Why are NJ property taxes the nation’s highest?

For many years, the Tax Foundation has listed New Jersey as having the nation’s highest property taxes.

Why are they so high? And why do most folks believe they are powerless to do anything about it?

First, is it true? NJ property taxes are higher, per capita, than others. The Tax Foundation’s ratings[2] rank New Jersey #1 in the nation (highest property taxes per capita) for each of the past five years.

• 2018: NJ ranks #1 (highest) in property taxes; #50 (worst) in overall tax climate. (data from 2016) For reference, in property taxes, California ranks 34th!

• 2017: NJ ranked #1 (data from 2015)[3]; In overall taxes, NJ Ranked 50th (worst).

• 2016: NJ ranked #1 (highest property taxes per capita)(data from 2014)[4]

• 2015: NJ ranked #1 (highest property taxes per capita)(data from 2013)[5]

• 2014: NJ ranked #1 (highest property taxes per capita)(data from 2012)[6]

Seven Key Reasons

Most folks tend to blame our high property taxes on schools or the “Mount Laurel” school funding decisions by the courts. But there are other causes. Susan Livio of NJ Advance Media, writing last year for NJ.com[7], listed these:

1. Our population density – of the states, NJ has the highest population density.[8]

2. High labor costs – in the Industrial Era, it was demand that produced high labor costs, but during the Progressive Era and beyond, labor rules and guaranteed benefits have put us near the top.

3. Generally high cost of living – The population density, proximity to both New York and Philadelphia, and demand for housing, utilities, high quality medical services … all boost costs.

4. Property taxes pay most of the costs – While New Jersey taxes just about everything imaginable, it has historically grouped municipal operations, county operations, the lower courts, jails, and schools under the “property tax” umbrella. In other states, some of those costs are paid by sales taxes or local income taxes.

5. Home rule – This is a point of debate. Some argue having 565 municipalities, 21 counties and 605 school districts increases costs; others argue that having decision makers close to the taxpayers (“we know where you live”) helps hold spending down.

6. Public worker pensions & health care costs – This is not in dispute. The public policy decisions in the 1930s and 1940s to allow governments to offer defined benefit pensions and lifetime health benefits to public employees … and often keep those costs off budget … are now wreaking financial havoc. Those policies allowed governments to skip putting money into pensions and health funds paycheck by paycheck, and allowed them to pass costs forward, only paying once folks retired. Kick the can down the road. This is changing slowly, but the damage of under-funding these programs may result in fiscal insolvency in the next decade.

7. Education costs – New Jersey has good schools, based on the reports. But it costs a lot to get those results, and decisions in the 1970s to significantly boost starting salaries boosted costs significantly.

A Deeper Look

But if we take a deeper look, our position as one of the original colonies, as a center for the Industrial Revolution, and our dubious reputation for hosting several of the world’s most progressive liberals (think Woodrow Wilson) all play a role. Consider:

• In 1875, the 1844 NJ Constitution was amended by adding the infamous “thorough and efficient” clause: “The [NJ] Legislature shall provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all the children in this State between the ages of five and eighteen years.” This obligation was carried forward, verbatim, into the 1947 rewrite of the NJ Constitution. The intent was an outgrowth of this colony’s Quaker origins, and a recognition of the importance (as observed by Alexis de Tocqueville) of enabling each citizen to read. At the time, the verbalized intent was for the State to pay education costs. But almost immediately, the State began pushing those costs to towns.

• New Jersey’s own Woodrow Wilson, - as president of Princeton University, then as governor of NJ, 1911-1913, then as President – brought us Progressive policies and liberal labor benefits. (Including but not limited to labor agreements as policy, like project labor agreements and arbitration, creation of the NJEA and other ‘mandated fee’ associations.)

• In 1947, New Jersey’s Constitution was radically revised.[9] The process was steered by self-admitted progressives within the legal and court system, who openly bragged of their desire for independence for the Courts and of their Progressive leadership and insight. Chief among the revisions was a complete reorganization of the judicial branch, abolishing the state’s former judicial system and its replacement with an entirely new and independent judicial structure. Heavily influenced by a well-known and politically powerful attorney named Arthur Vanderbilt, by 1950 the NJ Supreme Court had proclaimed itself as having the exclusive authority to control its own affairs, to interpret the NJ Constitution and to exercise unprecedented new rule-making powers “not subject to overriding legislation.”

As Chief Justice, Vanderbilt wrote more than 200 opinions, always advocating for a living/breathing judicial system not bound by past precedent or “old” legal doctrines, but one that was responsive to society’s contemporary needs. That legacy includes court rule-making such as the Council on Affordable Housing (COAH) and the Abbott school district funding issues.

• In 1972, a group of enterprising attorneys, urban school districts and cities sued the State and Gov. Cahill[10], alleging that the State’s system of funding free public schools was unconstitutional, namely, whether the equal protection and education clauses of the State Constitution were being violated by New Jersey's statutory financing scheme.[11] According to the court, the argument was that the then-current system of financing public education in New Jersey relied heavily on local property taxes, producing wide disparities in educational expenditures. The plaintiffs contended that public school education is a state function which must be afforded to all pupils on equal terms. But the state was funding districts on a formula basis that was not “full” funding – forcing each town to tax property to make up the difference (sometimes nearly 80% of the school budget). Thus, actual spending per pupil varied significantly, which they argued violated the “thorough and efficient” clause, as well as the “equal protection” clause of the U.S. Constitution’s 14th Amendment. The Court used statistics to document “a distinct pattern in every county in the State. In most cases, rich districts spend more money per pupil than poor districts,” and argued that “most of the poorer communities must serve people of greater need because they have large numbers of dependent minorities.” The Court ruled that “The Education Clause was intended to do what it says, that is, to make it a state legislative obligation to provide a thorough education for all pupils wherever located.”

