7 reasons why N.J.'s property taxes are highest in U.S. again (2024)

By Susan K. Livio | NJ Advance Media for NJ.com

With the Governor and the entire Legislature on the ballot this election year, New Jerseyans will likely hear numerous politicians promise to reduce their especially high property tax bills.

We pay among the highest property taxes in the nation. Last year, the average homeowner paid $8,500 per home, a 2.35 percent increase over 2015, according to the most recent state calculations.

Both the Christie administration and the Legislature agree the annual increases would have been worse had they not passed a 2 percent spending capon most local expenses.

As unpleasant as it is to admit, there are several facts about the Garden State that make bringing down property taxes very difficult, according to Marc Pfeiffer, assistant director for the Bloustein Local Government Research Center at Rutgers Center. (He previously helped manage six municipalities in central and north Jersey, then more than a quarter-century at the state office overseeing local government spending.)

"New Jersey has had property tax problem for roughly 140 years. We have been talking about this forever," Pfeiffer said. "If we could have solved it easily, it would have been done."

In no particular order, here are 7 reasons why they're so high.

1. New Jersey is dense

This is not a joke. Only Rhode Island packs more people per square mile, Pfeiffer said. It costs more to provide services to a larger group of people than a small or sparsely populated town.

"When you have a lot of people in one area, the cost of services, like public works, is so much more," he said. Generally speaking, it costs more to run a municipality in north Jersey than south Jersey because of the population density. These population hubs tend to be older, too, and the cost of maintaining infrastructure is much higher.

2. We have higher than average labor costs

"We are a high cost-of-living state," Pfeiffer said. "In order to attract people, (employers) have to pay well." In this case, the employers are the local governments who are saddled with the "legacy costs" associated with unionized public employees.

"Arguably, our labor environment, which has tended to favor employee unions over management, drives a lot of the cost. Look at most municipalities and employee costs can be 60 percent to 70 percent of the budget," Pfeiffer said.

Gov. Chris Christie and the Legislature passed a law in 2010 to help stem the rise of pay raises for police officers and firefighters by capping them in most cases at 2 percent. The state League of Municipalities, the lobbying group for local government officials, has called the law one of the most effective ways in which towns have reduced the growth of property taxes. The law was renewed in 2014.

3. It's among the most expensive states in which to live

An analysis by CNBC last year identified New Jersey the 10th most expensive state in which to live, based on housing, utility, food and medical costs. (Hawaii topped the list.) When costs are taken separately, New Jersey is at or near the top in cost-of-living rankings. Last year, New Jersey's $1,379 monthly rental average was the sixth highest, according to the National Low Income Housing Coalition. "We are a high cost-of-living state. Pfeiffer said. "In order to attract people, you have to pay well."

4. Property taxes pay for most of everything in New Jersey

County and municipal governments impose local income taxes and sales taxes in other states. That's not allowed in New Jersey. The property tax bill pays for local government, school and county expenses. From a budget standpoint, this makes sense, Pfeiffer said.

"One of the advantages of property taxes is it's reliable — you determine how much you need and you collect that. With the income tax, you get what you get," or what people are willing to pay on time.

But limiting the local taxing authority allows New Jersey's property tax problem to loom larger.

5. We love home rule

We have 565 municipalities and 600 school districts. That's a lot of payroll. State lawmakers have tried to encourage consolidation for decades. Pfeiffer isn't convinced consolidation is a big cash saver. Local officials have been regionalizing or sharing costs for purchases and services for decades. Every little bit helps.

But he points to the Princeton Borough-Princeton Township merger that voters approved in 2011. Local officials say the deal saved about $700,000. The two communities had already saved $2.3 million over the years by sharing services across municipal property lines.

"There are places where shared services and consolidation work but you are reducing costs at the margins," he said.

6. Public worker pensions strain every budget

The state pension fund is woefully underfunded and has been the subject of numerous lawsuits between the Christie administration and the union.

But even with municipal employers paying nearly all of its share into the Public Employees Pension System and the Police and Fire Retirement System, these costs add up.

With New Jersey's distressed state worker pension system the worst fundedin the nation, property tax revenues are critical to keeping New Jersey economically afloat. The solution?

7. Education costs

No debate on property taxes can take place without taking into account the cost of public education. New Jersey has one of the highest per-pupil price tags in the nation.

Education is the largest part of what is usually a three-headed property tax beast: county, municipal and school expenses. Gov. Chris Christie and both Democrats and Republicans in the legislature have vowed to devise a fairer formula this year.

Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.