What about the capital gains tax when you sell your property?

Property tax hikes smallest in 6 years
But Corzine goal not met

Sunday, November 18, 2007
JOE DONOHUE AND ROBERT GEBELOFF
Star-Ledger Staff

In the first test of sweeping property tax reform enacted after a seven-month special legislative session, homeowner taxes rose 5.5 percent this year, the smallest increase in six years but still higher than a 4 percent goal set by Gov. Jon Corzine.

A Star-Ledger analysis of property tax bills in every municipality found they averaged $6,504 in 2007, up $339 from last year. For many moderate-income homeowners, the increase in property taxes was more than offset by fatter rebate checks that typically gave them $700 more.

This year's 5.5 percent increase was the smallest since 2001, when the average property tax bill went up by 5 percent. Property taxes rose 6.8 percent in 2006.

The figures were a relief to Democratic leaders who this spring enacted reforms designed to stem New Jersey's highest-in-the nation property taxes.

"Any reduction in the rate is indicative of the fact that we've made significant inroads in reducing the property tax burden in New Jersey and, when combined with the increased rebate checks delivered this year, is extremely good news to Garden State residents," Corzine said. "This is only a start. Thanks to the reforms we've enacted with legislative partners, we should continue to see the property tax growth rate slow in years to come."

But even though taxes increased at a slower rate, the latest figures show New Jersey property taxes have now jumped 52 percent since 2000. Republicans said adding another $339 to an already high average bill is nothing to cheer about.

"I'm pleased that it's a percent lower increase than last year, but they're still much too high," said Senate Minority Leader Leonard Lance (R-Hunterdon).

Jerry Cantrell, president of the New Jersey Taxpayers Association, said he gives lawmakers "credit for some progress, but not a great deal. Unless they can get it down to the rate of inflation, every taxpayer is still on the losing end of the battle." Federal statistics peg inflation in northern New Jersey at 3.1 percent for the past year.

The Star-Ledger analysis of tax rates by counties and assessments on more than 3 million real estate parcels found that total property tax levies rose $1.2 billion to about $22 billion. Homeowners pay about $16.3 billion of total property taxes.

Terry Warrelmann, borough council president and mayor-elect of South Bound Brook in Somerset County, said his constituents "feel like everybody in New Jersey feels: that their property taxes are too high."

"People are worried," Warrel mann said "It's getting to be the affordability. They're paying a mort gage and watching their property taxes go up, too."

The opinion of taxpayers in South Bound Brook carries special significance because their property tax bills went up by 5.5 percent, matching this year's statewide average increase.

But behind that average lie enormous variations in how taxpayers in New Jersey's 566 municipalities fared:

# Average bills top $10,000 in 63 municipalities, up from 55 last year, and exceed $15,000 in eight municipalities, double the number paying that much a year ago.

# Among the 25 municipalities with the highest average tax bills, nine are in Bergen County and six are in Essex County. Homeowners in affluent Millburn paid the most -- $17,146 -- among towns with at least 500 homes.

# Average property tax bills fell in 23 towns, with Woodbine in Cape May County posting the largest decrease, 24.7 percent. The average bill there is $1,177.

# A total of 49 municipalities had average increases of 10 percent or more, down from 98 last year. The biggest increase was in Perth Amboy, where homeowners paid 28.9 percent more.

The special session of the Legislature that Corzine convened in the summer of 2006 produced a series of reforms, including a new state comptroller, new county superintendents to monitor local school spending, and a panel to study local government consolidation and several pension reform measures. A new formula for dispensing state aid to local schools still needs to be done.

The reforms that had the most immediate impact this year were increasing rebate checks and setting a 4 percent limit on how much municipalities, counties and school districts may increase their taxes each year. Senate President Richard Codey (D-Essex) said the new 4 percent cap is "starting to kick in" but will take several years to fully take effect.

The Star-Ledger review found 151 municipalities -- a little more than one town out of every four -- held their annual property tax increase to 4 percent or less. A year ago, only 82 towns kept their increases under 4 percent.

"There's no question that we're starting to see the light at the end of the tunnel, but it will be a gradual process," said Codey.

Frank Belluscio, a spokesman for the New Jersey School Boards Association, said the cap will "absolutely" have a bigger impact in future years, when it will be fully in effect and exemptions will be harder to get.

Assembly Speaker Joseph Roberts (D-Camden) said he wants to keep these limits on local governments "as rigid as possible."

"I think that our goal all along was to provide immediate relief and then implement reforms that would stop the upward spiral in property taxes," Roberts said. "While we still have an enormous amount of work to do, the early signs are encouraging."

But William Dressel, executive director of the New Jersey State League of Municipalities, said strict limits on spending without added state aid to towns will cause "a dramatic decrease in services. It's going to have a strangling effect on many municipalities."

Corzine said the key to long- term property tax reform is bring ing the year-to-year increase under control.

"We're trying to push it down below 4 percent," the governor said Thursday night during a call-in show carried on public television stations and on The Star-Ledger's Internet home, nj.com. "We'd like to get it to zero."

William Schluter, a former Republican state senator and co- chairman of Citizens for the Public Good, said holding property taxes to an increase of 5.5 percent is "progress, but it's not enough."

"Everybody is talking about the exodus out of the state. It's be cause of the property taxes," Schluter said. "Five-point-five percent is not cutting it as far as I can see."

Schluter won't get a quarrel from homeowners.

Margaret Mary Harrington lives in Runnemede in Camden County, where both the average tax bill ($4,805) and this year's increase (2.9 percent) are below statewide averages. She got a bigger rebate check this year. But it doesn't make her feel any better.

"The property taxes are outrageous. They're preposterous," Har rington said. "The state is not sav ing money by mailing checks out. Why not just decrease the tax?"

Staff writer Robert Schwaneberg contributed to this report.