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Opinion: For Property Tax Reform, the Political Stars Are in Alignment

Can a second-term Republican governor and an entrenched Democratic Legislature muster the political will to take on property taxes?

carl golden
Carl Golden

Gov. Chris Christie’s budget message and the Democratic response that followed both contained the obligatory and familiar pledges to ease New Jersey’s highest-in-the-nation property tax burden.

Both were also light on details. Christie, for instance, dusted off his three-year old “tool kit,” a laundry list of some 30 proposals designed to help local governments economize, and chastised the Legislature for enacting only six of the recommendations. He called as well for extending the cap on binding arbitration awards and urged a renewed push for shared-service agreements and municipal consolidation.

Democrats, for their part, were even less specific, reiterating their concern for homeowners confronted with rising property taxes and promising support for efforts to control them.

While not referring to it specifically, the comments from the governor and the Democratic leaders amounted to an acknowledgement that increased state aid -- long the most effective and reliable method of assisting local governments -- was off the table. Municipal aid, for instance, is flat-funded in the governor’s budget, while support for public education -- by far the largest consumer of property tax dollars -- would rise minimally, insufficient in most cases to have any meaningful impact on local tax rates.

It was a concession to the fact that the state’s fiscal condition precludes increases in aid now and for the foreseeable future. While shared-services agreements among neighboring municipalities are gaining in popularity, the savings realized, though welcome, are modest. Municipal consolidation, considered by many to be something of the holy grail of property tax control, has failed to secure much of a foothold, unable to overcome entrenched nativist home-rule resistance.

For as long as anyone can recall, New Jersey had 567 municipalities. Today, it has 565. Not exactly a track record offering hope or optimism to consolidation advocates.

Property taxes have long been a staple of gubernatorial and legislative election campaigns, reflective of the voter polls and citizen surveys that have for years placed the issue at the top of the list of greatest concerns. Despite the steps that have been taken -- most prominently the two percent cap on property taxes and requiring public employees to pay a greater share of their fringe benefits -- its status as the public’s most worrisome issue hasn’t abated.

The time may have arrived for a serious high-level discussion of the state’s tax structure, one that examines what viable options exists to lessen the current overreliance on property taxes as the principal source of funding for everything from kindergarten classes to snow plowing.

The political stars may be in alignment for such a review. Consider:

A governor just beginning his second term, free of the reelection influences that dominate decisions and actions taken in a first term.

 A Legislature controlled by the opposition party and likely to remain so for the governor's second term and most likely beyond.

An ambitious Senate president with designs on the governor’s office. and what better way to get there than being the person who led and won the fight for property tax relief.

A governor at the head of an administration besieged and distracted by investigations and who’d like nothing better than to change the subject and return to normal government functions.

The current system of local taxation is a hodgepodge of rules, regulations, and exemptions based on wildly fluctuating real estate values and, more often than not, out of sync with the financial conditions of those burdened with paying them. The homestead rebate program designed to provide direct financial aid to homeowners has been dramatically scaled back and is unlikely to be restored to its former level, while a record number of successful tax assessment appeals has put a serious dent in many municipal budgets.

There is a case to be made that property value has outlived its usefulness as the most accurate and fair method of determining individual economic circumstances and has become an official punishment so severe that many have been forced to sell their lifelong homes because they can no longer afford the taxes.

When discussion periodically turns to alternatives to the property tax, the two areas most often mentioned are levies on incomes and/or consumer purchases -- in other words, a sales tax. Advocates argue that empowering local governments to implement one or the other if they choose to do so and either permanently replace or dramatically reduce property taxes instills vastly greater fairness and equitable treatment in the system.

Whenever the debate is opened, critics cry that extending local taxing authority is nothing but a subterfuge for additional taxation and that any reduction in property taxes resulting from it will be temporary.

They reject the contention that reducing property taxes by 50 per cent or more -- potentially more than $4,000 -- and replacing the revenue with a tax based on real income or consumer purchases is a worthwhile trade off.

The sharply conflicting points of view and the fear of being tagged as tax raisers have always scared legislators off any serious consideration, leading to continued reliance on cost-savings ideas, which are generally short-lived or produce unintended consequences, such as laying off police officers as a result of deep municipal budget cuts. A number of legislators have been candid in describing inaction as a lack of political will.

The nearly $8,000 in average annual property taxes is a direct result of there being nearly 1,200 government entities with authority to establish, levy, collect, and spend property tax revenue to support their operations, a number unlikely to decline anytime soon.

Establishing a study commission with the freedom to delve into all aspects of the state’s tax structure and develop recommendations for legislative and executive action would be a public sign that government recognizes the injustices and drawbacks of the existing system and is willing to move decisively toward a tax code based on fair and equal treatment.

Christie is fond of proclaiming that he was elected and reelected to do “the big things.” Here’s his chance.

Carl Golden is a senior contributing analyst with the William J. Hughes Center for Public Policy at the Richard Stockton College of New Jersey

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