What is Phil Murphy doing about New Jersey's high property taxes? Not much yet Risk may be minimal, but lawmakers fret in private

Charles Stile | NorthJersey

Show Caption Hide Caption Video: Charlie Stile and Dustin Racioppi discuss Murphy budget address Governor Phil Murphy delivered his first budget proposal to a lukewarm reception.

Fewer New Jersey residents are enthused about living in the Garden State, and foremost among their grievances is — what else? — the state's nagging, always-rising property taxes, according a poll released this week.

The news is hardly a surprise. Piles of polling data suggest that the Jersey public views the highest-in-the-nation property tax — now an average of $8,690, a record — as an income-devouring menace. It's the tipping-point factor that has spurred generations of homeowners to seek refuge in low-tax states, analysts argue.

Despite this, Gov. Phil Murphy's $37.4 billion budget — which will soon face the wash-and-rinse cycle of final negotiations with the Legislature — virtually skimps on providing homeowners property tax relief.

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In some ways, Murphy's downgrading of direct property tax relief is an eye-popping pivot from past governors. These programs have been a sacrosanct staple of state budgets dating back to Gov. Brendan T. Byrne, in the 1970s, who sent the first rebate check in 1976 to help voters swallow the bitter pill of a new state income tax.

Since then, governors, with, perhaps, the exception of Chris Christie, have showered voters with manna from Trenton — rebates, tax credits, property tax "freeze" programs.

But Murphy is banking on a different calculus. He is flouting the conventional wisdom of the rebate, and argues that Trenton should be investing in other ways that bring relief — and prosperity — to homeowners and the middle class.

That's not to say Murphy has totally abandoned traditional property relief programs. And he's calling for a significant boost in public school aid, which indirectly helps local officials to keep taxes from rising.

But in Murphy's first budget, traditional relief has largely been pushed into the background. In its place, Murphy emphasizes spending on long-neglected services — like mass transit — and on some of his new liberal objectives, such as free community college tuition and expanded pre-kindergarten programs.

And he wants to pay for much of it by raising a series of taxes.

Murphy's bold gamble

At first blush, Murphy's fiscal year 2019 plan appears to be a bold gamble, given the results of the latest Monmouth University Poll. A majority of residents, 54 percent, said they view the state as a good or excellent place to live, but that was the lowest positive score since 1980.

The poll also said 45 percent of residents point to property taxes as the most important issue facing the state right now. No other issue even comes close. Only 9 percent listed income tax as the most important, and 8 percent named the sales tax.

Yet Patrick Murray, the Monmouth poll director, doubts that Murphy has placed himself in political hot water with his skimping on property tax relief. Most voters, he said, have become cynical over the property taxes, and flat funding or cuts in relief programs are unlikely going to stir that cynicism into a backlash.

"They don't believe there is going to be any solution" to rising property taxes, Murray said. "They have come to accept it.''

The real danger, he said, isn't the potential for political fallout from trimming back relief programs, but the threat of an accelerated exodus of wealthy and middle-class families seeking lower taxes in neighboring states. Wealthy residents provide nearly 60 percent of the state's income tax revenue.

"Given these results, it’s no surprise that more and more New Jerseyans are choosing to vote with their feet by simply moving out of the state,” Murray said.

Murphy's budget is not totally bereft of direct relief for homeowners. He's adding $82 million to the budget to cover the cost of expanding the property tax deduction on the state income taxes from $10,000 to $15,000.

And after years of flat funding for public K-12 school aid under Christie, Murphy is proposing a $284 million increase, which he says will ease the property tax burden on homeowners, because education spending generally accounts for about half of most local property tax bills in New Jersey. He's also maintained funding for the property tax "freeze" program for lower-income seniors.

But he's refusing to restore full funding to the Homestead Rebate tax credit, the largest and most popular relief program, available to some 650,000 middle- to low-income homeowners as well as seniors and the disabled. The program got roughly cut in half during last year's budget squabble with Christie.

Democrats, who control the Legislature, grudgingly agreed to the cuts last year, expecting that Murphy would restore the money. But instead, Murphy has booked $141 million for the program, which is a slight reduction from the current fiscal year.

Unsure about tax increases

This has put him at odds especially with Craig Coughlin, the Assembly speaker, who is hardly jumping for joy over Murphy's proposed tax increases, particularly a plan to restore the sales tax from 6.625 percent to 7 percent.

Coughlin is insisting that Murphy restore the Homestead credit to where it was before it got mangled in last year's budget negotiations — a move that would cost an additional $143 million.

"I think there is no more direct property tax relief than the Homestead rebate plan,'' Coughlin said Wednesday. "I hear people talk about it as I go through my daily life at the grocery store, the diner. People really do rely on it and count on it."

Coughlin is not saying how far he'll press the issue in budget talks with Murphy. But he is also being pressed by a different set of political calculations.

While Murphy may not fear the threat of backlash, Coughlin and his Democratic members do worry. The issue may come back to haunt his Democratic members as they run for reelection — and at the top of the ballot — in 2019.

"i think first and foremost it is the right thing to do. Other considerations pale in comparison to that,'' he said of boosting the Homestead relief. But he added, "We are always mindful of what people think."

Murphy is also mindful of how people think. It's just that he wants them to consider the future in a new, more progressive way — and without the old way of doling out property tax relief.