New Jerseyans on Their Property Taxes: Plenty of Pain, Few Solutions

New Jersey’s property tax system is, without question, the top concern of state residents in this gubernatorial election year.  As part of the Gannett New Jersey newspaper series “Fighting New Jersey’s Tax Crush” (www.app.com/TaxCrush), the Monmouth University/Gannett New Jersey Poll took a wide-ranging look at public views of the tax that 6-in-10 Garden State residents tab as the least fair tax they pay.

The poll found that New Jersey’s highest in the nation property tax burden:

• is the top reason why residents want to leave the state;
• has risen at a faster rate for middle income families than it has for either lower income or upper income homeowners, although it eats up the largest proportion of income among the state’s lowest earners; and
• is perceived to be caused by a wide variety of factors, including waste and fraud, high public employee salaries, and the large number of local governmental entities in New Jersey.

The poll also found that just half of New Jerseyans feel the quality of their local schools justifies the amount they pay in taxes.  However, reducing the property tax burden will take political courage.  The only idea for reducing property taxes that residents give strong support to is sharing local services, although many also say they would consider the outright merger of towns and school districts if it would significantly reduce their property taxes.  The public is strongly opposed, though, to shifting the property tax burden onto other sources of tax revenue.

New Jersey’s quality of life

A majority of New Jersey residents give the state’s quality of life a generally positive rating, but few feel particularly enthusiastic about it.  Moreover, the 52% who give the state’s quality of life a positive rating is down from 63% who said the same just two years ago.  Currently, just 8% of New Jerseyans rate the state’s overall quality of life as excellent while another 44% say it is generally good.  This compares to 31% who say the quality of life in New Jersey is only fair and another 15% who call it poor.

Half (50%) of New Jersey residents say they would like to move out of New Jersey at some point, compared to 43% who would like to stay here for the rest of their lives.  These findings are nearly identical to poll results in 2007 when 49% wanted to leave and 44% preferred to stay.  Those under the age of 55 (56%) are more likely than those age 55 and older (34%) to want to leave New Jersey.

The reasons why residents want to leave New Jersey have not changed in the past two years.  Property taxes (33%) and the cost of living in general (25%) continue to be the top reasons for fleeing the state.  Among Garden State homeowners who want to leave, fully 40% identify the state’s property tax burden as their primary motive while another 26% blame the state’s high cost of living in general.

New Jersey school quality

The state’s public education system is the “big ticket” item funded by property taxes, and it is reasonable to ask whether taxpayers feel they are getting their money’s worth.  A majority of state residents give New Jersey’s public schools a positive rating of either excellent (12%) or good (43%).  Another 27% say they are only fair and 10% give them a poor rating.  Positive ratings for the state’s public schools have consistently registered between 52% and 55% since 1996.  Prior to the mid 1990s, school ratings were generally lower.  Statewide surveys between 1978 and 1993 registered positive school ratings from between 33% and 46% of the public, interrupted by only one majority positive mark of 53% in 1987.

Despite the current positive trend, only half (50%) of New Jersey residents feel the quality of the schools in their own town is worth the amount they pay in taxes.  This compares to a sizable 40% who say the quality of their local schools does not justify the cost.

Least fair tax

When asked to choose the most burdensome tax in New Jersey, it’s no contest.  Six-in-ten (59%) residents identify the local property tax as the least fair tax they pay, far outpacing the state sales tax (12%), federal income tax (11%), and the state income tax (7%) for this notorious distinction.  While the property tax has continually stood out as the least fair tax over the past two decades, the number of residents who identify it as the most onerous tax they pay has increased significantly from the 47% who felt this way in 1991.

The typical homeowner currently reports paying an average $7,929 annual property tax bill according to the poll.  This figure is somewhat higher than the 2008 tax year numbers released by the state, indicating that there is at least the perception that property taxes have risen about 15% over the $6,894 average reported by homeowners in a 2006 poll.

Linking the reported property tax burden to household income indicates that the load is not evenly distributed.  Homeowners earning less than $50,000 per year pay $5,642 in property taxes on average.  This increases to an average $7,692 bill for those earning between $50,000 and $100,000, and an average $9,629 bill for those earning more than $100,000.

Extrapolating some hypothetical situations from these numbers suggests that homeowners earning $25,000 paying their income category’s average $5,600 property tax bill, would be devoting more than one-fifth of their household income to paying this bill (not taking into account any “Senior Freeze” or other rebate program for which the homeowner may be eligible). On the other hand, homeowners earning $75,000 with a $7,700 property tax bill – the average tab for the state’s middle-income homeowners – would be dedicating one-tenth of their household income to property taxes (but they would not be eligible for non-senior rebates).  Furthermore, $150,000 earners paying $9,600 a year – the average for upper-income homeowners – would devote only one-sixteenth of their income to property taxes.

The only good news in the poll for lower income earners is that their property taxes have not been going up as fast as higher income earners.  Compared to the 2006 survey, the average property tax bill for homeowners earning under $50,000 has increased by $248, or 5%.  By comparison, the average property tax bill for homeowners earning more than $100,000 has increased by $923, or 11%.  However, there is worse news for middle income homeowners – those making between $50,000 and $100,000 report their average property tax bill increased by $1,719, or 29%, over the past three years.

