HOME PRICES AND PROPERTY TAXES IN NJ

Statistical analysis of Home prices and Property Taxes in NJ

Statistical analysis of Home prices and Property Taxes in NJ

New Jersey's recently adopted budget for the 2007 fiscal year represents an important milestone that could pave the way for fundamental reform of the state's property tax system. The budget resolved the state's immediate fiscal crisis without fiscal gimmicks or an over-reliance on one-time revenues, freeing state officials to focus on long-term reforms. It also provides for a modest reduction in property taxes by applying half of the revenue from the approved increase in sales taxes to reduce the local property tax burden. However, there should be no illusion that the budget is a solution to the structural problems inherent in both the property tax system and the state's long-term fiscal condition.

In fact, simply applying sales tax revenue to New Jersey's existing property tax rebate programs would waste this opportunity to implement sorely needed reforms. Property taxes would still be among the highest in the nation and would continue to result in inefficient land use, an inequitable distribution of tax burdens, and incentives that conflict with the goals of the State Development and Redevelopment Plan, the Council on Affordable Housing and the Abbott education finance decisions. Property taxes in New Jersey must be reformed in the context of the state's ongoing fiscal challenges. A fairer and more effective system of local taxation should be part of a structural solution to the state's long-term budget problems. Over the last two years, Regional Plan Association and the Lincoln Institute of Land Policy have issued a series of reports to help inform the ongoing debate over how to reform property taxes. These reports have attempted to address two issues that were not receiving sufficient attention in the political debate, and which need to be a priority in any serious attempt at reform.

The initial goal was to improve public understanding of the connection between property taxes and land use, and to generate ideas for advancing the widely accepted goals of reducing sprawl and encouraging equitable and efficient land use through tax reform. It soon became apparent, however, that there was an even greater need for a framework to evaluate wide-ranging reform proposals. As a result, RPA and the Lincoln Institute issued a report in May 2006 that evaluated five reform proposals by a set of seven criteria for making both taxes and land use more efficient and equitable. These reports are summarized in Table 1 on page 5. The criteria include achieving consistency with the State Development and Redevelopment Plan, encouraging the production of affordable housing, improving equity in education funding, encouraging flexibility in different economic environments, encouraging local fiscal discipline, improving fiscal stability, and maintaining local autonomy. Of the five proposals that were analyzed, none was the clear winner, although some showed more broad-based benefits across all the criteria. Some, such as proposals to shift to a statewide or countywide school property tax rate, would have a limited ...