Net Property Tax Increase Much Higher Under Christie Than Corzine

Mark J. Magyar | May 6, 2013 | Budget
Christie's rebate cuts result in 18.6 percent increase in net property taxes that hits those making under $150,000

Net property taxes in New Jersey rose 18.6 percent in Gov. Chris Christie’s first three years in office, compared to just 6 percent in Democratic Gov. Jon Corzine’s last three years in office, a New Jersey Spotlight analysis shows.

Christie, who has made attacks on “Corzine Democrats” a centerpiece of his reelection campaign, has been touting his record of holding down overall property tax increases. But when Christie’s rebate reductions are factored in, his property tax record is not so clear-cut.

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While Corzine doubled average property tax rebates from 2006 to 2009 and provided rebates to families earning as much as $250,000, Christie sharply cut the size of rebate payments and limited eligibility for non-seniors to those earning $75,000 or less.

As a result, average net property taxes — the actual cost of property taxes for the average New Jerseyan after rebates are deducted — rose from $6,244 in 2009, Corzine’s last year in office, to $7,405 in 2012, Christie’s third year in office, state Department of Community Affairs data shows.

In contrast, net property taxes rose just $350 from $5,894 to $6,244 in the previous three years under Corzine because of large rebate increases.

The net increase in actual out-of-pocket property tax payments by New Jersey residents occurred even though the 2 percent cap and other policies pushed through by Christie and Senate President Stephen Sweeney (D-Gloucester) limited the actual growth of property tax bills to just 8.3 percent from 2009 to 2012, compared to a 12.95 percent increase in Corzine’s last three years.

Treasury Department officials did not respond to requests for comment Friday and yesterday. But Christie has repeatedly pointed to the low percentage growth in property taxes during his administration as evidence that the 2 percent cap and other policy changes, including pension, health benefit, and binding arbitration reform, are succeeding in holding down New Jersey’s highest-in-the-nation property taxes.

However, David Rousseau, budget analyst for New Jersey Policy Perspective, and Henry Coleman, a Rutgers University political scientist who served as executive director to the State and Local Expenditures and Revenue (SLERP) Commission under Republican Gov. Thomas Kean in the mid-1980s, said it is important to look at the net property taxes paid by different income groups.

“The real impact of these policy changes is that the property tax burden on the middle class has increased exponentially with the virtual elimination of rebates,” said Rousseau, who served as state treasurer under Corzine. “But on upper-income people, there has been no impact.”

In fact, one of the biggest side-effects of Christie’s rebate reductions is that the wealthiest 2 percent of New Jerseyans — those earning more than $500,000 — have been receiving more property tax relief from the state government for the past three years than the overwhelming majority of residents, with the exception of upper-middle-income seniors living in affluent suburbs.

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That is because while Christie has cut property tax rebates, the GOP governor left the income tax credit for the first $10,000 of property taxes untouched. That tax credit is worth $897 to New Jerseyans in the top tax bracket, but a maximum of $245 to a New Jersey family making $50,000 to $70,000.

With rebates for non-seniors cut to an average of $409 under Christie, the vast majority of families receive less property tax relief than the rich — in sharp contrast to 2007 to 2009 when property tax rebate checks alone averaged $1,100 for those earning up to $150,000, according to state Treasury and Community Affairs department reports.

Consider the impact on low- and middle-income families:

  • A family earning the typical Hamilton Township income of $72,020 and paying the average property tax for that Mercer County municipality of $4,533 in 2006 (the year on which all rebate payments are calculated) received a $907 rebate under Corzine in 2008, but only a $302 rebate last year; with the income tax deduction on property taxes added in, that family received $1,092 in direct property tax relief from Corzine and $490 under Christie.
  • A Middletown family earning the $95,455 average income and paying the 2006 average property tax bill of $6,781 would have received a $1,356 rebate and a $405 income tax credit under Corzine for a total of $1,762 in direct property tax relief in 2008, but only a $445 credit and no rebate from Christie.
  • A Newark family earning the $35,902 average and paying the average $4,159 in 2006 property taxes would have received an $832 rebate and $80 income tax credit from Corzine for a total of $912, compared with a $416 rebate and $112 income tax credit from Christie for a total of $528.
  • The numbers reflect both differences in rebate eligibility standards and the amount of money dedicated annually to direct property tax relief by the two governors.

