Opinion ID: 1503246
Heading Depth: 1
Heading Rank: 3

Heading: Our Statutes Require Property Assessments at Full Value.

Text: The majority opinion holds that all that the plaintiff taxpayers before us are entitled to is the elimination of discrimination against them by reducing their taxes to the point where they are equalized with those of other taxpayers in the municipality in accordance with the requirements of the equal protection clause of the Fourteenth Amendment to the Federal Constitution as enunciated in Hillsborough Township v. Cromwell, 326 U.S. 620, 66 S.Ct. 445, 90 L.Ed. 358 (1946). It declines to give effect in this case to the many statutes requiring assessments at true value and to the plaintiffs' claim for relief on that ground. Consistently and without deviation since 1875 the standard for taxation as laid down in our law has been and still is assessment at true value. It was to overcome the difficulties which are still plaguing us in this state of unequal and unfair assessments for taxation that Article IV, Section VII, par. 12, was added in 1875 to the Constitution of 1844: Property shall be assessed for taxes under general laws, and by uniform rules, according to its true value.  (Emphasis supplied throughout) All the statutes passed pursuant thereto (or to the corresponding provision of the 1947 Constitution, to which I shall refer in due course) have uniformly adhered at every level of the taxing machinery  municipal, county and state  to this standard of true value. Starting at the local level, N.J.S.A. 54:4-1 provides that All property    shall be subject to taxation    at its true value, and shall be valued by the assessors of the respective taxing districts.    N.J.S.A. 54:4-23 defines the true value of real estate; it requires the assessor to determine the full and fair value of each parcel of real property situated in the taxing district at such price as, in his judgment, it would sell for at a fair and bona fide sale by private contract on October first next preceding the date on which the assessor shall complete his assessments. By N.J.S.A. 54:4-36 each assessor is required to annex to his assessment list an affidavit stating among other things: I,    do swear (or affirm) that the foregoing list contains the valuations made by me to the best of my ability, of all the property liable to taxation in the taxing district in which I am the assessor, and that I have valued it, without favor or partiality, at its full and fair value, at such price as in my judgment it would sell for at a fair and bona fide sale by private contract on October first last,   . Likewise at the county level, we find the county boards of taxation created expressly to secure the taxation of all property in the county at its true value : Each county board of taxation shall secure the taxation of all property in the county at its true value, in order that all property, except such as shall be exempt by law, shall bear its full, equal and just share of taxes.  R.S. 54:3-13. The same standard of assessment at true value is imposed in the two specific modes of action authorized by the statute for the county boards of taxation, first in appeals by aggrieved taxpayers from local assessors to the county board of taxation, which is directed under N.J.S.A. 54:3-22 to revise and correct the assessment in accordance with the true value of the taxable property, and second, in proceedings under N.J.S.A. 54:4-47 on the county board's own motion to correct assessments to true value: The county board may adjourn from time to time in the discharge of its duties, and may, after investigation, revise, correct and equalize the assessed value of all property in the respective taxing districts, increase or decrease the assessed value of any property not truly valued, assess property omitted from any assessment, as provided by law, at its true value, and in general do everything necessary for the taxation of all property in the county equally and at its true value.  It is under this last-mentioned section of the statute that the present proceedings were taken. Similarly at the state level any appellant who is dissatis- may appeal from that judgment to the Division of Tax Ap- fied with the judgment of the county board of taxation    peals in the State Department of Taxation and Finance and on such proceedings each petition of appeal    shall contain a general prayer that the assessment be increased or decreased (as the case may be) to the true value thereof, N.J.S.A. 54:2-39. It is difficult to conceive of a standard of assessment that would be more simple or more fair than the standard of assessment at true value, yet notwithstanding its simplicity and fairness and the clarity of these constitutional and statutory directions to the taxing authorities to assess at true value, it is a matter of common knowledge that assessments on real property in this State have not been made at true value, creating, among other untoward results, disparity in the burden of the taxpayers in various municipalities with respect to their county taxes, for even the explicit statutory directions to the county boards of taxation to equalize taxes as between taxing districts in the county have for the most part gone unheeded, R.S. 54:3-15 to 19, along with most of the other supervisory provisions of the tax statutes. Briefly, R.S. 54:3-15 requires the members of the county boards of taxation to inspect so far as possible the properties in the varying taxing districts and to make their revision and correction after such view and inspection. R.S. 54:3-16 gives the county board supervision and control over the local assessors, who shall, in making assessments, be governed by such rules, orders or directions as the county board may issue, provided they are first approved by the State Tax Commissioner. R.S. 54:3-17 to 19 states one method of obtaining such equalization of total assessments as between taxing districts according to true value: Each county board of taxation shall annually ascertain and determine, according to its best knowledge and information, the general ratio or percentage of full value at which the real property of each taxing district is assessed according to the tax lists laid before