The average New Jersey property bill rose above $9,000 for the first time ever last year, although the rate of growth slowed slightly compared to the previous year.
Adding to the financial pressure for many New Jersey homeowners was a decision by Gov. Phil Murphy and lawmakers to not provide state-funded Homestead relief benefits last year amid budget problems triggered by the coronavirus pandemic.
And while the state allows for up to $15,000 in annual property taxes to be deducted from New Jersey income taxes, the cap on the federal deduction for state and local taxes, known as SALT, remains at $10,000.
In all, nearly $31 billion in revenue was raised through local property taxes to support spending by county and municipal governments, and school districts across the state, in 2020, according to new figures released by the Department of Community Affairs.
To support that spending, New Jersey homeowners paid an average property tax bill of $9,112, according to the new data. That’s up nearly $160, or 1.8%, compared to 2019 figures.
Close to $350 increase since Murphy took office
The average property tax bill has now risen by nearly $350 since Murphy, a first-term Democrat, took office in 2018. The average bill went up by slightly more than 2% in 2019, Murphy’s first full year in office.
While the year-over-year rate of growth slowed on paper for 2020, the net increase was likely much higher for the hundreds of thousands of New Jersey homeowners who are enrolled in the state-funded Homestead relief program. That group includes seniors and people with disabilities who make up to $150,000 annually, and other New Jersey homeowners who make up to $75,000 annually.
That’s because Murphy and lawmakers withdrew funding for Homestead benefits last year to help offset state revenue shortfalls triggered by the ongoing health crisis.
Over the last decade, property-tax bills have risen by roughly $1,350, or just over 17% in New Jersey. The average bill was $7,759 in 2011, the first full year of former Republican Gov. Chris Christie’s tenure.
Annual cap when Christie was governor
Christie, who served two terms in office, worked with Democrats who control the state Legislature to establish a 2% cap on annual property levy increases. The cap law took effect in 2011.
Even though the cap law provides for several exceptions — including debt payments, the costs of pension and health benefits for public employees, or county and local government employees as well as school district employees, and to fund response to large-scale emergencies — the average New Jersey property-tax bill has increased by no more than 2.4% year-over-year since the cap was enacted, according to Department of Community Affairs historical data.
By contrast, average property-tax bills increased by 4.1% in 2010, and by more than 7% in 2005, according to the historical data.
The latest state budget did include funding for paying out Homestead benefits in 2021. But those benefits won’t keep pace with the state’s rising property-tax bills because the governor and lawmakers continued the practice of using fine print in the annual appropriations bill to calculate benefits based on bills levied in 2006, which averaged less than $6,500.
Murphy is up for reelection later this year, and property taxes are typically one of the top concerns for voters during a gubernatorial election.
More state aid for schools
To address the issue, Murphy has increased state aid for K-12 school districts, arguing that those increases help ease pressure on local schools, which generally account for more than 50% of an individual homeowner’s property-tax bill in New Jersey.
In 2020, nearly 53% of the total haul from property taxes went to K-12 schools, according to the state’s data. Splitting the rest were municipal governments, with about 30%, and counties, which received nearly 18%.
Murphy has also sought to encourage more local governments and school districts to reduce their overheads by pooling services. During his first year in office, he also increased the cap on the state income-tax deduction for local property-tax bills, from $10,000 to $15,000.
Asked about the latest figures, Murphy spokesman Darryl Isherwood pointed to a new state budget proposal the governor is due to present to lawmakers later this month.
Hoping for a reversal in SALT cap
The election of Democratic President Joe Biden last year has fueled hopes that an unlimited federal SALT deduction could soon be enacted, especially with the House of Representatives and the Senate now both controlled by fellow Democrats.
The $10,000 limit was established in 2017, as part of a wider overhaul of federal tax policies that was approved when the Congress was controlled by Republicans, and when Republican Donald Trump was still in office.
Last month, New Jersey’s congressional delegation made a bipartisan pitch for SALT-cap relief to be included in any COVID-19 relief package that comes out of Congress in the coming weeks.
One third of New Jersey’s 21 counties now have property-tax bills that are above the federal government’s $10,000 SALT cutoff, according to the latest Department of Community Affairs data. They are Essex, $12,736; Bergen, $12,192; Union, $12,075; Morris, $10,870; Somerset, $10,272; Passaic, $10,247; and Hunterdon, $10,176.
On the other end of the list, the lowest average county property tax bills were levied last year in Cumberland, $4,536; Cape May, $5,443; and Salem, $5,973.
— Map and additional reporting by Colleen O’Dea.