America’s Highest Property Taxes

When Christie became governor, New Jersey had the highest property taxes in the nation. Even if he were to serve two terms, we could still count on our state keeping that crown.

The reason: spending. New Jersey splurges more than any other state on K-12 education, has more police per capita than any other state, and  uses home rule as an excuse for  jamming five hundred and sixty-six municipalities, five hundred ninety-one school districts and various independent authorities into an area only 166 miles long and 65 miles wide.

Christie has succeeded in helping tighten the belt on spending with a property tax cap, pension and benefit reforms and new arbitration law. After decreasing municipal aid, towns are being forced now to consider some much-needed, cost-cutting regionalization measures, such as Somerset County, which could soon shrink nineteen of its local police departments into three regional police forces.

All of which is helpful..

But even if property taxes were sizably reduced, in order to fill the gap other taxes would need to be increased, such as income tax and sales tax. New Jersey depends so heavily on property taxes to pay its bills that spending cuts alone won’t do the job. To reduce the property tax, Trenton would have to raise state taxes and shoulder a larger portion of local costs.

Fact is, New Jersey is second only to New Hampshire in having a property tax that is higher than state income, corporate taxes and sales taxes combined. In 2011, New Jerseyan’s paid a total of $21 billion in corporate and sales tax — and a whopping $25.8 billion in property taxes to support their schools districts and municipal and county governments.  

A tax system is generally considered good when income, sales and property taxes are in rough balance such that each provides somewhere between 30 percent and 40 percent of the entire revenue — which is the case in most states.

In New Jersey, however, property taxes alone makes up to 58 percent of the income/property/sales tax pie, with income tax just 24 percent and sales taxes the remaining 18 percent of the revenue.

The only workaround to lower the property taxes in New Jersey to a reasonable and competitive level with other states is to transfer K-12 education or municipal or county services, worth billions of dollars, to another major tax or taxes with the income and sales taxes being the most prominent choices along with devising an effective cap that prevents any new increase in school district and local government expenditure. This was Jim Florio’s vision in 1990 when he dedicated half of the $2.8 billion tax package to property tax rebate, though the majority of the money was rapidly consumed by school districts and municipalities for new expenses — and by the second year the property taxes were skyrocketing again.

Voter renunciation of Florio led to the election of a Republican legislature and GOP government Christie Whitman, and frightened politicians in both the parties away from any substantive effort for overall tax reform. Ever since then there have been a periodic calls for a constitutional convention to inspect and repair the New Jersey's tax system, but it was made clear in Christie campaign that any effort to raise any new tax will be opposed.

Steve Lonegan's proposal to substitute the states graduated income tax with flat 2.9 percent tax was acutely criticized by Christie because it would raise the tax on some citizens. He also rejected independent Chris Daggett's proposal to raise sales taxes by $4 billion to reduce the property, income and corporate taxes by $5.4 billion a net reduce of $1.4 billion as “$4 billion tax hike”.

Christie also sternly ruled out an increase in gas tax which is the third-lowest in the country and rather reinstated the Transportation Trust Fund with funds from the ARC rail tunnel project which he shut down.  

In reality reducing property taxes would require a solid multibillion-dollar tax alteration, and the Democrats didn’t have the guts to do it when they controlled the Statehouse. And it’s not likely that Christie will be the governor to undertake the needed renovation though he’ll go as far as he can on tax cuts.

But his unchanging opposition to state tax hikes will mean that New Jersey will continually have the highest property taxes in the nation. Christie might slow the growth of the property tax, but he cannot kill it.  And it’s uncertain at this point anyone truly can.   

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