Role of Property Tax in New Jersey

Introduction

New Jersey has a population of about 8.8 million people as per the 2012 census report. This figure shows a slight increase in population by about 0.8% as the 2010 census report. This mean the population of this state is increasing at a very slow rate due to economic hardships and family preferences. The property tax is among the seven bracket taxes that determine income tax rates (Bruckner 7). The most common taxes in this state include the sales, property and income taxes that range between 1.4 to 8.97%. a handful of the population is exempted from property tax while the majority of the population must pay this tax especially those with real property. However, all consumers are expected to pay a 3.5% tax on every shopping. This means nobody is exempted from this tax. All retail stores are entitled to pay a 7% sales tax with exemptions in food, medicine, footwear and clothing.

Property Tax in New Jersey

If your property was to become more valuable because of an event like renovations or structural additions and all other property remained unaffected, your tax charge in terms of property tax bill will increase (Lee 65). Increased worth beyond standard appreciation limit means that the property correspond to a larger portion of the worth of the metropolis (Lee 65). For that reason, it is assigned a superior portion of the sum to be raised through assets taxation. On the other hand, if it costs extra to deliver local authority’s services and to educate our children in public school or if the Federal and State governments enforce new demands on local societies, all other factors being equal, the tax bill will be bigger.

If the institutions, school districts and local governments cannot rely on other revenues maintaining pace with economic hardships and inflation, all other factors being equal, the tax bill gets bigger (Saavedra 78). On the other hand, if the State or federal government exempts certain people or classes of property from taxation or if previously concerned people or taxable property is used for property tax exclusion purposes, all other factors being equal, the tax bill becomes complicated since it gets bigger (Wilson 12). In addition, if a huge local industrial business shifts from a town, its operations will stay equal and the property tax bill will increase.

However, it is common knowledge that it is impossible for all other factors to remain equal or constant. In actual fact, usually, the things that people want to remain constant or undergo minor adjustments to keep property taxes down usually become the first to change. On the other hand, properties people want its price to go up usually remain low priced for long time (Michael 32). Therefore, to understand New Jersey property taxes the following should be taken into account.

Colonial age is the time when the New Jersey property started taking place from. In early 1670, a levy of one half penny per acre of land was usually imposed for the maintenance of the central government that was ruled by colonialists (Karcher 211). However, until the middle of the 19th century, these property taxes were imposed only on existing legal estates and private organizations at illogical rates within determined limits. However, the Public Laws of 1851 signified a new era in New Jersey and introduced the uniform evaluations based on actual property value and a general property value tax (Karcher 211). This meant that all property groups and classes were to be treated similarly for the purpose of collecting taxes to support the local government. In early 1875, the idea of uniform evaluations was included in the State Constitution. New Jersey courts held that this amendment, on the other hand, permitted the categorization of property for tax functions and the exemption of some property classes from taxation (Wilson 21). This was the beginning of a long tussle between private property owners and tax collectors regarding property tax and how much they should pay. Most people perceived this as an attempt to place unfair regulations that discriminated against some people. In early 1884, a State Board of Assessors was formed to evaluate the value of canal property and railroad, and through this the State thus included itself into the local property tax assessment policies and processes (Braid 23).

This levy is locally collected and evaluated to support county governments, municipal and local district schools (Braid 23). It does not help the State government; however, the biggest part of it supports the purpose that the State has forced on local authorities (Levy 13). All taxable property is consigned a market value assessed by a local appraiser in each town. An evaluation is set as taxable value not including in the case of eligible farmland which is particularly valued (Levy 13). Annually, district schools, municipal governing, and county governing organizations inform the County Tax Boards of their financial requirements through submitting their adopted budgets (Levy 14). In addition, various levies are calculated to correspond to the amount to be raised through taxation for each taxing area like a municipality or state.

The Origin of Property Tax Exemptions

New Jersey started exempting Intangible personal property from its tax base in 1945. The 1947 Constitution holds the famous uniformity clause that states that “property shall be assessed for taxation under general laws and by uniform rules (Brunori 12).” All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district” (Brunori 12).