Causes of New Jersey’s high property taxes

The poll asked state residents to rate the impact of five possible factors on property taxes in New Jersey.  Among these factors, waste and fraud is the top culprit, identified by nearly 2-in-3 (64%) New Jerseyans as contributing a lot to higher property taxes.  A majority also point to high salaries for public employees (53%), the number of school districts (54%), and the number of municipalities (51%) in New Jersey as contributing a lot to the state’s property tax burden.  Fewer residents (41%) say the same about union pension and benefit agreements.  The bottom line though is that many, if not most, New Jersey residents see all of these factors playing a significant role in why their property taxes are high.

Compared to a poll taken in 2005, the same number of New Jerseyans today (64%) identify waste and fraud as a major cause of the state’s property tax burden.  However, the number who identify high public employee salaries as a large contributor has increased from 44% four years ago to 53% in the current poll.  The prior poll did not ask about the other three factors.

Solutions for New Jersey’s high property taxes

Many of the major property tax reduction proposals floated in the past few years have focused on either shifting some of the burden to income taxes or merging local authorities in order to cut costs.  When asked to choose between these two options, 51% of New Jerseyans prefer merging local authorities if it would significantly reduce their property tax burden, compared to just 11% who would choose the income tax solution.  Another 31% say neither option is acceptable to them.  The number of residents who would favor merging local authorities if it resulted in lower property taxes has increased from 33% in 2006 to 51% today.  The number who favor an income tax shift has remained stable (14% in 2006 and 11% in 2009).

Among five potential solutions for reducing property taxes asked about in the poll, the most popular is sharing emergency services with a neighboring town, with 70% of New Jerseyans saying they are at least somewhat willing to accept this plan.  A majority of residents (55%) also say they are at least somewhat willing to merge their school district with a neighboring one if it led to a significant reduction in their property taxes.  Just under half (48%) support the idea of having a statewide agency collect property taxes and distribute the funds to local school districts.

Compared to a poll taken three years ago, support for sharing municipal emergency services (70% willing in 2006 to 70% willing in 2009) and merging school districts (58% willing in 2006 to 55% willing in 2009) is basically the same, while support for a statewide property tax agency has declined slightly (55% willing in 2006 to 48% willing in 2009).

In terms of revenue-based solutions for reducing property taxes, a majority (57%) of residents are somewhat willing to accept a one penny increase in the state sales tax.  This is up significantly from 38% in a July 2006 poll taken shortly after the state sales tax rate was increased from 6 percent to the current 7 percent.

Only about 1-in-5 (22%) residents, though, support increasing the state income tax by ten percent in order to significantly reduce property taxes.  This is nearly identical to the number (18%) who felt the same in 2006.

While a majority of residents say they generally favor most of these solutions, it is important to look at the intensity of these opinions – i.e. the percentage who are very willing to accept these changes versus those who are not at all willing.  History suggests that an intense and active minority can be even more politically powerful than a lukewarm majority.

In this regard, only one of the five solutions suggested in the poll appears to stand the test of provoking only minimal controversy among the general public.  Specifically, 41% of New Jersey residents say they are very willing to share emergency services with a neighboring municipality if it reduced their property taxes, compared to only 22% who are not at all willing to consider this solution.

While a majority would be at least somewhat willing to merge their school district with a neighboring one, only 29% would be very willing to do so, and an equally sizable 31% say they are not at all willing to accept this.  Furthermore, only 18% of New Jersey residents are very willing to accept a statewide property tax agency, compared to twice as many (37%) who are not at all willing to accept this proposal.

While a majority of residents say they are at least somewhat willing to accept a one penny sales tax increase to reduce property taxes, the 24% who are very willing to see this happen are outnumbered by the 36% who are not at all willing to consider this.  And while just 5% of the state is very willing to consider an increase in their income tax bill to offset property taxes, an overwhelming 63% are not at all willing to accept this proposal.

The Monmouth University/Gannett New Jersey Poll was conducted by telephone with 900 New Jersey adults from July 29 to August 2, 2009.  This sample has a margin of error of ± 3.3 percent.  The poll was conducted by the Monmouth University Polling Institute and originally published by the Gannett New Jersey newspaper group (Asbury Park Press, Courier-Post, Courier News, Daily Journal, Daily Record, and Home News Tribune).

DATA TABLES

The questions referred to in this release are as follows:

(* Some columns may not add to 100% due to rounding.)

[The following question was asked only of those who said “Move out of NJ” to Q4, moe= ± 4.8%]

[The following question was asked only of homeowners, moe= ± 3.7%]

The Monmouth University/Gannett New Jersey Poll was conducted and analyzed by the Monmouth University Polling Institute research staff.  The telephone interviews were conducted July 29 to August 2, 2009 with a statewide random sample of 900 New Jersey adults. For results based on this sample, one can say with 95% confidence that the error attributable to sampling has a maximum margin of plus or minus 3.3 percentage points.  Sampling error increases as the sample size decreases, so statements based on various population subgroups, such as separate figures reported by gender or party identification, are subject to more error than are statements based on the total sample.  In addition to sampling error, one should bear in mind that question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of opinion polls.

It is the Monmouth University Polling Institute’s policy to conduct surveys of all adult New Jersey residents, including voters and non-voters, on issues which affect the state.  Specific voter surveys are conducted when appropriate during election cycles.

Click on pdf file link below for full methodology and results by key demographic groups.