Gov. Chris Christie yesterday claimed victory in the battle against property taxes, touting a 1.3 percent statewide increase in 2013 as evidence that his programs are working. But Christie’s approach to property taxes has benefited wealthier New Jerseyans more than middle-income and working-class homeowners.
For families and individuals earning more than $150,000, Christie’s success in limiting average property tax increases to 9.7 percent during his first four-year term is a clear improvement over the 20.1 percent hike during his Democratic predecessor Jon Corzine’s four years in office.
But that’s not the case for homeowners making up to $75,000, senior citizens earning up to $150,000 and renters whose large Corzine-era property tax rebates were cut or eliminated by Christie. With the cuts in the rebates included, net property taxes for lower- and middle-income residents actually rose 20.3 percent under Christie compared to 14.1 percent in Corzine’s four years, a New Jersey Spotlight analysis of state Department of Community Affairs property tax tables shows.
Assessing the impact on property taxes of the 2 percent cap, the pension and health benefits overhaul, and limits on interest arbitration pushed through by Christie in partnership with state Senate President Stephen Sweeney (D-Gloucester) and other Democratic legislative leaders is critical to the ongoing debate over whether New Jersey needs to cut its highest-in-the-nation property taxes or simply continue to limit property tax growth:
For Christie, holding down actual property tax growth represents sufficient progress. He made that clear in January 2012 when he declared that limiting property tax growth to 1.6 percent the previous year showed that his property tax initiatives were working and called for the state to put $1.4 billion into a 10 percent across-the-board income tax cut that would primarily benefit the wealthy, rather than restoring the cuts in property tax rebates.
When the Democratic-controlled Legislature refused to consider his income tax cut for “job creators,” Christie switched his support to a plan by Sweeney to offer a property tax credit of up to $1,000 on state income taxes to be paid for out of future revenue growth, but Christie’s revenue projections failed to meet expectations.
That option for attacking property taxes is no longer viable: Too much of New Jersey’s future revenue growth is being eaten up by increases of up to $600 million each year in state pension payments mandated by the 2011 pension and health care overhaul.
And while Christie has been weakened politically by Bridgegate, the Republican governor is sticking to his “no new taxes” pledge as he continues to contemplate a 2016 presidential run — which would rule out not only the new local option taxes that Greenwald and others have discussed, but also a revenue-neutral shift from property taxes to other broad-based taxes.
The Municipal Benefit
Ironically, the pension overhaul that is devouring so much of the annual increase in tax revenues as New Jersey makes up for 15 years of state government skipping pension payments for state workers and for teachers has had the opposite effect for the state’s 565 municipalities, which kept up with their annual pension obligations. The pension bill’s elimination of cost-of-living increases for retirees, increase in pension contributions by municipal employees, and hike in the retirement age will save municipalities an additional $135 million on their pensions this year, which will help them stay within the 2 percent cap imposed by Christie and the Legislature in 2010.
For the past two weeks, Christie has highlighted the 1.3 percent property tax increase at town hall meetings as evidence that he is bringing property taxes under control, and Community Affairs Commissioner Richard Constable underscored Christie’s message yesterday when his department released the official town-by-town figures.
“By any measure, Gov. Christie’s property tax reforms have been a resounding success as demonstrated by the third straight year of property tax restraint with more than 160 communities seeing either decreases in taxes or increases of less than 1 percent,” Constable crowed.
“Progress will continue and accelerate if the Legislature renews the binding arbitration law and passes the accumulated leave liability reform that Gov. Christie has championed. Taxpayers want the Legislature to continue the governor’s reforms so we don’t return to 4, 5 and 6 percent annual property tax increases,” he said.
Christie argues that the limitations on property tax increases he has imposed are more meaningful than the large property tax rebates provided by the Corzine administration, which he has dismissed as government taking money out of one pocket to put it in another.
Average property taxes rose $6,062 in 2005, Democratic Gov. Richard Codey’s year in office, to $7,281 in 2009, Corzine’s fourth and final year — a $1,219 increase that represented a 20.1 percent hike. Property taxes rose just $707 — or 9.7 percent — to $7,988 last year, which was Christie’s fourth year as governor.
But for New Jersey homeowners and renters, the rebate cuts by Christie represent a real out-of-pocket loss. Combined with Christie’s decision not to touch the existing income tax deduction for the first $10,000 of property taxes that disproportionately benefits wealthier taxpayers in higher income tax brackets, the net result of Christie’s property tax relief policy is a heavier burden for working-class, middle-income and upper middle-income homeowners.
