control of taxation by the Legislature is continued."
Indeed, the question whether assessments should be made on a percentage of full value did not emerge until some time after the Constitutional Convention. The question was generated by litigation, culminating in Switz, supra, 23 N.J. 580, decided in 1957, wherein it was held that mandamus would lie to compel local assessors to obey the statutory mandate for assessment at full true value. That holding, made ten years after the Constitution of 1947 was adopted, focused attention upon sundry collateral problems which would arise upon the use of full true value. See concurring opinion in Switz, 23 N.J., at p. 599. Assessors had used percentages of true value and the percentages so used, usually well below 100%, varied tremendously. There was also intra-municipal inequality because different percentages were used with respect to different classes of real property, but the holding in Switz went beyond that problem of internal inequality, for it held that equality must be achieved at the level the Legislature had commanded, i.e., full true value. There followed much public debate upon the question whether the Legislature should fix a percentage of full value close to existing local practices, to minimize repercussions which were feared.
That question was explored in the Ninth Report of the Commission on State Tax Policy (1958), which recommended the program that became, with certain modifications, the basis of Chapter 51. The Ninth Report said (p. 69):
A decline in the tax rate commensurate with the increase in the tax base which would follow 100 per cent assessments is the other
major effect which should follow such a change. The average State rate would have been $2.05 instead of $8.30 in 1957. It has been earnestly contended that such a decline in the tax rate is purely theoretical in that there would be a tendency to encourage a spending spree because taxpayers are accustomed to the present higher tax rates. To the contrary, taxpayers appear to attach significance only to the amount of tax payable as shown on their tax bills, and few taxpayers are able to state the tax rate of the community in which they live.
This Commission does not concur in the view that a more realistic tax base would produce unrealistic local budgets. Nevertheless, the apprehension among taxpayers who associate the phrase, increased assessments, with increased taxes, rather than with a reduced tax rate, must be recognized as real and widespread. The commitments of both political parties are equally plain. For these reasons alone, a fractional standard of value would be more acceptable than 100 per cent assessments. Under such ...