Creating An Equitable And Efficient New Jersey Property Tax Relief Program

Governor Jon Corzine has proposed increasing direct property tax relief to residents by spending $350 million in revenue from the new sales tax increase. The Governor’s idea is to increase property tax rebates by an unspecified amount and to double the credit for tenants.

Corzine also proposes using the state’s Property Assessment Management System (PAMS) to replace rebate checks with direct credits to each homeowner’s property tax bill by July 1, 2007.

Corzine’s original budget called for spending an additional $530 million to increase homeowner rebates and tenant credits by 10 percent. The $530 million would have increased senior homeowner rebates by a maximum of $130 and for all other homeowners by a maximum of $35. Senior tenant credits would have increased by a maximum of $82 and all other tenant credits by $7.50. (See details below)

Should Corzine spend $530 million to increase rebates, but not double tenant credits, the increase to these benefits would be scaled back by 33 percent from his original budget proposal. The maximum increase to a senior homeowner rebate would be $85.80 and all other homeowners would receive a maximum increase of $23.10. If tenant credits were doubled, we have no idea what the maximum increase to tax rebates might be, but certainly well below the previously proposed maximum increases of $85.80 and $23.10.

In our opinion, it would be better to consolidate the six direct property tax relief programs into one efficient and equitable program. This change would save on administrative costs and provide greater benefits to more people without spending any additional tax revenue.

With the average property tax bill now exceeding $6,000, very few average homeowners would consider it worth spending $350 million to get an extra $16.60 to $23.10, much less going to the trouble of amending the state’s constitution to make the small increase permanent.

The New Jersey PAMS technology will enable the state to provide the appropriate property tax relief benefit based upon age, income, disability, veterans status and property tax bill without exceeding any resident’s actual property tax expense. Today, property relief benefits can and do exceed residents’ actual property tax costs because of the piecemeal fashion in which relief is provided. Here’s how it happens.

Senior and disabled homeowners with incomes of $51,465 or less have not paid any property taxes increases since 1998 under the state’s property tax freeze program. In addition, these homeowners receive property tax rebates and credits that total a minimum of $1,000 to a maximum of $2,330. The lower the homeowner’s income the greater the property tax relief benefit. (See details below)

The property tax freeze along with combined direct property tax relief benefits results in some senior/disabled homeowners receiving a benefit greater than their actual property tax bill. For example, Camden’s current average property tax is $1,145.

Consolidating the various freeze, exemption, credit and rebate plans would enable the state to stop providing a total benefit greater than a homeowner’s actual property tax bill so that greater property tax relief could be extended to other senior and disabled homeowners with similar incomes, but with higher property tax bills.

The same concept should be applied to all senior/non-senior tenant property tax relief benefits, as well as for all other homeowners. For example, Newark’s average per capita residential property tax is $375, so clearly property tax relief benefits are exceeding the actual property tax expense for many residents. (See details below)

It is patently unfair for any resident to receive property tax relief benefits greater than the property tax bill they must actually pay, whether it is paid directly to a municipality or indirectly to a landlord. If there is a need or desire to grant additional income subsidies, separate programs should be passed into law and funded. A property tax relief program should be limited to the stated purpose, reducing a person's actual property tax burden.

Current Direct State Property Tax Relief Programs

Senior/Disabled/ Veteran Homeowners

Senior and Disabled Homeowner Property Tax Freeze
Since1998, New Jersey’s low-and middle-income senior and disabled homeowners (income $51,465 or less) have had 100% of their property tax increases paid through the state’s Senior and Disabled Citizens’ Property Tax Freeze program.

The Senior Tax Freeze program reimburses homeowners for any property tax increases assessed after the senior/disabled resident qualifies for the program. Property tax freeze payments are increased annually as local property taxes increase. (NJ Budget – Page B24).

Senior and Disabled Homeowner Property Tax Rebate
Senior and disabled homeowners receive a property tax rebate based upon income. Homeowners with an income of $70,000 or less receive a rebate between $1,000 and $1,200. Those with incomes of $70,001 to $125,000 receive from $600 to $800 and those earning $125,001 to $200,000 receive a $500 rebate. (NJ Budget – Page B24).

New Jersey Earned Income Tax Credit
The NJEITC program provides low–income residents (income $35,263 or less) with a payment equal to 20% of their federal EITC benefit. The maximum NJEITC is $880. (NJ Budget – Page B24).

Senior/Veteran/Disabled Local Property Tax Credit
Veterans and qualified senior and disabled residents receive a $250 credit on their property tax bills. The state reimburses municipalities for the credit qualified homeowners receive on their property tax bill. (NJ Budget – Page B25).

Property Tax Exemption for Disabled Veterans
Full exemption from property taxes on a principal residence for certain totally and permanently disabled war veterans and their unmarried surviving spouses/domestic partners. Unmarried surviving spouses of servicepersons who died on wartime active duty may also qualify. This benefit is administered by the local municipality

Senior and Disabled Tenants

Senior and Disabled Tenant Property Tax Rebate
Senior and disabled tenants receive a property tax rebate based upon income and filing status. Married, widowed and head of household tenants with an income of $70,000 or less receive a rebate between $150 and $825. Those with incomes of $70,001 to $100,000 receive a $150 rebate.

Single tenants with an income of $35,000 or less receive a rebate between $150 and $825. Those with incomes of $70,001 to $100,000 receive a $150 rebate. (NJ Budget – Page B24).

New Jersey Earned Income Tax Credit
The NJEITC program provides low–income residents (income $35,263 or less) with a payment equal to 20% of their federal EITC benefit. The maximum NJEITC is $880. (NJ Budget – Page B24).

All Other Homeowners and Tenants

Homeowners

Homeowner Property Tax Rebate
Homeowners with an income of $70,000 or less receive a rebate of $350. Those with incomes of $70,001 to $125,000 receive $250 and those earning $125,001 to $200,000 receive a $150 rebate. (NJ Budget – Page B24).

Veteran Local Property Tax Credit
Veterans receive a $250 credit on their property tax bills. The state reimburses municipalities for the credit qualified homeowners receive on their property tax bill. (NJ Budget – Page B25).

New Jersey Earned Income Tax Credit
The NJEITC program provides low–income residents (income $35,263 or less) with a payment equal to 20% of their federal EITC benefit. The maximum NJEITC is $880. (NJ Budget – Page B24).

Tenants

Tenant Property Tax Rebate
Tenants with an income of $100,000 or less receive a rebate of $75 .(NJ Budget – Page B24).

New Jersey Earned Income Tax Credit
The NJEITC program provides low–income residents (income $35,263 or less) with a payment equal to 20% of their federal EITC benefit. The maximum NJEITC is $880. (NJ Budget – Page B24).