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New Jersey Considers Property Tax Constraining Measure

2 min readBy: Justin Higginbottom

New Jersey is considering reigning in its property taxes:

The Republican governor wants to copy Massachusetts’ Proposition 2 1/2 law, which limits annual increases in a community’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. levy to 2.5 percent and requires voter approval to exceed that cap. The law went into effect in 1981.

According to Christie’s March 16 budget address, its effect has been dramatic.

“While in 1977 Massachusetts had the third highest property-tax burden, by 2005 it had dropped to 33rd place,” Christie said.

Those numbers sound great. They just don’t add up when you look at the big picture.

According to census data, in 1981 Massachusetts had the third-highest property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. per capita and New Jersey the fourth-highest.

In 2005, Massachusetts had dropped to the 8th-highest per capita in property taxes; New Jersey rose to the top.

The columnist is right to play down Massachusetts’s lower property tax burden. While property tax collections are not as relatively high as they were in 1981 (when proposition 2 1/2 passed), their property tax burden is still pretty high compared with the rest of the country. The problem with proposition 2 1/2 is that overrides are just too easy. For fun, you can scroll through a history of the thousands of proposed and passed overrides here.

In 2007 Massachusetts had the 8th highest state and local property tax collections per capita ($1,703). In 2008 Massachusetts had the 20th highest property taxes on owner-occupied housing as percentage of median home value (.96%).

In 2007 New Jersey had the highest state and local property tax collections per capita ($2,490). In 2008, New Jersey’s property taxes on owner-occupied housing as a percentage of median home value ranked 2nd highest (1.74%). New Jersey loses.

(To see where your state ranks check out 2010 Facts and Figures.)

Property taxes, while hated by property owners, can be good taxes relative to other options. For one, they are fairly transparent (unless you are renting), which is why they are hated. Of course, that does not mean it is alright to have as high of property taxes as your local school board wishes.

Any constraint New Jersey could put on nearly any of their tax collections is a good idea. Here I give a summary of how highly those is New Jersey are taxed.