    Corzine increased direct property tax relief from $1.31 billion in Democratic Gov. Richard Codey’s last budget to $1.71 billion in his first budget for Fiscal Year 2007, $2.85 billion in FY2008, and $2.52 billion in FY2009.

    The increased funding enabled Corzine to provide a 20 percent credit on the first $10,000 in property taxes to an estimated 1.23 million homeowners earning up to $100,000 for an average rebate of $1,115 in 2007 and 2008 — almost twice the $592 average rebate provided by Codey.

    The 325,000 homeowners earning between $100,000 and $150,000 received credits for 15 percent of property taxes that translated into an average rebate of $960 in 2007 and a 10 percent credit worth an average rebate of $665 in 2008. In 2007, before the Great Recession hit, Corzine also provided rebates worth an average of $745, based on a 10 percent credit, to 206,000 homeowners earning between $150,000 and $250,000.

    But Corzine lost his reelection bid to Christie, and the Republican governor found himself wrestling with a $2.2 billion budget gap as the state’s revenues bottomed out in the spring of 2010 in the aftershocks of the Great Recession, which began officially in December 2007 and ended in June 2009.

    In his first budget in FY2011, Christie cut almost $850 million from the $1.1 billion Corzine spent on property tax rebates in FY2010. Corzine had eliminated income tax rebates for the wealthiest 2 percent of New Jerseyans in 2009 as part of the one-year “millionaire’s tax” surcharge he had imposed on those earning above $400,000.

    Christie refused to extend the “millionaire’s tax” to fund a restoration of property tax rebates and left the income tax credit for property taxes in place for all New Jersey residents. As a result, since 2010, those making over $500,000 have received $897 income tax credits on their property taxes that are greater than the property tax relief received by the overwhelming majority of New Jerseyans.

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    Christie set aside just $268 million for property tax rebates in FY2011 — less than the $334 million cost of the income tax credits for property taxes allocated that year. This interim program provided average rebates of $240, according to DCA statistics.

    In his next three budgets, including the one he has proposed for FY2014, Christie set out a revised property tax rebate program with a projected $400 million price tag as part of direct property tax relief programs totaling $1.1 billion to $1.2 billion — far below the $1.7 billion to $2.85 billion Corzine had provided in his FY2007 to FY2009 budgets.

    Compared to Corzine, Christie’s rebate program for 2011, 2012, and 2013 cut rebates in half for non-senior homeowners earning up to $50,000 by providing a maximum 10 percent credit on the first $10,000 in property taxes, and chopped rebates by two-thirds to a maximum 6.67 percent credit for homeowners making $50,000 to $75,000. Those two groups received an average rebate of $407.

    Corzine had eliminated rebates for non-senior homeowners making over $75,000 as part of his FY10 budget plan to deal with plummeting revenues in the wake of the recession, and Christie chose to keep that lower income limit — rather than the $150,000 limit that was in place previously — when he set up his new rebate program.

    Compared to Corzine, Christie also has cut rebates in half for homeowners over age 65 and for those with disabilities, providing a 10 percent credit for senior and disabled homeowners earning up to $100,000 and a 5 percent credit for those making $100,000 to $150,000 for an average rebate of $540, according to Treasury Department documents.

    Meanwhile, property tax rebates for tenants, which reached a maximum of $860 for senior citizens and $350 for low-income homeowners under Corzine in 2008, were eliminated by Christie in FY2011 and never restored.

    Christie clearly has been dealing with a state economy recovering slowly from the recession, but cutting net property taxes has not been his top tax cut priority.

    In early 2011, Christie provided $199 million in his FY2012 budget for the first stage of a series of business tax cuts that will cost $690 million a year by FY2016.

    Then, when Christie felt that his “New Jersey Comeback” had begun in January 2012, he did not propose a restoration of direct property tax relief, but called instead for a 10 percent across-the-board state income tax cut that would have cost at least $183 million in FY2013 and $1.4 billion by FY2016 and would have disproportionately benefited the state’s wealthiest residents.

