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New Jersey Property Tax Facts
In New Jersey, property taxes are collected by the municipality, but distributed to the county, school and any special districts (i.e. fire district) based upon their levy.  Due to State statutes and policies, property taxes are the major source of revenue for most municipalities.  However, historically, the municipality is responsible for the smallest portion of the property tax bill.

  • Over-reliance on property taxes to fund local services

 

  • According to the Census Bureau, in 2010, property taxes in New Jersey totaled over $25 billion, and represented 48% of all State and local tax revenue.
  • Nationally, property taxes equaled 35% of State and local tax revenue.
  • According to the Tax Foundation, in 2008, New Jersey ranked #1 in property taxes, per capita. New Jersey’s rank in property taxes as a percentage of the median value of an owner occupied house was #1.
  • In 2008, the New Jersey per capita property tax bill was $2,625.
  • And in 2009, according to the Tax Foundation, our median residential property tax was $6,579 – tops in the Nation.
  • New Jersey property taxes as a percentage of home value were 1.89% also ranked tops in the Nation.
  • New Jersey property taxes, when measured as a percentage of homeowner income, equaled 7.45%. Here again, the Garden State ranked first of all the 50 States.
  • On the Census Bureau’s 2010 charts, in New Jersey, property taxes account for about 98% of all locally collected revenues. The National average is about 75%.

As the Washington-based Center on Budget and Policy Priorities has noted, “New Jersey does have one of the nation’s highest property taxes as a percent of residents’ personal income, ranking 3rd highest in 2006-2007 …  This reflects New Jersey’s choice to rely almost exclusively on property taxes to support local services. …”

 

  • Loss of Other Revenues
  • There once was a time when municipalities had direct access to a number of revenue sources aside from the general property tax.
  • In 1966, the State became the collection agent for property taxes on Class II Railroad properties and agreed to hold municipalities harmless, by annual appropriation.
  • Until 1968, when the State became the collection agency, municipalities also collected the Business Personal Property Tax. When it assumed collection, the State pledged to return the revenues to local government.
  • In 1970, the Financial Business Tax, which had formerly been equally divided between the host municipality and the host county, was doubled, and the new revenue distribution was 50% for the State, 25% for the host county and 25% for the host municipality.
  • In 1980, major changes in Public Utility Gross Receipts and Franchise Taxes were enacted, but the State promised, once again, to return the revenues to the host municipalities.
  • That promise was soon forgotten. In 1982, the Governor then in office used the line item veto of the State’s Annual Appropriations Act (for FY 1983) to take $32 million of Public Utility Gross Receipts and Franchise Tax funding from the appropriation intended for municipalities, and to use that money for other State priorities—priorities other than property tax relief.
  • This was challenged in Court. But, the State Supreme Court ultimately sanctioned this practice.
  • Throughout the ‘80’s and into the ‘90’s, every State Budget featured an annual diversion of some of the funding dedicated by permanent statutes to municipal property tax relief, and the use of that funding for different State purposes.

 

So the lion’s share of the monies that municipalities receive from the State as Energy Tax Receipts Property Tax Relief and as Consolidated Municipal Property Tax Relief Aid are only a partial replacement for funds that were originally direct sources of municipal revenue.

 

  • Local cost increases, further property tax relief cuts, but help from ‘toolkit’ reforms
  • From September, 2000 to September, 2012, the costs of local government increased
    44.3%.
  • For several years during the last decade the State provided municipalities with ‘level funding’ of major property tax relief programs.
  • In 2008, 2009 and 2010, because of State budget problems, the appropriation was significantly reduced.
  • What had been a distribution of $1.58 Billion in 2001, became only $1.294 Billion in 2011. This under-funding has forced municipalities to rely almost exclusively on the property tax to adjust to the cost increases.
  • Governor Christie’s 2010 “Special Session” was the third major attempt at property tax reform in the last decade.
  • In 2004 Governor McGreevey’s “FAIR” (Fair And Immediate Relief) plan included relief for our hardest hit taxpayers; stricter spending caps; and a plan to advance towards a Citizens’ Convention for Property Tax Reform Convention bill.  Today, all that remains of that plan is the caps.
  • In 2006 Governor Corzine’s Special Session for Property Tax Reform produced property tax credits that have been reduced, and property tax caps that have been tightened.
  • The centerpiece of Governor Christie’s “toolkit” reforms has been the new 2% levy cap. The cap does nothing to enforce discipline on State budget makers and reduce State reliance on local funding.
  • But the new levy cap was followed by major pension and benefits reforms and by a temporary cap on arbitration awards for public safety personnel. Other cost saving measures may advance.

 

  • Inside and outside the cap
  • Operating under the 2% levy cap municipalities are allowed certain common sense exceptions – capital expenditures, including debt service, pension increases above 2%, health benefit increases and costs related to a declared emergency cost.
  • But health benefit costs, as well as ‘inside the cap’ costs like insurance premiums, utility bills, reserves for uncollected taxes, funding of tax appeals and motor fuels, continue to rise by much more than 2%.
  • Likewise, the costs of State mandates continue to add up.

 

Contact:  Jon Moran, Senior Legislative Analyst, 609-695-3481 ext. 121 or jmoran@njslom.com

 

 

 

 

 

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