New Jersey's Property Tax System - Research Paper Example

New Jersey's Property Tax System Introduction One of the things that propelled people to leave New Jersey in the past decade was the high property taxes. Although in 2010 New Jersey capped the taxes, only two percent of the cap worked which resulted in the lowest property tax growth in the past two years for the last two decades. However, the task is not over yet because property tax is still high; hence, the need for a new property tax initiative for tackling the root causes that increase property tax. Although no single approach is capable of adequately addressing the objective of property tax reform, there are various potential elements for packaging a comprehensive reform. The two percent cap worked because costs were under control and reforms in the interest award system that needed fixing. However, the interest arbitration restriction was not permanent because is set to expire April 2014 unless action is taken. Therefore, to reduce property tax, there is need to renew the restriction on interest arbitration awards and even making the cap permanent. Moreover, property taxes in New Jersey are high because cities and town are trapped by costly state policies that raise costs for the local government. To cover the increased costs in the government, taxpayers end up paying up the price. Therefore, to deal with the burgeoning government costs, the senate has to approve real consolidation and civil service reforms. Everyone’s effort is needed especially those who are accountable for the property taxes like the Senate, Assembly, and local government. This would provide the local government the authority to run the governments like business because it would be able to consolidate, share services, eliminate duplication, and eventually decrease property tax. For instance, Princeton managed to save 4.7% of its budget by consolidating various tax departments, police forces, and offices answering calls into one government that allowed provision of better services and reduction of municipal taxes (Christie 81 &82). According to Christie (82), reorganization commission in Princeton pointed out “seniority rules were at the top of the list of barriers to shared services.” Therefore, New Jersey needs to help its cities and towns to do away with the rules that get in the way of attaining lower property taxes. Moreover, sick leave payout for government employees is one of the things driving costs up because it is often abused in many occasions with real costs. With New Jersey towns facing $880 million in liability, this is set to increase if the system is not fixed. Therefore, reforms are the common sense in lifting the billion-dollar burden off New Jersey towns, which would propel a decrease in property taxes in New Jersey (Christie 82). Moreover, individuals who claim disability retirement mess up New Jersey’s pension system because the individuals are capable of working fulltime. This necessitates the established of a special unit tasked with the job of prosecuting pension fraud. In addition, New Jersey has to further solidify its pension system and decrease costs through reforming its disability retirement system in order to curb the fraud and abuse. These efforts would in return help New Jersey decrease its property taxes. There is need to end the practice of getting around property tax cap in some towns by avoiding enacting user fees meant to fund conventional services that were in the budget (Christie 83). New Jersey has to cut property taxes drastically in order to improve its competitive position as a preferable place for business as a way of attracting high-income taxpayers in New York City and making it affordable for families to stay and even encourage young couples to purchase and homes in the state. Fifteen counties in New Jersey appear in the top twenty-five in the nation regarding property taxes; this should propel the desire cut property taxes. According to New Jersey State League of Municipalities (para2), “the only way to do it is by shifting significant portion of property tax to other broad-based taxes.” In the past decade, there have been various reform proposals for decreasing New Jersey’s overreliance on property tax through changing a large portion of income and sales tax or even both (New Jersey State League of Municipalities para3). One key element New Jersey property tax debate has to consider is the way the reform deals with spending and revenues in decreasing property taxes. Currently, it is impossible to decrease the overall tax burden without addressing the spending aspects even if the state shifts to other revenue sources. However, the counter argument believes that the goal of tax reform should result in equitable and efficient system regardless of changes in revenue and expenditure. Nevertheless, decreasing the costs is one of the initial measures that come to mind in dealing with the high property tax in New Jersey. Apart from structural reforms in New Jersey, other measures for decreasing and controlling costs can be enacted within the comprehensive reform package. These measures include mandatory spending caps that have the appeal of clearly illustrating the defined limits on spending. Moreover, the other two measures capable of controlling costs include consolidation and state aid reform as part of the comprehensive reform package. These two measures have the capability of making the government efficient because the measures have a relationship to the structure of local property taxes. The number of authorities responsible for collecting taxes affects not only the degree of property tax but also the complexity of the tax system (Christie 81-84). Conclusion Since there is no single approach capable of addressing the high property taxes in New Jersey, it is clear that fragmentation of New Jersey’s system offers the quickest route to decreasing costs that eventually decrease property taxes. The theory shows that through economies of scale it is possible for consolidation to promote fiscal discipline and decrease costs that consequently result in decreased property tax. New Jersey stands to gain a lot from consolidating the various units of government and even sharing services and combating the various ways its cities lose money through fraudulent ways. All these measures form an essential part of the comprehensive reform package for the state to address the high property taxes. Works cited Christie, Chris. "In This Hour Of Choice." Vital Speeches Of The Day 80.3 (2014): 81-86. Academic Search Premier. Web. 3 Apr. 2014. “New Jersey State League of Municipalities” Report of the Property Tax Reform Task Force of the New Jersey State League of Municipalities: The Case for a Major Property Tax Cut, and an Examination of Policy Options. n.d. Web. 3 Apr. 2014 Read More