Property Taxes in New Jersey: Striking a Balance

Frequently asked questions about…

The New Jersey School Boards Association's Tax Reform Policy

Property taxes in New Jersey are very high.  Why?

New Jersey relies far too heavily on local property taxes to support education.  In most states, the cost of public education is evenly divided between state revenues and local property taxes.  But in New Jersey, the state government's contribution to education has hovered around 40% for more than a generation, with local property taxes paying most of the education bill statewide.

What types of changes would help taxpayers and public schools?

The New Jersey School Boards Association believes the state Legislature should act to balance school taxes.  State government should provide—on a statewide basis—the equivalent of at least 50% of the cost of public education in the form of state aid to education and school property tax relief.  To accomplish this, NJSBA policy supports a reduction in school property taxes, matched dollar for dollar, by a shift to a progressive (that is, a fair) state revenue source.

What type of school districts would benefit from a tax shift?

All school districts would benefit from a tax shift.  In fact, any tax-shift method supported by NJSBA would increase the flow of state money into virtually every community—regardless of the school district's eligibility for state aid.

Every New Jersey community includes senior citizens and others living on fixed incomes—citizens who often feel they have no choice but to oppose school spending proposals because of overburdening property taxes. Rebalancing school taxes would enable citizens to consider school spending objectively.

How could New Jersey achieve a tax shift?

Methods to accomplish a tax shift could include direct subsidies to municipalities dedicated exclusively to school property tax relief; a "circuit breaker" that would limit property tax liability for people on fixed incomes; or a state income tax credit based on school property taxes paid.

Would a tax shift increase public school spending and overall school taxes?

No.  The New Jersey School Boards Association advocates revenue-neutral property tax reform—that is a statewide, dollar-for-dollar shift from the property tax to a progressive state-level revenue source, such as the state income tax.  NJSBA would support a change in the state income tax only if the increase is matched by a reduction in local property taxes statewide.

Would NJSBA's tax-shift policy change state aid to public school districts?

Under-funding of state aid since 2001 has contributed to the property tax problem in New Jersey.  NJSBA will continue to advocate that every school district receive its full entitlement of state aid.  While full funding can help school districts contend with the property tax situation, it does not attack the problem at its root.  The property tax issue has its basis in the statewide over-reliance on local property taxes to fund education.  This condition exists even when the state aid formulas are fully funded.  A tax shift—provided through permanent direct property tax relief to citizens in all communities—is necessary to resolve the problem. 

Why does NJSBA support using the income tax to solve the property tax problem?

The state income tax is an ideal mechanism to accomplish school property tax relief.  First, it was enacted specifically to fund public education.  Second, unlike the sales tax or the property tax, it is progressive—that is, based on an individual's ability to pay.  The local property tax would still play a role in education funding under NJSBA's policy.  It is a stable and predictable revenue source.  In addition, it provides for a degree of local discretion, an important factor in building community involvement in the school system.

The problem in New Jersey is the over-reliance on the property tax—not the property tax itself.

Would our state's leaders support a plan that might be construed as a state income tax increase?

Lawmakers should understand that NJSBA's policy constitutes a tax shift, not a tax increase.  In addition, their constituents (voters) must make it clear that they will support the Legislature's efforts to shift a portion of school revenues from the local property tax to the state income tax.  Opinion polls have shown that New Jerseyans would support (1) a larger state role in paying for education and (2) higher state taxes in return for lower property taxes.