Property Tax Caps Considered Across America
Recent sustained increases in the values of single family homes across much of the country have caused some states to consider imposing limits on the ability of local government agencies to raise property taxes to reflect higher values. While homeowners have enjoyed likely increases in the equity of their homes, combined with a high likelihood that many own homes secured by long-term debt at historically low interest rates, rising values can cause pain points to homeowners in the form of higher property taxes. As other home expenses such as insurance have soared, the increases in property taxes may be even tougher pills to swallow.
In an effort to mitigate this pain, several states are pursuing efforts to limit annual increases in property taxes. This year, Alabama, Wyoming and Kansas have all adopted legislation which curbs future property tax hikes for homeowners. This fall, Colorado and Georgia will put similar questions up to voters on election day ballots. Other states are also considering similar measures.
According to this article on Realtor.com, state and local governments in the US collected more than $750 billion in property taxes last year. Property taxes obviously vary from state to state but generally represent a signficant or sometimes the sole source of revenues to meet expenses for local services such as schools, local facilities and services like police and fire protection. But states with higher property taxes, such as our home State of New Jersey (we’re #1!!), have witnessed population losses due to the increases in property taxes which many homeowners find unwarranted and/or unaffordable, thereby causing migration to other states with lower property tax burdens.
Property tax increase “caps” are not a new thing. In 2010, the NJ Legislature approved a bill initiated by former Governor Chris Christie, which set a 2% annual increase limit on property taxes. But that law provided loopholes and exceptions which have routinely been used, and property taxes in the Garden State do frequently increase by more than 2% annually. These pressures on homeowners’ budgets and local government budgets alike have caused lawmakers in New Jersey to consider modifiying the legislative limits as recent as this year. For instance, Jackson Township, in Ocean County, is facing a struggle over the school funding formula and finds itself in a dispute with the State over its ability to increase property taxes to meet a growing deficit. The same issue was also the focus of this recent Op-Ed in a Jersey City paper.
The nationwide effort to limit property tax increases has generally recognized the Catch-22 this proposition presents – on the one hand, revenue sources are needed to provide critical infrastructure and services, and areas with increased population in recent times have more needs, thus putting more pressure to raise revenues to meet these expenses to build roads, schools, parks, essential services and the like. On the other hand, to the extent that relief is given to single family homeowners, unless reductions in ratables are replaced by other revenue streams, the only logical place where budget shortfalls can be made up would be to increase the share of property tax burdens paid by commercial property owners. That result could be unconstitutional, causing discriminatory tax practices. Even if that type of practice passes constitutional muster, raising the proportionate share of tax burdens upon commercial property taxpayers could cause decreases in value to those properties and might actually stifle economic growth and activity in certain regions.
Like most big problems, there is no easy solution in sight here. We’ll be watching this story carefully as it unfolds as it may result in legislative changes and incentives not only in New Jersey but in other states as well.
McKirdy, Riskin, Olson & DellaPelle, P.C.’s experienced attorneys help New Jersey commercial, industrial, special purpose, and residential property owners 
determine when it’s best to file a property tax appeal for their real estate tax assessment—and when it is best to take no action.
While it is too late to file a property tax appeal in New Jersey for 2024, you can learn more about whether you might qualify for a reduction in your New Jersey property tax bill by downloading our white paper which is available here. Or you can send us an email at info@mrod.law and we’ll provide a complimentary evaluation of your property tax assessment to see whether you might be entitled to a reduction.
