NJ Property Taxes: Will federal tax bill spark property tax reform?

Before the last property tax prepayments reached the coffers of local municipalities last week, fresh discussion had begun anew on how to solve New Jersey's never-ending property tax dilemma.

Elected officials, think tanks and academics all agree that renewed attention is being paid to New Jersey's sky-high property taxes, in light of the tax overhaul's sharp new limitations on housing-related deductions.

More: NJ property taxes have you #TaxedOut? Tax Appeal Workshop returns Jan. 11

But they said it remains to be seen if the upcoming $10,000 cap on federal tax deductions for local property taxes will be enough to spark real reform — for long at the top of the list of New Jersey voters' concerns. Shore residents flooded local tax collectors' offices last week, looking to get ahead of the new limitations, as you can see in the video above.

TAX CRISIS: Property Taxes bring pain to New Jersey

The tax overhaul spearheaded by President Donald Trump and congressional Republicans also limits deductions for mortgage interest — a one-two punch that some analysts believe with make homeownership less attractive in high-cost and high-tax states like New Jersey

"I think we are beginning of starting to learn what the impact may be," said Marc Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers University. "This may add some heightened interest in the subject but, as we have seen in the past, these are very big problems to solve."

Perhaps the biggest challenge to dealing with property taxes is education funding, which make up the bulk of local property tax bills. New Jersey's are some of the highest in the nation. The high taxes also support some of the highest costs for public employees and retired public employees, who have powerful allies in Trenton.

"I think the major thing driving property taxes are the school budgets," said Tom Bracken, president of the New Jersey Chamber of Commerce. "For many, many years, everybody has said we have way too many school districts...consolidation is the first point of attack."

More: NJ property taxes: Taxpayers scramble to prepay before 2018, tax reform bill goes into effect

BIG UPGRADE: Asbury Park Boardwalk to get $400,000 upgrade

Lakewood Mayor Ray Coles agreed.

"What hurts us most is the school funding formula. We need the legislature to look at some drastic reforms in how taxes are collected, rather than a property tax-based system," Coles, a Democrat said. But he said he was skeptical about the political will to accomplish reform. "I’m not hopeful we’ll see anything soon."

Aberdeen Township Manager Holly Reycroft said many towns are considering things like shared services and other cost-saving measures to help keep a lid on spending. "If you don’t have a lot of commercial properties the burden is on the residents, unfortunately you have to run the town," Reycroft said.

But she said noted that municipal costs were not the major driver of property taxes in the township. "If they could find a different way to fund the schools," Reycroft said, "67 percent of our tax bills go to the schools."

Neptune Board of Education President Laura Granelli said school consolidation was likely the best way to achieve property tax reform but said she had mixed feelings about the idea.

"I pay the same taxes as everybody else and I don’t know how else to make them go lower," she said. Choosing how and where to consolidate school districts could prove tough for lawmakers and educators, Granelli added. She said while school districts may share close geographic boundary lines often times they have different challenges for their academic missions and philosophies.

Outside of school reform, Gov. Chris Christie has called for legislators to lift a $10,000 cap on property tax deductions from state income taxes. But whether that can be accomplished is an open question.

Earlier this month Gov.-elect Phil Murphy said the idea was worth considering, but was skeptical due to its last-minute nature.

"This might have been a good idea to be talking about over the last several years as opposed to a rush to judgment over the next few days. But it’s not a crazy idea," Murphy said.

He said a comprehensive approach would be needed in the aftermath of the new federal tax overhaul. Others noted that the prepayment of 2018 taxes is no real option for many property owners. Nor is it a sustainable or long-term solution to the state's intractable fiscal problems.

"Whether it’s our legal options questioning constitutionality, our creative juices, working with other states, reassessing and reviewing the notion of how we’re taxed and how people pay for things in this state and how those are classified – all of those have to be on the table, and then some,” Murphy said.

Austin Bogues 732-643-4009; abogues@gannettnj.com