Op-Ed: Property Tax Bills — Ransom Notes from Our State Government

Carl Golden | September 18, 2012 | Opinion
The problem posed by the use of property taxes to finance county, municipal, and school district operations is a systemic one

For New Jersey homeowners, the month of August has become an annual rite of passage. It’s when property tax bills arrive.
Some see them as holiday greeting cards from Hallmark. Many more treat them as ransom notes.
As they have for years, the highest in the nation property taxes remain the most serious issue facing the state, consistently in poll after poll, easily out-distancing education, environmental protection, crime, or transportation. They’ve been a staple in gubernatorial and legislative election campaigns for years and will surely be one in 2013.

Despite some progress in dealing with the problem — most notably a cap on tax-rate increases while requiring public employees to contribute a larger share toward their fringe benefits — the broad perception remains that the property levy is too high and, more discouraging, will continue to increase year after year.

Not surprisingly, such a view has led to a kind of weary resignation, a stoic acceptance that taxpayers will simply have to live with the ever-growing burden of property taxes the way Londoners lived with the blitz in the 1940s — it’s just something that will always be there to be dealt with the best way they can.

While recognizing that steps have been taken by the governor and the Legislature to face up to the problem, the wider belief is that the impact of those actions has been minimal. Too many of the bills that showed up last month still read like ransom notes.

Contributing greatly to the upward pressures this year has been the collapse of the housing market and the concomitant steep decline in home values. A record number of tax assessment appeals were filed and a great many homeowners succeeded in winning significant reductions in their taxes, reductions that had to be made up by other taxpayers who either didn’t appeal or lost their appeals.

In Atlantic City, for instance, a number of casino-hotel properties won assessment appeals, forcing the Council to borrow more than $100 million to cover the lost revenue. The remaining taxpayers have been forced to not only shoulder the burden of covering the revenue losses, but also paying off the municipal debt as well.

It is undeniable that the problem posed by the use of property taxes to finance county, municipal, and school district operations is a systemic one, a belief in the theory that the value of one’s property is the only accurate and reliable test of individual economic circumstances and ability to pay.

While such a theory may have been wholly acceptable over many years, its validity has been undermined by the expansion of government at all levels along with the increased demand for services that such growth produces. The financing mechanism has not changed significantly and property owners were expected to assume the ever-growing cost through ever-increasing taxes on their homes.

To be sure, the controls put in place have slowed the rate of property tax increases, but these are more about holding increases to a predetermined manageable level rather than stabilizing or reducing them. The systemic problem is unchanged — the unfairness inherent in a tax structure which fails to take into account any qualification other than property value to provide revenue to support government.

Taxes on income and consumption of goods and services are traditionally seen as more reliable indicators of individual wealth, yet in meeting the cost of all local governments, neither one is used.

On those infrequent occasions when the issue is raised, there is little appetite displayed to confront it on a broad front. The discussion often turns to shared-services arrangements or consolidation of municipalities to eliminate duplication of services, but efforts to implement such agreements have always been thwarted by fierce local opposition and invoking the inviolate concept of home rule.

Occasionally, talk surfaces of a constitutional convention to restructure the entire tax system, but all efforts have come to naught.

Alternative taxation — such as local income or sales levies used by many other states –immediately draws vigorous protests that it amounts to additional taxation, even though it would lead to potentially significant property tax reductions, instill greater equity in the system, and could easily be statutorily or constitutionally protected.

There is, in short, no reason to believe the Legislature will on its own undertake the kind of restructuring of the system that is clearly necessary. Many legislators have been quite open and candid in their assessment that the will to do so is lacking and that any effort in that direction would be stymied by political and private interest pressures.

The cap legislation and reform of public employee benefits — steps that were helpful but of low ultimate impact — were achieved with great difficulty and only after furious political accommodations. Reaching even further is not something many legislators are eager to attempt.
In the meantime, those ransom notes will continue to arrive every August.

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