By Christian Barranco
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Governor Phil Murphy has apparently woken up to the fact that there is a property tax crisis in New Jersey and he is determined to do something about it. But what he is proposing to do is the wrong thing. Taxing millionaires more and redistributing the money in tiny increments of $125 to eligible taxpayers is not a solution to New Jersey’s property tax crisis. It’s a way to buy votes.
New Jersey has an effective property tax rate of 2.13%, according to the Tax Foundation; that is the highest in the country. In raw numbers, New Jersey’s homeowners pay an average $8,800 in property taxes – with many middle-class families paying much more than that. The Garden State also has a top individual income tax rate of 10.75%, applicable to income exceeding $5 million; and one of the highest corporate tax rates in the nation. No wonder people are fleeing the state.
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The average property tax bill in the country — depending on whether you add in taxes such as the vehicle property tax — which 27 states charge including Rhode Island ($1,133 per year), Virginia ($962 and Connecticut $630) – is about $3,300. Vehicle tax or not, New Jerseyans pay a lot more than that. And we suffer from this most unfair of all taxes.
High property taxes hurt the state in several ways:
First, they are a burden to homeowners and a disincentive for property owners to invest in their properties. As former state Assemblyman and Republican candidates for governor Jack Ciattarelli has repeatedly pointed out: a homeowner decides to invest $10,000 into a new bathroom and the first person at the door after the job is done is the tax man to increase the assessment on the house which leads to higher taxes next year, and every year after that. Home remodeling is a big economic generator that cuts across a number of sectors but New Jersey’s property taxes are a disincentive to home improvements.
Senior citizens who bought their house decades ago and with modest care have seen its value grow – are stuck paying high property taxes at a time in their life when their income can least bear it. With few options seniors are forced to leave the state.
On the other end of age spectrum, young people are priced out of homes in desirable areas because of high property taxes. Progressives such as Murphy fail to recognize how property taxes contribute to one of the left’s most often embraced issues – affordable housing. If taxes weren’t so high, home prices – including rental units — would be lower.
The second way property taxes hurt the state economy is they dampen corporate investment in the state. Not only does a company have to pay high property taxes on its property, but so do its employees on their homes, which means that the company has to compensate its valued employees at a higher rate to get them to move to or stay in New Jersey.
The third way property taxes hurt New Jersey is by taking billions of dollars out of the economy to give it to government. No matter what progressives or socialists may think, governments do not create prosperity. They create tax burdens.
It’s long past time for the state legislature – the governor – and all elected officials to start treating New Jersey’s property taxes as the crisis they really are. And a $125 one-time tax credit financed on the backs of taxpayers isn’t a structural, long-term solution for property tax relief. It’s a gimmick.
Cutting property taxes is admittedly hard, if for no other reason than there are so many people with a vested interest in keeping taxes high. Millions of people, from lawyers, accountants, engineers, school superintendents and the state’s teachers’ union benefit from obscenely high property taxes. But it’s time to put Joe and Jane taxpayer ahead of the those feeding from the public trough. Government is not an enterprise; it is a calling to do good.
Drastic changes are needed to how governments spend money and how much they borrow to conceal their spending. To enact these changes is not impossible. It starts with more transparency and electing officials who will pledge cut spending on everything from professional fees to bloated public employee contracts. We need legislators with the courage to change our current tax system to one that relies less on property taxes to fund government — as four states have already done.
By cutting fees, and salaries, introducing more competitiveness in government work, limiting spending on so-called improvements, and revamping pensions and health benefits to reflect the median in the private sector; billions could be saved. But we never get to the savings point in this state because the spending cut discussion always gets hijacked by those whose ox is being gored. It’s time to forget about the sacred cows and show concern for people paying taxes.
FREE UP BILLIONS
If the state’s property taxes were lowered by $2,000 a household for the estimated 2 million households eligible for the governor’s $125 tax credit, the state could put $4 billion into circulation. Think of what that would mean to our state economy. With more money to spend at their discretion, homeowners would be free to buy more consumer goods, visit more restaurants, buy new cars and upgrade their homes. Businesses would save on their property taxes and that savings could go into creating jobs.
New Jersey got to this dismal point in its economic history because elected officials turned public service into an opportunity to serve themselves and their friends. Government service used to be a calling, now the politicians and the politically connected have turned it into a billion-dollar enterprise. It’s time to end profiteering at the expense of taxpayers and to treat New Jersey’s property tax problems as the crisis they are.
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Christian Barranco is the labor liaison for the New Jersey Organization for Economic Growth, a union electrician with IBEW Local 102, and the founder of the New Jersey Rough Riders Society which is dedicated to building bridges among labor, business and government to create economic opportunity.
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