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Taxes have been a regular topic on HD and why not, they are critical for both our personal finances and running our society. To say people have different views about taxes is a major understatement.
One of the current hot issues is property taxes. Movements are afoot to stop property taxes- at least for those “retired,” over age 65 or who have no mortgage. The logic of any of that escapes me.
However, the level of support among seniors seems quite high and to my way of thinking a bit selfish and shortsighted. The reasoning given for support is seniors are on a fixed income, taxes keep increasing, surviving spouses can’t afford to stay in their home of decades and my favorite – seniors already paid their dues and should not pay more.
That gets us to core of HD-prudent long-term financial planning, anticipating the future, income streams, accruing adequate resources, including for survivors. But the thing is, too many people don’t get it or ignore those responsibilities.
Following is my itemized property tax bill for the current year.
County tax $2663.04
Country open space tax $120
District school tax $4976.65
Regional school tax $3566.80
Local municipal tax $ 2488.33
Municipal open space tax $ 90.38
Total $13,905
Keep in mind this is for a condo, one unit in a building with twelve units. There are nine buildings in total on about 16 acres. Even though we don’t directly own the land, our portion is assessed at $195,000.
As you can see, over 60% of the bill is for schools. That allocation is typical. NJ schools are ranked #3 in the nation. Is there a direct correlation between between high taxes and schools? There is some relationship. States that spend more (NJ, NY, CT, MA, VT) consistently rank in the top 5–10 on most outcome measures. States that spend the least (MS, OK, AZ, ID, UT) tend to rank in the bottom quartile, but there are other factors so it is not a perfect correlation.
Property taxes have been used to fund schools since the 1840s. The reason property taxes are used by municipalities is because they are stable and predictable and relatively easy to adjust. Sales and income taxes are more variable and less reliable because they are subject to economic conditions and changes in the incomes of the people living in and moving in and out of the community. It is hard for a school system and municipality to manage fixed costs with variable tax income. Some localities think by relying more on state revenue the local tax burden can be eased. Critics note that doing so can also subvert local control over school spending, something typically highly valued.
The majority of states have one or more programs to ease the property tax burden on those in need, most programs age based. The rallying cry that seniors should not lose their homes is a red herring. That rarely happens. In fact, 0.05% of homeowners of any age actually lose a home for unpaid taxes and even then they keep all the equity after the tax bill is paid.
So, why shouldn’t every homeowner pay property taxes with shared relief for those truly in need?
The county we lived in offered a Senior Homestead Exemption for property taxes. This reduced the tax due if age and income limits were met. I never used it, or ran the calculations. I was of the opinion the taxes were essential to providing certain services. Particularly as the state (Illinois) continually reduced revenue sharing with communities.
We live in Passaic County, NJ, in a township with a very good elementary school sysytem and a fair secondary school system. My youngest graduated high school in 2017.
I have no problem funding our local school systems via property taxes. If property taxes are waived for a certain group others have to pick up the slack. We all benefit by having educated citizens. Presumably, we all have utilized the public school systems either for ourselves, our kids or both. With limited exceptions, I feel we all should share the costs.
We live in essex county, nj, w high taxes and great schools. Have no kids and are both seniors. Just redid our =2000 sqft 3 bedroom house and got accessed 8k/yr more bringing us to 20k/yr. Sometimes feels like the schools and towns behave like drunken sailors but also believe the children of this town are getting a great start in life and that’s paying it forward.
Most of the smaller houses, like ours, get knocked down when seniors move to build MacMansions with even more taxes (45k). Hopefully they plan well for the future but suspect some come just for the time their kids are in school and then they flee.
It all feels unsustainable, but maybe thats because we are on a fixed income. We are lucky in that our state has many income based programs to help with state taxes. Think treasuries vs. Interest/dividends.
Having my tax dollars go to private schools would set my hair in fire.
Sorry so long, a subject I have some passion for
I have lived on that county for 82 years. Are you saying your actual tax bill increased in one step by $8,000 or the assessed value increased because of improvements you made? A tax bill jump of $8,000 doesn’t even sound legal under NJ law that caps annual increase percentage at 2%
I think we all need to contribute to educating the generations behind us, even if we are retired. I see it more as a moral obligation. We have lived in areas where schools are supported by both property and income taxes. Some places we lived in had consolidated schools for a large area, some had smaller schools that were not consolidated. We paid more taxes to live in a better school system when we were raising our kids. It is just what we did. We haven’t had kids in public or private school since ‘08 (except college), but we still feel a responsibility to educate the kids in our town. Our country needs an educated society and it is up to all of us to kick in on it. Chris
I agree.
In my mind there’s one answer to your question, but a few different funding dilemmas.
First the answer; the public school districts have to be funded by everyone, with a few carve outs for legit situations.
Funding dilemma; districts with low property values don’t generate enough taxes to meet the needs of the schools. State funding can help provide those districts with tools needed to help students.
Funding dilemma; in Ohio, a student choice program lets public school money follow a student who wishes to attend a private school. These dollars come right out of the public school district budget. I don’t think this is fair to the public schools or taxpayers. (My grand-kids all go to private schools).
Seems to me that generates a death spiral for public schools.
Don’t forget regardless of property values the rates can be adjusted. I had the opposite situation where the property was reassessed higher but the tax bill didn’t increase because the tax rate was lowered so the taxes were neutral, but future rate increases were more fairly distributed. In fact, the amount revenue increase from property taxes is sometimes limited to a certain percentage.