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Out-of-Date Data Shortchanges Recipients of Homestead Tax Rebates

The calendar may say 2016, but Homestead credits are based on 2006 property taxes, which were typically 30 percent lower than today’s

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Some of the New Jerseyans who need the most help paying their property taxes are being shortchanged by the program that was specifically put in place to assist them. And the problem affects 650,000 low- and middle-income homeowners, seniors, and the disabled who qualify for the state’s Homestead benefit program.

On the surface, the problem seems simple enough. Homestead tax rebates are still being calculated using property-tax bills from 10 years ago, when the average homeowner was assessed for about 30 percent less than today’s record-high taxes. That includes the latest Homestead benefits, which many homeowners are receiving from the state this month.

Whether the problem is intractable remains to be seen.

Gov. Chris Christie’s latest budget proposal would extend the little-known policy again. But lawmakers have also begun to talk about ways to reverse it. That effort comes as they continue to sift through the new spending plan Christie put forward in February, as a July 1 deadline for a new budget that’s set in the state constitution draws nearer. If they’re successful, a change in policy could provide a nice boost for many seniors and other homeowners who qualify for property-tax relief each year through 40-year-old program.

Both parties are to blame for freezing the baseline year that’s used to calculate Homestead benefits. It started under Democratic Gov. Jon Corzine in 2008 and has continued under Christie, a second-term Republican who took office in early 2010.

Legislation that revised the program in 2006 called for the benefits, which used to go out to taxpayers in the form of a rebate check, to be calculated each year using property tax bills from the prior October. That seemed to ensure the benefits would keep pace each year with escalating taxes.

But when the state faced a tightening budget in 2008, Corzine decided to calculate the Homestead benefits not on 2007 property tax bills but on the smaller bills from the year before. The move was executed in budget language and saved the state an estimated $85 million.

Fast forward to 2016, and the freezing of the baseline year for calculating Homestead property-tax relief remains in effect, having been continued by Christie and lawmakers from both parties ever since.

Christie also turned the Homestead rebates into a direct credit after he took office in early 2010. And he’s delayed the regular payment schedule at times to get the state through budget problems, which has created another lag. As a result, the benefits being paid out by the state this month are technically credits for property tax bills that were paid by homeowners in 2013 and are based on what they would have paid in 2006.

Asked about the continued use of the outdated property tax bills yesterday, Treasury spokesman Christopher Santarelli said the latest benefits are “effective May 1” and “already credited on property tax bills.”

That means that the rebate is smaller, since the 2006 tax bill was smaller. And if a homeowner or a previous owner has improved the house since 2006 and their tax bill was increased as a result, they are really out of luck.

Homeowners must meet income-eligibility requirements to qualify for the Homestead credits, with seniors and disabled homeowners earning up to $150,000 annually eligible for some relief and other homeowners making up to $75,000 annually also eligible.

The formulas used to determine each homeowners’ credits are complicated. For seniors and disabled homeowners making up to $100,000, the Homestead credit is generally worth 10 percent of the property tax bill from 2006. For seniors and disabled homeowners making over $100,000 but no more than $150,000, the credit is worth 5 percent of the property tax bill from 2006.

For other households making up to $50,000, the credit is worth 10 percent of the 2006 property tax bill. And it’s worth 6.67 percent of the 2006 bill for a household making up to $75,000. If there is no bill available for a home as of 2006, the state determines the appropriate amount, according to the New Jersey Society of Certified Public Accountants.

Christie’s proposed $34.8 billion spending plan for the fiscal year that begins July 1 would continue the practice of using the 2006 bills as the baseline. That will keep spending on the Homestead program essentially flat without having to make cuts in eligibility that would be politically unpopular with taxpayers -- particularly among the thousands of seniors and other homeowners in lower-income brackets that would be directly impacted.

And in raw dollars, a continuation of the freeze would mean Homestead credits would be calculated for another year using bills that averaged $6,446, about 30 percent less than last year’s average bill of $8,353.

When the freeze was first enacted by Corzine in 2008, then-Assemblyman Joe Malone (R-Burlington) called the move “deceptive,” predicting Trenton was on its way to making sure “there probably won’t be any rebates left.”

But Assemblyman Troy Singleton (D-Burlington) said many lawmakers today are simply not aware that the baseline for the Homestead program has been frozen because it happened before they joined the Legislature. Singleton, who has sponsored a number of bills centered on property-tax relief, was first elected to the Assembly in 2011.

‘I don't think it is common knowledge about the basis for the formula since the majority of members came to Trenton after 2006,” he said.

As budget committee hearings are scheduled to continue this month -- including an important mid-May update on the status of revenue collections from the state’s acting treasurer -- Singleton said he will raise the Homestead baseline issue and pursue a change in either legislation or a budget resolution.

“We should stop paying lip service to property-tax relief and actually do something,” Singleton said.

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