This part was founded on an 1875 amendment of New Jersey’s 1844 Constitution. However, the next clause correspondingly ‘grandfathered’ property tax exemptions as “validly granted” that are provided under the 1844 Constitution that is still in existence. However, it exposed those exemptions to future unplanned legislative repeal and amendment, “except those exempting real and personal property used exclusively for religious, educational, charitable or cemetery purposes”. In addition, it gave the legislature the power to endorse other exemptions “only by general law” (Lenon 43). The legislature was permitted by the constitution to allow the decrease and exemptions in regions that had to be rehabilitated and redeveloped.

In late 1953, this constitutional proposed that the property tax deduction for war veterans who served in time of emergence war should be granted to widows of those soldiers and volunteers who died while on duty (Nicholas 33). Also, according to Nicholas, “in early 1960, another amendment was accepted which included a property tax reduction for senior civil servants including citizens” (33). In late 1963, this constitution was adjusted to authorize

the evaluation of farmland at its worth for farming purposes. This was an attempt that received a lot of criticism and ridicule from farmers and civil rights groups (Nicholas 33).

On the other hand, 1966 saw non-business classified property was exempted from taxation by the legislature even as restriction was imposed on and the taxation of other private property and business accounts (Figlio 76). In addition, this law also extracted the UBT and CBT (Unincorporated Business Tax and Corporation Business Ta respectively), RGRT (Retail Gross Receipts Tax), BPPT (Business Personal Property Tax) and directed local authorities to develop other strategies that will provide alternative sources of revenue for them. other exempted properties included those used by public authorities, youth or veterans’ associations, parsonages, New Jersey School Boards Association those taken by district administrators, dental service corporations, religious societies, historic properties, conservation and recreation land, property owned by medical corporations and pet cemeteries (Wilson 43). A survey conducted in 2005 showed that more than $ 91 billion was lost in terms of property exempted from taxation. This is an enormous amount that can finance various federal and state projects.

Effects of Property Exemptions

Property tax is usually an index to measure the growth of a city and evaluate its needs. Without property tax index, the local authorities will no estimate the needs of the local population in terms of infrastructure, recreational facilities, health services security and education (Jan 66). Therefore, the absence of property tax gives planners a hard time in deciding the needs of the population. In addition, it becomes impossible to predict business growth and population demands in terms of provision of social amenities.

Secondly, property tax plays significant roles in funding district schools. Most people have limited income that forces them to enroll their children in public schools that are affordable and available. However, tax exemption on property tax means that these families will not take their children to school (Wilson 34). Children deserve the right to go to school and get quality education. However, lack of adequate district schools to enroll children is denying them their right to education. All properties must be taxed to generate revenue to finance these schools.

Thirdly, local governments rely on property tax to finance their projects. The national government is not actively involved in local issues like education, health and other social amenities. Therefore, the exemption of some people and businesses from paying property tax is a major blow to the development of states. People have always relied on the local authorities to provide security, healthcare, education and water and sewerage services to them on a regular basis (John 231). This means these authorities must have adequate funds to finance these projects and ensure they are repaired, maintained and services regularly. In addition, the local authorities have employees who deserve better pays. They are human beings who like to live in clean environments and afford quality houses, meals and other needs. Therefore, the local authority must generate revenue to pay these workers salaries. An increase in tax exempted property means that the local authority workers face salary delays.

Lastly, all states must develop their future plans and present them to national authorities for approval and support. However, when they are not able to collect enough tax from property owners, it becomes very difficult to plan any projects. The availability of funds is the first step of planning. In addition, the local government plans its projects based on the revenue collected or expected from taxes (Wilson 23). The local authorities use tax approximations as tools to enable them to draw budgets foe various activities. In addition, property tax reflects the level of development in a region and can be used to predict the future developments and growths. Therefore, the local authority misses this opportunity as more people and businesses continue to be exempted from taxation.

Comparisons of Property Tax in Two Cities in New Jersey

Property taxes in New Jersey differ from state to another depending on various factors. The first determinant of property index is a city’s population. This means that cities with big populations have higher property taxes compared to those with small populations. Secondly, a demand for land also influences the rate at which property is taxed. Areas with limited land for sale have higher property rates compared with those that have expansive farms. In addition, urban areas have higher property taxes compared to rural regions. Lastly, the central government also determines the tax each state pays through various issues like other tax generation activities available in a state. The table below shows some of the rates applicable in some regions within New Jersey.

