Around this time ten years ago New Jersey was just beginning to see the effects of the new restriction on raising the local property tax.
Already known for high property taxes, the increase averaged 5% annually for about a decade. In response, government officials agreed to an annual limit of 2% in New Jersey.
After the restriction was in effect for the first full year, in early 2012 the state reported that the annual growth rate of the average property tax had been nearly halved.
News release of the then governor. Chris Christie, a Republican who imposed restrictions on cooperation with the Democrat-controlled legislature, said the increase over the same period last year was the smallest recorded in New Jersey in two decades. The Christie administration, according to the release, “finally took control of the property tax problem.”
The 2% limit on annual fee increases has replaced the weaker 4% limit that has been in effect so far. Importantly, local governments could exceed the new, lower ceiling only under more limited circumstances or only under the condition of voters. Around the same time, a similar wage increase limit was imposed, won through arbitration by local police and firefighters.
Looking back, these bipartisan policy changes and others about a decade ago seem to have been an important turning point for property owners across the state.
Local property taxes have risen no more than 2.4% over the same period last year since the 2% cap was introduced in 2011.
According to an analysis by NJ Spotlight News, the average property tax bill in 2021 would be about $ 12,800 – not nearly $ 9,300 – if bills grew at the same rate over the past decade as they did over the decade to 2% cap became laws.
In that analysis, NJ Spotlight News reviewed tax data and found that local real estate tax accounts grew no more than 2.4% over the same period last year since the 2% cap was introduced in 2011.
And average property tax accounts overall increased by less than 20% since 2011. In the decade before the restriction was adopted, the average property tax had risen by more than 60%. And in some of those years the bills have grown by more than 7% over the previous year.
It was not one
Of course, a lot has happened in New Jersey since the 2% limit was imposed, and it’s hard to fully attribute the slowdown to just one thing.
In addition to imposing a 2% limit on fee increases and a similar limit on raising the salaries of police and firefighters, Christie also worked with Democrats in the legislature to change pensions and medical benefits for civil servants so as to shift most of the burden of funding. for these taxpayer benefits for workers.
All three were key policy changes after they were included in employment contracts by the middle of the decade, said Mark Pfeiffer, former deputy director of the State Department of Local Government Services, who now serves as assistant director of Blaustein’s local government research at Rutgers University. Center.
“These three things together have really made a big difference,” Pfeiffer said.
Meanwhile, Gov. Phil Murphy, a Democrat who took office in 2018, was also trying to take credit. Last month, he suggested that during his speech in the state last month, a significant increase in his administration of public funding for New Jersey public schools, whose spending could be a leading factor in rising property taxes in many communities, was significant.
New construction and other stable growth rates that occurred after the Great Recession of 2007-2009 also probably played a role. The increase in the gas tax, which was used to increase public funding for local and county transportation infrastructure projects, was also supposed to ease the pressure on local property taxes when it was adopted in 2016.
“Among the highest in the country”
Regardless of the explanation, the goal, which was stated at the time to limit to 2% – according to the then Speaker of the Assembly Sheila Oliver (D-Essex), to help homeowners who are facing property taxes, which are among the highest in the country “- apparently, was fulfilled.
“If they could at least expect 2% growth, we are on the way,” Oliver said in 2010. Oliver now serves as lieutenant governor at Murphy.
Despite this, for many New Jersey residents, including those in the low-income group, home affordability remains a major concern. The slowdown in the average real estate tax bill over the past decade has probably brought no consolation.
In raw dollars, the average value of a property tax in New Jersey has risen more than $ 1,500 since 2011, before inflation.
And last year alone, the average bill increased by $ 172 to $ 9,284. For those living in the five most expensive counties in northern New Jersey – Essex, Bergen, Union, Maurice and Somerset – the average year-on-year increase is even higher, at more than $ 200 between 2020 and 2021.
Great bite from middle income
The average New Jersey property tax bill last year consumed more than 10% of the latest U.S. census estimate for the state’s annual average family income. And in a national context, a 2021 WalletHub study found that property taxes levied on homes at the average price for New Jersey were nearly $ 2,500 more expensive than for the next highest U.S. state.
Meanwhile, a major policy change that has taken effect at the federal level since fiscal year 2018 – limiting state tax deductions and local tax deductions, commonly known as SALT – for many New Jersey residents has wiped out the benefits of any slower local tax growth on real estate. This is because these bills can no longer be fully deducted from federal taxable income under the limit, which is currently set at $ 10,000 for both single citizens and married couples.
However, it’s also important to keep in mind that it’s what New Jersey residents get for high property taxes.
In most communities, property taxes are funded by local public schools and police departments. They also pay for plows that clear snow and ice from local and district roads. And the health departments that relied heavily on the coronavirus pandemic.
The newly re-elected Murphy often points to the “value proposition” when talking about the taxes levied in New Jersey and what residents get for them. However, this year even Murphy says more needs to be done to eliminate the rise in property tax bills.
State House effect
Although property taxes are levied locally in New Jersey, what happens in Trenton can have a big impact on outcomes for homeowners.
During his first four years in office, Murphy, among other policy changes, increased state aid to K-12 schools and worked with lawmakers to modernize popular state-funded real estate tax relief programs such as Homestead Benefit and Senior Freeze.
“For New Jersey residents, affordability is the most pressing issue, and property taxes are the biggest burden.”
But last month, during an inaugural speech for his second term, Murphy said he would not be satisfied with just “slowing real estate tax growth.”
“I want to take us to a place where we can see them fall,” Murphy said during a speech.
It remains to be seen what, if anything, will come out of his administration if he pursues this goal. More news can be made next month when Murphy publishes his proposal for the state budget.
New measures of “accessibility”.
For their part, lawmakers are not expecting a new budget to do more on property taxes.
Instead, they have advanced a number of “accessibility” measures in recent weeks. These include legislation that would expand tax deductions for tenants and direct more funding for municipal authorities who also use property taxes as their main source of income.
The latest legislative effort was made after last year’s election led Democrats to retain control in both houses of the Legislative Council, but with less advantage.
“For New Jersey residents, affordability is the most pressing issue, and property taxes are the biggest burden,” said Senate President Nicholas Scooty (D-Union).
However, watching the majority party, Democrats in recent years have not restored the wage increase limit that can be imposed by police unions and firefighters by their local employers in arbitration courts.
One hat remains, the other goes
In contrast to the 2 percent limit on total fee growth, Art The arbitration limit had an expiration date when the law was signed, and this limit was allowed to expire in late 2017 due to Republican objections, citing estimates that it had jointly saved taxpayers about $ 530 million, holding back wage growth.
And there have been several other political changes that Christie pushed for ten years ago as part of a “toolkit” of government reforms that Democrats have never widely accepted.
Some of these proposals remain in the latest accessibility program, backed by Republican lawmakers, including a call to limit the often expensive payments that civil servants in some places can receive for unused sick time.
“We have solutions that can help turn the tide,” said Senate minority leader Steve Oroha (R-Sussex).
Due to rising inflation, which is now affecting local government budgets, calls for so-called easing of limits may gain momentum as higher prices for fuel, goods and other products begin to affect those budgets.
“The story of inflation has yet to be told,” said Pfeiffer, who added that the costs associated with cybersecurity and information technology – is another new problem.
– Graphics by Genesis Abanda