    Leaders of the Democratic-controlled Senate and Assembly proposed increasing property tax relief programs instead, with Sweeney proposing a 10 percent income tax credit of up to $1,000 on the first $10,000 in property taxes paid and Assembly Majority Leader Lou Greenwald (D-Camden) pushing a 20 percent cut funded partly by re-imposition of a “millionaire’s tax.”

    In poll after poll, New Jersey voters preferred the Democratic plans to cut net property taxes over Christie’s income tax plan. Subsequently, Christie, then in the running for the Republican vice presidential nomination, jettisoned his own tax cut in favor of Sweeney’s proposal, which did not require any other tax increase to fund it.

    However, when Christie’s tax revenues came up short starting in March 2012 and continuing through November 2012 in the wake of superstorm Sandy, Democrats balked at approving any tax cut.

    Property tax rebates took a back seat again this spring. When Christie’s revenue forecasts came up $405 million short, the governor’s solution was to push back this year’s $392 million in property tax rebates from May to August – a decision that was roundly criticized by Democrats who contended that lower and middle-income families were counting on the May payments.

    Christie has continued to call for a tax cut as his re-election campaign rolls out.

    Approval of a $1.4 billion phased-in property tax credit program would push direct property tax relief back up to — or even above — the record levels provided by Corzine in 2007.

    But the pressure of providing an additional $600 million a year for pensions each of the next five years, the state economy’s slow recovery from the recession, and the built-in costs of already approved business tax cuts, unfunded retiree health benefits, and future Medicaid growth make it difficult to see where the state can come up with $1.4 billion more for property tax relief without some sort of tax increase.

    That leaves New Jersey still locked into the unenviable position of having the highest property taxes in the country, which is Christie’s biggest vulnerability. Christie heads into reelection in November with a comfortable 32-point advantage over underfunded Democratic challenger Barbara Buono in the latest Quinnipiac Poll.

    But New Jerseyans generally give Christie lower ratings for his handling of property taxes than other issues, and it doesn’t change the impact that Christie’s rebate cuts have had on middle- and lower-income New Jerseyans.

    It isn’t only state policies that provide greater property tax relief to the wealthy in New Jersey.

    “Even more important than the rebates is the impact that the federal deductibility of property taxes has on overall net tax expenditures,” said Coleman, the Rutgers professor who served as executive director of the SLERP Commission.

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    Federal tax brackets ranged from 15 percent to 35 percent in 2012, and a new top bracket of 39.6 percent was added in January. A Mendham Township family earning $550,000 a year and paying the average $18,235 property tax bill in 2012 would have received a federal income tax deduction of $6,382 because they are in the 35 percent tax bracket.

    Meanwhile, a Mount Holly family making $54,590 and paying an average property tax bill of $4,283 would have received a federal income tax deduction of just $642.

    Total federal and state property tax relief for the Mendham Township family would total $7,279, and that family would have paid out just $10,956 — or 2.0 percent — of their total income of $550,000 in property taxes. Meanwhile, the Mount Holly family would have received $1,097 in total federal and state property tax relief, and would have paid out $3,186 — or 5.8 percent — of their total income in property taxes.

    A Newark family making the average income of $35,902 and paying out the average property tax of $6,358 would receive just $1,482 in total federal and state property tax relief and would be paying out a whopping 13.5 percent of family income for property taxes.

    Coleman suggested that policymakers need to spend less time focusing on the particular sources of regressiveness in the tax system than on the overall impact.

    “Maybe we need a new kind of total tax rebate, one that calculates the overall regressivityof all taxes, then provides the appropriate rebate,” Coleman mused. “That would free policymakers to design a property tax, sales tax, and income tax system that focuses on more important purposes like maximizing revenue rather than simply on issues of fairness.”

    Colleen O’Dea, an editor-at-large at NJ Spotlight, created the interactive map for this story.

    Editor’s Note: The original version of this story incorrectly indicated that Christie’s rebate cuts resulted in a 22.4 percent increase in net property taxes. This mistake and other inaccuracies have been corrected in this version of the article.