In the 1975 Robinson v. Cahill decision, New Jersey’s Supreme Court began to exercise “the unprecedented new rule-making powers not subject to overriding legislation” that it had given itself through interpretation of the 1947 Constitution. The Court said, “each child in the State has the right to an educational program geared to the highest level he is capable of achieving, permitting him to realize his highest potential as a productive member of society.” It also said, “that pupils of low socio-economic status need compensatory education [greater funding than others] to offset the natural disadvantages of their environment.” … “Providing free education for all is a state function. It must be accorded to all on equal terms,” the Court said.

The conclusion was, “The State must finance a "thorough and efficient" system of education out of state revenues raised by levies imposed uniformly on taxpayers of the same class.” The Legislature and Governor were directed to come up with a new tax plan to equally fund the education of every student. They didn’t.

• By 1985, the inequities had not been resolved, and a new lawsuit was filed, “Abbott v. Burke”. This time, the Court named 28 specific school districts (commonly called “Abbott districts”[12]) “that were provided remedies [by the court] to ensure that their students receive public education in accordance with the state constitution.”

• In 1990, another lawsuit was filed which became known as “Abbott II”. The Court ordered the state to fund the (then) 28 Abbott districts at the average level of the state's wealthiest districts.

A Wikipedia article[13] summarizes in this way:

Abbott districts are school districts in New Jersey covered by a series of New Jersey Supreme Court rulings, begun in 1985, that found that the education provided to school children in poor communities was inadequate and unconstitutional and mandated that state funding for these districts be equal to that spent in the wealthiest districts in the state.

The Court, in Abbott II and in subsequent rulings, ordered the State to assure that these children receive an adequate education through implementation of certain reforms, including standards-based education supported by parity funding. It added various supplemental programs and school facilities improvements, including to Head Start and early education programs.

In the time since these decisions, many structural changes have been made, and vast amounts of public money have been spent. But property taxes remain the highest in the nation, most funding from schools is still from the property tax, and school funding is anything but “equal.” Finally, Federal tax policy that favored a few “high cost” states, allowing them to write off property taxes against federal income tax obligations, allowed a few states including New Jersey to skirt responsibility for their spending. There are arguments on both sides of the recent tax changes that took this write-off away, but while it lasted, it gave New Jersey towns the ability to spend more while lessening the threat of taxpayer revolt. Why do most folks believe they are powerless to do anything about high property taxes?   Many citizens say they’re not actively engaging in policy issues because they’re too busy and stressed from all the obligations of living in such an intense part of the country. While we’re all stressed, in my experience, it would be more accurate to say the obstacle is that they’ve never gotten involved. That’s not a criticism, but an observation. When we run orientations, or take “newbies” to a public meeting or to a legislative hearing, they often report that it wasn’t intimidating at all. 

Many volunteer to go to another, or to several, because the “live action” beats television any day of the week … and there are no commercials.

 This, however, is very serious business, with very serious consequences for Christians, Jews, and ordinary citizens. That’s because those who can gain from the favors of legislators work every day to assure their future economic benefit. More often, these days, their efforts also restrict our freedoms. 

Want some fun? Research the origin of this quote: “If not us, who?; If not now, when?” But it deserves some really serious consideration. “Politics” is the civil side of policy. You can be absolutely certain of another quote by Edmund Burke: “The only thing necessary for the triumph of evil is for good men to do nothing.” You can rest assured that evil men are active.

The Center for Garden State Families is a starting point. But a few active citizens isn’t enough. Emails to legislators are good, but they’re not enough. A check for $25 is good, but it isn’t enough. Get involved. No experience necessary. God Bless. 

[1] The Tax Foundation, Tax Foundation

[2] The Tax Foundation, 2018 Facts & Figures

[3] The Tax Foundation, 2017 Facts & Figures

[4] The Tax Foundation, 2016 Facts & Figures

[5] The Tax Foundation, 2015 Facts & Figures

[6] The Tax Foundation, 2014 Facts & Figures

[7] see http://www.nj.com/politics/index.ssf/2017/02/7_reasons_why_njs_property_taxes_are_highest_in_us.html

[8] see https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population_density

[9] see https://www.judiciary.state.nj.us/courts/supreme/vm/vanderbilt.html

[10] Robinson v. Cahill litigation

[11] see https://law.justia.com/cases/new-jersey/appellate-division-published/1972/118-n-j-super-223-0.html

[12] see https://en.wikipedia.org/wiki/Abbott_district

[13] see https://en.wikipedia.org/wiki/Abbott_district

*Mr. Eames has worked as an instructor for the Center for Self Governance and has been a candidate for NJ Senate, LD 27. He has served as CEO of the New Jersey Tooling & Manufacturing Association and the Greater Atlantic City Chamber of Commerce.