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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 use the sad stories of a few seniors to justify a deduction for all seniors which is just wrong given that many seniors are very well off financially. Any deductions should include an income/asset limit.
But wow, NJ taxes are high!!! No wonder so many seniors leave the state.
The problem with schools is that they are a never ending money pit. Does anyone review the school system for excessive spending? The incentives are all to spend more. If cuts come, they hit the teachers first, to create public sympathy, rather than administrative positions/other.
I love the idea of no property taxes. What other thing do we buy once yet pay taxes on it again and again forever? Talk about a good way to discourage home ownership. There’s got to be a better way to fund schools and other government programs rather than burdening homeowners year after year.
We pay property taxes again and again because they fund recurring expenses. The cost of police and fire protection, street lights, garbage removal, sewers, court systems, jails, road maintenance, schools, etc., doesn’t end because we paid property taxes this year. They need to be paid this year, next year and in the future. If I buy a new television or washing machine I pay the sales tax once and that’s it – until I need a new one.