Patchwork Property Tax Relief: How to Make a Bad System Better

By Judith C. Cambria

Introduction

New Jersey faces a new millennium with a tax structure whose centerpiece is a creaky, outmoded relic from colonial times. More than any other state, we continue to tax the value of property to get most of the money we spend for schools and a host of local services. We do this even though we know that calculating the worth of your home is not the best way to measure your ability to pay taxes. We do it even though the result is a tax burden that takes a higher percentage of a lower-income family’s earnings or net worth than it takes from the wealthiest.

There are strong signs that people want this changed. In October of 1999 The New Jersey School Boards Association released a statewide poll it commissioned from The Eagleton Institute of Politics at Rutgers University. The findings made headlines: more than half the people in New Jersey said they believe the local property tax is the state’s least fair tax. What’s more, nearly 60 percent said they would support an increase in the state income tax if the money went for school funding and there was an offsetting reduction in property taxes.

The public shows a marked willingness to think things through, to consider alternatives, to see the problem whole. If policy makers catch up with the public, a substantive, honest, real debate can replace a narrow, hemmed-in discussion framed by the notion that tax increases, no matter how much they might improve things for average people, are philosophically taboo or politically suicidal.

The report Judith C. Cambria has prepared on the pages that follow examines New Jersey’s tangled web of property tax relief measures in terms of their scope, adequacy and equity. This work can be an instrumental part of that debate. It is a primer and a call to action rolled into one. In the first section, New Jersey’s patchwork of property tax relief programs are identified and explained in detail. Reading this makes it clear just what a confusing and at times counterproductive system we have. Aspects of it give the most assistance to the people who need it the least. Redundancies co-exist with unconscionable gaps in who is covered.

It is hard to read this and not conclude that New Jersey’s years-long intertwining of politics and policy on property tax relief has taken us about as far as we can get. It will take boldness that means major changes in how we think about and pay for property tax relief if further relief is to be realized and current inequities made right. As the author’s analysis of the new NJ SAVER program points out, this can no longer be a zero-sum endeavor, not if it is going to offer people meaningful, fair relief from the burden of property taxes. It is time to get beyond the politics of the moment and take a hard look at how New Jersey raises the revenues it needs. The amount of money available to provide property tax relief has to be expanded.

The second part of this report deals with what can be done. First, increase state support for education. As the report shows, no public service paid for by the local property tax in New Jersey costs more than schools. Relying more on the state income tax and less on property taxes to fund education would make ours a far more just system than it is now. Second, restructure the state’s existing property tax relief programs to disburse the money now available more effectively and more efficiently.

Judy Cambria shows us that it is time to stop nibbling at the edges of this problem. Years of doing so have turned New Jersey’s property tax relief system into something of a monster, the care and feeding of which keeps us from the larger issues that the system was supposed to solve in the first place.

NJPP is grateful to the author for putting her years of expertise and insight to work in a report that helps show the way to reform New Jersey’s property tax relief system. This is the second piece in NJPP’s property tax project. The first came in 1998, when David C. Mattek analyzed the Senior Citizen Property Tax Freeze and concluded that such a piecemeal approach would produce less than the desired and promised results. Our next report will outline an alternative to the NJ SAVER program that builds on some of Judy Cambria’s lessons. NJPP is committed to help frame the debate on this crucial issue, and confident that an informed public will lead the way.

– Jon Shure

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