As David Rousseau, Corzine’s treasurer who now serves as a budget analyst at New Jersey Policy Perspective, noted when last year’s property tax numbers were released, “The property tax burden on the middle class has increased exponentially with the virtual elimination of rebates. But on upper-income people, there has been no impact.”
Under Christie, net property taxes rose 20.3 percent from $6,244 to $7,514 — a $1,270 hike — for the average New Jersey homeowner earning up to $75,000 or senior citizens making up to $150,000 whose rebate checks were more than twice as large under Corzine. That 20.3 percent out-of-pocket increase in net property taxes is more than twice as large as the 9.7 percent actual increase in property taxes under Christie.
Meanwhile, as a result of the large rebate checks, net property taxes for the average homeowner rose just $774 — from $5,470 to $6,244 — under Corzine, a 14.1 percent increase in net property taxes that was lower for working-class and middle-income homeowners than the overall 20.1 percent increase property tax increase in the Corzine years.
The question as to whether to judge Christie’s property tax relief programs by the actual level of property tax increases approved by municipal governing bodies or by the net property tax increases paid by homeowners after rebates are factored in is a sore subject for the Christie administration.
In fact, the Christie administration yesterday for the first time eliminated the calculations of average homestead rebates and net property taxes for the state’s 565 municipalities and for the state as a whole from the Property Tax Tables released by the Department of Community Affairs. These calculations have been part of theDCA’s annual report every year since at least 1998.
Lisa Ryan, spokeswoman for the Department of Community Affairs, did not respond to emailed questions about the decision not to include the average homestead rebate and net property tax calculations in this year’s report, or what the average statewide rebate and net property tax numbers were for 2013. However, those numbers are easy to project with considerable accuracy because the Christie administration made no changes in rebate eligibility standards between 2012 and 2013. Consequently, this analysis can use the 2012 rebate averages to calculate net property taxes for 2013.
Simply focusing on the average statewide rebate figures, however, actually understates the difference between the Christie and Corzine rebate programs, Rousseau noted, because the Corzine program provided substantial rebates to homeowners earning up to $150,000 in 2007 and 2008 before it was cut back to $75,000 in 2009 after the Great Recession hit. Two-income suburban homeowners earning between $75,000 and $150,000 were hit particularly hard when comparing 2008 to 2013.
Under Corzine, a family earning $145,000 living in Ridgewood and paying the average property tax bill of $13,805 would have received a $1,381 rebate in 2008. Coupled with a $553 property tax deduction on state income taxes because it is in the 5.525 percent tax bracket, that family would have paid just $11,872 in net property taxes that year.
Under Christie, that family would still receive the $553 income tax deduction, but no property tax rebate, against an average property tax bill of $16,272 in 2013. Its net property tax increase over five years from the height of the Corzine program in 2008 would be $3,754 — a 32 percent out of-pocket increase.
Similarly, a Middletown family making $95,455 and paying the average property tax bill of $7,336 in 2008 would have received a $1,467 rebate to go along with a $405 income tax credit for a total of $1,873 in property tax relief that would reduce its net property taxes to just $5,463. Today, that family would receive no rebate, its income tax credit would rise slightly to $445 against the average tax bill of $8,118, and its net property taxes would jump $2,209 — a staggering 40 percent.
The Top 2 Percent
The wealthiest 2 percent of New Jerseyans earning above $500,000 have benefited the most from Christie’s focus on capping property tax increases because they never qualified for rebates anyway, but continued to receive the maximum income tax write-off of $897 for property taxes because they are in the highest tax bracket.
Further, they also benefited when Christie vetoed Democratic legislation to reinstate the millionaire’s tax of 10.25 percent on income above $500,000 and 10.75 percent on income over $1 million to pay for increases in property tax relief for lower- and middle-income New Jerseyans.
The impact of the income tax credit in tipping the property tax relief scale toward the wealthy is clear when a family in Christie’s hometown of Mendham Township making $550,000 is compared to a typical family in Newark.
A family making $35,902 in Newark with a $4,559 tax bill would have received a $904 average rebate under Corzine and an $80 income tax credit, and thus would have paid just $3,559 in net property taxes. Under Christie, the average rebate of $294 and income tax credit of $111 on the average property tax bill of $5,081 would have that family paying $1,116 more — and its total property tax relief of $405 would be just 45 percent of the income tax writeoff received by a Mendham Township family making 14 times as much money.
Those that suffered the worst, however, were those who cannot afford to buy homes. The Corzine program included rebates of up to $860 for senior-citizen tenants and $350 for low-income renters, which Christie cut in 2010 and never restored.