the board. It shall prepare an equalization table showing the assessed valuation of the real property in each district, the ratio or percentage, if any, by which the assessed valuation should be increased or decreased in order to correspond to true value, and the true value of the real property within the district as determined by it. A copy of the table shall be mailed to the assessor of each district, and be posted at the courthouse, at least one week before the hearings provided for in section 54:3-18 of this title. ( R.S. 54:3-17) A hearing for the interested assessors is provided by R.S. 54:3-18, and then by R.S. 54:3-19 the county equalization table as confirmed by the board is directed to be filed with the state tax commissioner [now the director of division of taxation], the state board of tax appeals [now the division of tax appeals], the state comptroller and each taxing district in the county. The functions of the State Tax Commissioner (now the Director of Division of Taxation) in the equalization process are set forth in the statute: The commissioner shall annually, after receiving from the county boards of taxation the abstracts of ratables as last certified by such boards, inquire into and determine the general ratio or percentage of full value at which the real property within each county is assessed and listed for taxation, and shall prepare a state equalization table of county ratables, showing the assessed valuation of real and personal property in each county, the ratio or percentage, if any, by which the assessed valuation of real property of each county should be increased or decreased to correspond to true value, and the true valuation of real property as determined by him. A copy of the table shall be mailed to the county board of taxation and director of the board of freeholders of each county, and to the state comptroller, and posted at the state house, at least ten days before the hearing provided for in section 54:1-34 of this title. ( R.S. 54:1-33) The commissioner shall sit annually on the second Tuesday in July at his office in Trenton, for the purpose of equalizing the assessments between the several counties. At that time a hearing shall be given to the county boards of taxation and representatives of the boards of freeholders for the purpose of determining the accuracy of the ratios and true valuations of property as shown in the state equalization table, and the commissioner shall confirm or revise such table in accordance with the facts. The hearing may be adjourned from time to time, but the equalization shall be completed by August twenty-fifth. At the first hearing any county may object to the ratio or valuation of any other county, but no increase in any valuation as shown in the table shall be made without giving a hearing, after five days' notice to the board of freeholders of the county affected. ( R.S. 54:1-34) The commissioner shall prepare an abstract of the total ratables of the State, as returned by the county boards of taxation and corrected or confirmed by him in accordance with the State equalization table, and transmit a certified copy thereof to the State Board of Tax Appeals, the county boards of taxation and the State Comptroller, who shall apportion the State school tax, State tax or State moneys, as provided by law, upon the ratables as shown in such abstract, which shall take the place for all such purposes of the annual abstracts heretofore filed by county boards of taxation in the office of the Comptroller under the provisions of section 54:4-52 of this Title. ( R.S. 54:1-35) According to the records of the Division of Taxation, only a few counties attempt true equalization by increasing or decreasing assessed valuations yearly among taxing districts (in 1952 Bergen and Burlington; in 1953 Bergen and Middlesex; and in 1954 Bergen, Burlington, Middlesex, Passaic and Warren) as required by the statute; the equalization process within counties has been as much a dead letter, in operation, as assessments at true value. Likewise it appears from the records of the Director of the Division of Taxation that he has not prepared a state equalization table of county ratables as required by R.S. 54:X-XX-XX-XX, supra; statewide equalization has thus been as much a dead letter in operation as the equalization process within counties and the levying of assessments at true value in the various municipalities. The vice of this situation rests not only in discrimination between taxpayers of different municipalities with respect to the burden of county taxation within the same county, but in the encouragement that a shifting standard of valuation lends to inequalities in assessments within the same municipality, a matter of which I shall speak later at length. The administrative breakdown in the enforcement by the taxing authorities of the constitutional and statutory standard of true value and in the equalization of taxes at true value as required by the statutes has been facilitated by the difficulties heretofore placed in the way of a resort to the courts by an aggrieved taxpayer. The crucial case is Royal Manufacturing Company v. Board of Equalization of Taxes, 76 N.J.L. 402 ( Sup. Ct. 1908), affirmed 78 N.J.L. 337 ( E. & A. 1909), where it was held that a taxpayer whose property is not assessed at more than true value has no standing to complain, because under the 1875 amendment to the former Constitution all property must be assessed at true value; accordingly, even if he was discriminated against in favor of other taxpayers, he cannot have his assessment reduced, but rather must seek to raise the assessments of those whose assessments are lower than his. This legalistic decision not only frustrated the clear intent of the 1875 amendment by placing on the individual taxpayer an intolerable burden, which he could not possibly hope to meet by reason of the sheer expense of such a suit, but even if he brought such a suit it offered no promise of his obtaining assessment at true value for all taxpayers. This unfortunate decision which ignored the realities of the taxing process ushered in the era of what the public and the press when its possibilities came to be understood called tax lightning. The Commission on State Tax Policy euphemistically but graphically expressed the existing situation in its Fifth Report (1950; p. 4): The administration of the general property tax (real estate and improvements) is a chaos. On the business side it is a matter of a more or less gentle bargaining process that over the years has created a host of insecure but `favorable' conditions.  