As New Jersey homeowners fall asleep tonight, maybe they’ll dream of North Dakota. It’s possible that the folks in Fargo will wake up this morning as the first state to abolish the dreaded property tax. Pinch me, they’ll say.
The average property tax bill in North Dakota is $2,600, chicken scratch compared with New Jersey’s, which was more than $7,500 in 2011. That’s up 20 percent from 2009, and nearly 12 percent of a family’s annual income.
Big numbers are one reason to hate the property tax. Here’s more:
• Middle-class mauler: It’s a flat tax, hitting the one-bedroom bungalow at the same percentage as the mansion next door, taking a larger chunk of the middle-class taxpayer’s paycheck.
• Pockets of poverty: Taxing private property creates hopeless pockets in cities, where there is precious little property to tax. In Newark, a third of the real estate is occupied by tax-exempt properties such as churches, schools and government buildings.
• Suburban sprawl: For municipalities that need extra income, it’s tempting to approve new development — if only to create a new stream of property taxes. Need money? Say yes to the strip mall.
• Pay up: If your pay is cut, your income tax rate drops, too. But you pay your full property tax bill no matter what happens to your income. For many, the only way to get property tax relief in tough times is to sell.
• Anti-ownership: One of the loudest criticisms in North Dakota’s anti-property tax campaign was that it’s the only tax that can cost a family its home. In the words of one critic: “It means all of us are renters — none of us are homeowners.”
North Dakota was ripe for this move. Oil drilling created a budget surplus, and taxpayers might be willing to gamble it will last. But it probably won’t. Pre-election polls that showed 70 percent of voters were opposed to the measure that, while abolishing property taxes, also would blast an $800 million hole in the state budget — with no plan to fill it.
Still, the notion already has spread. The
New York Times says Pennsylvania, North Carolina and Texas all are
considering eliminating property taxes, at least to some extent.
Which brings us back to New Jersey — the property-taxing champ.
In fiscal year 2012, more than $26 billion in property taxes will be
collected in New Jersey — more than all state income and sales taxes
combined. So for all of Gov. Chris Christie’s chest-pounding over his 2
percent cap, it still lets local property taxes rise every year —
meaning there’s little reason to believe New Jersey will lose its crown.
Here’s the ugly truth: You can’t cut property taxes without drastically increasing others, such as the sales tax. The last candidate who suggested that — Chris Daggett, the independent in the 2009 gubernatorial race, wanted to cut property taxes 25 percent by expanding the sales tax — got just 6 percent of the vote.
Yes, it’s fun, this North Dakota fantasy. But no property taxes in New Jersey? That dream won’t come true.