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Chris Daggett has proposed a fundamental restructuring of the state’s tax system, changes that will deliver up to a 25 percent property tax cut to all New Jersey homeowners to a maximum of $2,500. All senior citizen property owners will receive the maximum cut of $2,500 per year.

“Property taxes are the number one issue in New Jersey and the main reason why people are finding the state unaffordable and leaving for other states. New Jersey is the only state in the nation where residents pay more money in property taxes than in income, sales and corporate taxes combined. This program will end that inequity,’’ said Daggett, the only candidate in the race to propose a specific property tax reduction plan.

Daggett’s proposal revamps New Jersey’s entire tax system and realigns the state’s four major sources of state and local revenue along the lines of recommendations of academic experts and most influential state organizations. It also provides more stability and balance to a tax system which has changed dramatically as the nation and state have largely shifted from a manufacturing economy to a service-based economy.

New Jersey’s overreliance on property taxes is the reason people regard it as the biggest problem facing the state, Daggett said. The only way to achieve an immediate cut in property taxes is to shift some of the burden to another tax, he said.

Under the plan, the $1.6 billion spent in this year’s budget for property tax relief programs—including homestead rebates, the senior citizen property tax freeze and the income tax write-off for property taxes—would be folded into a property tax cut that would be deducted directly from homeowners’ property tax bills, as proposed by the Legislature’s Property Tax Study Commission three years ago.

Daggett’s tax reform plan would extend the existing 7 percent sales tax to a wide range of personal, professional and household services, including services provided to individuals by professionals such as lawyers, accountants and architects. The sales tax extension would not include business-to-business services. The expansion would add $3.9 billion in tax revenue.

The $3.9 billion in new sales tax revenue would be combined with the $1.6 billion from existing property relief programs to fund the $4 billion property tax cut, a $620 million reduction in the income tax surcharge, a $750 million drop in corporate income taxes and a permanent source of funding for open space to cut future debt.

“New Jersey’s tax system is broken. Democrats and Republicans keep trying to deal with recurring deficits with one-shot gimmicks and borrowing that puts the state further in debt,’’ Daggett said. “We need new thinking in Trenton to solve our state’s fiscal crisis. Only an independent is capable of changing the system.’’

The most important component of the package is the imposition of a cap on municipal, county and school district budgets based on the Consumer Price Index (CPI). If a budget exceeds the cap, homeowners in the town will not be eligible for the new property tax cut, a provision that will serve as a hammer to control government spending.

“We cannot hold down property taxes without addressing the employee salaries, health care and pension benefits that are the real cost drivers of state and local government spending,’’ Daggett said. “This provision gives local governments and school districts the weapon they need to finally say no because this program carries a big stick: If you exceed the cap, you forfeit the property tax cut for your citizens.’’

Daggett said imposition of the cap could save New Jersey taxpayers approximately $100 billion in property taxes over the next decade compared to the average rise in property taxes over the past 10 years. The cap also will cut the state’s projected $30 billion pension deficit, which is based on actuarial calculations that assume the continuation of annual salary increases of 4.5 percent to 5.5 percent for public employees; pensions are based upon the three highest years of salary, so if employees retire at lower salary levels, pension costs are reduced.

A key element of the tax overhaul is designed to make New Jersey more competitive with other states by reducing corporate and income tax rates. The plan funds the reduction of the top income tax rate from the current 10.75 percent to 8.97 percent, which drops New Jersey’s top rate from third-highest to seventh-highest in the nation. The 10.25 percent and 8 percent brackets also return to the previous levels of 8.97 percent on income over $500,000 and 6.37 percent over $75,000.

New Jersey’s corporate income tax rate will also be reduced under Daggett’s plan. The top rate would drop from 9.36 percent (the statutory 9 percent rate plus a 4 percent surcharge) to 7 percent, which would drop New Jersey from sixth-highest in the nation to 25th, below both New York and Pennsylvania. The rates on small business would drop from 7.5 percent to 5.8 percent on businesses earning between $50,000 and $100,000, and from 6 percent to 4.7 percent on those earning less than $50,000.

“These tax cuts make New Jersey more affordable for people and more competitive for businesses, and will bring jobs back to the state,” said Daggett. “Just as important, the cap will put a long-term brake on property tax growth and school, municipal, county and state government spending.”

The $3.9 billion sales tax expansion includes a $205 million extension of the 7 percent sales tax to vacation home and condominium rentals to establish a stable source of funding for open space preservation and related uses. Only 19 percent of the tax would be paid by New Jersey residents, and it makes taxation of private rentals comparable to hotels and motels, as most states with shore tourism economies, including North Carolina and Florida, already do.

The plan keeps Daggett’s promise to identify a stable source of funding for open space preservation by dedication of $100 million to protect open spaces and preserve farmland. In addition, this stable source of funding would provide $20 million to triple funding for tourism promotion, and up to $10 million would be set aside to replace beach badge revenue for Shore towns or counties that are willing to make their beaches free.

Finally, as with the existing hotel and motel tax, the plan allows municipalities with vacation homes and condominiums to add a 3 percent local option tax on seasonal rentals by vote of their governing bodies. This option would provide up to $60 million to fund the burden of tourism or reduce property taxes in towns with seasonal rentals; 94 percent of seasonal rentals are Monmouth, Ocean, Atlantic and Cape May counties.

“This tax reform plan makes New Jersey’s tax system more equitable, and it also makes next year’s budget problem more manageable. At the same time, the plan begins to deals with the $130 billion in long-term unfunded liabilities by finally beginning to rein in the pay increases given to public employees that drive up both local property taxes and state pension obligations,’’ Daggett said.