This statement is documented with complete county by county tables in its Sixth Report (1953; p. 30). At page 27 the Commission summarized its findings as follows: Real estate in New Jersey is assessed at an average assessment ratio of 34 per cent of its value. On this basis, the State-wide average tax rate of $6.77 per $100 valuation taxable in 1952 represents an average effective tax burden of $2.30 per $100 of full value. The estimated average assessment ratios vary as among the 21 New Jersey counties from a low of 16 per cent in Ocean County to a high of 56 per cent in Hudson County. Six of the State's 21 counties show estimated average assessment ratios above the over-all State-wide average of 34 per cent and three of them (Hudson, Essex and Passaic) show estimated average assessment ratios above 40 per cent. On the other extreme, four counties (Ocean, Burlington, Sussex and Salem) show estimated average assessment ratios of under 20 per cent. The variation as among individual municipalities ranges from estimated average assessment ratios under 10 per cent in seven municipalities to over 60 per cent in two municipalities.  Its conclusion ( p. 133) seems inescapable:  Never has so much money been raised from so many people so inequitably as in the current administration of the local tax on real estate.  Here we have conclusions of fact documented by years of competent study by an official commission that we cannot afford to ignore in the consideration of such vital issues. In the Hillsborough case, supra, 326 U.S. 620, 66 S.Ct. 445, the tax collector of a small New Jersey community with total assessed valuations for all property, both real and personal, of $3,139,020, levied assessments in the amount of $221,940,438 upon the intangible property belonging to an individual resident and to a trust of which she was trustee. This assessment would have resulted in additional tax payments of nearly $7,000,000 per year as compared with the township's annual budget of approximately $97,000, an outrageous instance of tax lightning which had become prevalent in various parts of the State. In that case the United States Supreme Court, which seemed more aware of the economic and political realities of taxation than our courts, correctly criticized the Royal Manufacturing Company decision for failing to accord the taxpayer the protection to which he was entitled under the Federal Constitution: The equal protection clause of the Fourteenth Amendment protects the individual from state action which selects him out for discriminatory treatment by subjecting him to taxes not imposed on others of the same class. The right is the right to equal treatment. He may not complain if equality is achieved by increasing the same taxes of other members of the class to the level of his own. The constitutional requirement, however, is not satisfied if a State does not itself remove the discrimination, but imposes on him against whom the discrimination has been directed the burden of seeking an upward revision of the taxes of other members of the class. Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 445-447, 43 S.Ct. 190, 191, 192, 67 L.Ed. 340   ; Iowa-Des Moines Nat'l Bank v. Bennett, 284 U.S. 239, 247, 52 S.Ct. 133, 136, 76 L.Ed. 265; Cumberland Coal Co. v. Board of Revision [ of Tax Assessments ], 284 U.S. 23, 28-29, 52 S.Ct. 48, 76 L.Ed. 146. The courts of New Jersey in a long line of decisions have held that a taxpayer who has been singled out for discriminatory taxation may not obtain equalization by reduction of his own assessment. His remedy is restricted to proceedings against other members of his class for the purpose of having their taxes increased. The rule was stated in Royal Mfg. Co. v. Board of Equalization [ of Taxes ], 76 N.J.L. 402, affirmed in 78 N.J.L. 337, as follows: `   the county boards are required to secure taxation of all property at its true value; so that the fact that the property of A is assessed at its true value and the property of other taxpayers within the same district is assessed below its true value, affords A no ground for demanding a reduction of his valuation, though it does entitle him to apply for an increase in the valuation of the others.' 76 N.J.L., pages 404, 405. On the basis of that rule it is plain that the state remedy is not adequate to protect respondent's rights under the federal Constitution. (326 U.S., at pages 623-624, 66 S.Ct. at page 448.) Had our courts applied the same reasoning and the same requirements of proof in the Royal case, the 1875 amendment and the implementing statute would have been quickly complied with by the taxing authorities. The question of law now before us is whether this court will ignore the clear and consistently repeated statutory mandate for the assessment of property at true value or direct the defendants to perform their solemn duty by assessing property at true value. The relief against inequality of assessment secured by the Fourteenth Amendment requires the reduction of the aggrieved taxpayer's assessment to the general level of assessments even though this is a departure from the requirement of [state] statute, Sioux City Bridge Co. v. Dakota County, supra, 260 U.S. 441, 446, 43 S.Ct. 190, 192, 67 L.Ed. 340, and that we must and should give effect to under the Hillsborough case, but a state court may not content itself merely by doing so when its statutes direct assessments at true value and the plaintiffs, as here, insist on the statutes being lived up to. By assessing all property at true value  and only by so doing  can both the state law and the Federal Constitution be complied with. It is the duty of our courts to require the proper discharge by the assessing authorities of their clear obligation to both the law of this State and the Federal Constitution, not to condone their violation of the law of New Jersey.