COUNTY PLACE MEDIAN HOME PRICE MEDIAN TAX TAXES PER $100k
Atlantic Mullica Township $172,500 $2,233 $1,294
Bergen Rochelle Park Township $399,950 $4,102 $1,026
Burlington Pemberton Township $170,500 $2,357 $1,383
Camden Brooklawn Borough $118,000 $1,920 $1,627
Cape May North Wildwood City $440,000 $2,095 $476
Cumberland Maurice River Township $113,725 $1,377 $1,210
Essex Irvington Township $205,000 $4,401 $2,147
Gloucester Greenwich Township $170,000 $2,402 $1,413
Hudson Hoboken City $925,000 $7,751 $838
Hunterdon Tewksbury Township $682,500 $9,511 $1,393
Mercer Hamilton Township $240,000 $3,756 $1,565
Middlesex Plainsboro Township $448,000 $7,312 $1,632
Monmouth Asbury Park City $250,000 $2,878 $1,151
Morris Chester Township $775,000 $10,616 $1,370
Ocean Harvey Cedars Borough $1,287,500 $7,165 $556

The data above present a shocking figure on how the residents of New Jersey spend more money on property taxes than any other expenses. This may explain why there are fewer people interested in acquiring property in this country. In addition, most businessmen prefer investing in other nations to investing in New Jersey due to these heavy costs. However, the state cannot abolish this tax since it funds more than a third of the total budget (Salmore 23). On the other hand, property taxes in New Jersey have declined since this program was developed. The period between 1992 and 1996 saw this tax slump by about $ 14,000. However, his figure has remained constant since then but the recent two years have seen it start to rise again. An analysis conducted by the Tax Foundation on taxes paid in each state revealed that Louisiana had least taxation of 0.18% compared to New Jersey that levied its residence at 1.89%.

Property taxes in New Jersey

References

Braid, Ralph. “Symmetric Tax Competition with Multiple Jurisdictions in Each Metropolitan Area.” American Economic Review. 86.5 (1996): 1279–1290. Print.

Bruckner, Jan K. “A Tiebout/Tax–Competition Model.” Journal of Public Economics. 77.2 (2000): 285–306. Print.

Brunori, David. Local Tax Policy: A Federalist Perspective. Washington: Urban Institute Press, 2007. Print.

Figlio, David N., Van W. Kolpin and William Reid. “Do States Play Welfare Games?” Journal of Urban Economics. 46.3 (1999): 437–454. Print.

Jan, Nancy. “Testing for Strategic Interaction among Local Governments: The Case of Growth Controls.” Journal of Urban Economics. 44.3 (1998): 438–467. Print.

John, D. “Property Taxation, Congestion, and Local Public Goods.” Journal of Public Economics. 64.2 (1997): 207–217. Print.

Karcher, Alan. New Jersey’s Multiple Municipal Madness. New Jersey: Rutgers University Press, 2009. Print.

Lee, Kangoh. “Tax Competition with Imperfectly Mobile Capital.” Journal of Urban Economics. 42.2 (1997): 222–42. Print.

Lenon, Mary Jane, Sajal K. Chattopadhyay, and Dennis R. Heffley. “Zoning and Fiscal Interdependencies.” Journal of Real Estate Finance and Economics. 2.2 (1996): 221–232. Print.

Levy, John M. Essential Microeconomics for Public Policy Analysis. Westport: Praeger, 1995. Print.

Michael J. New. “Limiting Government through Direct Democracy: The Case of State Tax and Expenditure Limitations.” Cato Institute 420 (2001).

Nicholas, Johnson. “The Taxpayer Bill of Rights and Referendum B: Assessing the Availability of Public Services and Investment,” Center for Budget and Policy Priorities, Washington (1998): 3–7.

Saavedra Lewis. “Do Local Governments Engage in Strategic Property–Tax Competition?” National Tax Journal. LIV. 2 (2001): 203-226. Print.

Salmore, Barbara. New Jersey Politics and Government: The Suburbs Come of Age. New Jersey: Rivergate Books, 2008. Print.

Wilson, John D. “Theories of Tax Competition.” National Tax Journal. 52.2 (1999): 269-304. Print.

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