Passing new bucks?
At stake in Brick are 172 jobs, Pezarras said, from every department, including 29 police officers, as well as the elimination of trash and recycling pickup and park maintenance. That’s on top of 71 positions that have already been eliminated since 2008. The township currently employs 369 people.
Shifting the burden
New Jersey has some of the highest property taxes in the country. What is less often noted is that the state’s other taxes are relatively low. According to the Center on Budget and Policy Priorities, New Jersey’s income tax revenue as a percentage of residents’ personal income ranked 20th in the country in 2010, while its sales tax revenue ranked 38th and its excise tax revenue ranked 45th. When taken together, the CBPP said, New Jersey falls in the middle relative to other states in terms of its tax burden on residents.
Moreover, New Jersey is one of only two states in which revenue from property taxes exceeds revenue from income taxes, sales taxes, and corporate taxes combined, according to the New Jersey Star-Ledger. (The other is New Hampshire, which has not state income tax at all.)
In Gov. Christie’s 2011 budget, the state will collect $10.1 billion in income tax revenue, $7.8 billion in sales tax revenue, and $2.3 billion in corporate tax revenue. Combined, that’s $20.2 billion dollars. That compares with the $25 billion in property taxes that New Jersey’s municipalities combined to collect last year, an amount that will almost certainly increase this year.
And while, in many states, municipalities use local sales or income taxes to boost their revenues and decrease their reliance on property taxes, towns and cities in New Jersey are prohibited from raising any tax revenue for their own use except through property taxes.
The other tax revenue generated in municipalities goes directly to the state, and some of it is supposed to come back to the municipalities in the form of state aid and “property tax relief.”
Not all of it does, however. While Christie will hold state aid to municipalities level this year, he cut aid by $446 million, or 26 percent, in 2010.
Those cuts forced many municipalities to make layoffs and reduce services. Pezarras and many other municipal officials said that a large part of their budget problem comes from the diminishment in state aid. This year, Gov. Christie has announced that aid will not be cut any further, but Pezarras said that, in Brick Township, the aggregate revenue lost in the last three years was at least $5.6 million.
William Budesheim, the mayor of the Borough of Riverdale, said that the Borough had only received $20,000 in state aid last year, and received no state aid the year before. He pointed specifically to the Energy Receipts Tax, which is paid by utilities for the use of local rights of way. That money has increasingly been used to balance the state budget, he said, and less of it has come back to municipalities in the form of aid.
“There’s a complete structural imbalance in the taxes of this state,” said Deborah Howlett, President of New Jersey Policy Perspectives, a research organization and think-tank. “Across the river in Pennsylvania, you pay a state income tax and all of the towns have a local income tax. New Jersey towns can’t raise revenue that way.”
Property taxes, like sales taxes, are regressive, meaning that they disproportionately affect people with lower incomes. Income taxes are generally more progressive, with wealthier people paying higher rates. And, in the case of New Jersey, the further reliance on property taxes has meant that more and more of the burden of generating revenue has been placed on municipalities.
“There’s a way that folks above us in the state make us out to be the culprit here,” said Chuck Chiarello, the president of the League of Municipalities, which represents the state’s local governments. “But who didn’t pay into their pension funds?”
Chiarello contended that the state’s position is hypocritical: on the one hand, he said, the state government is placing blame for budget deficits on the municipalities; on the other hand, “there has been a real reluctance on the part of the state to look for other revenue sources.”
One alternate source of revenue that has been proposed by some state lawmakers is the “millionaires tax,” a two percent increase in the tax rate on income’s over $1 million dollars a year. Last year, the State Senate and Assembly passed the measure, but were unable to overcome Christie’s veto. The measure was introduced again in the Assembly last week, but the Governor has promised another veto. The proposed measure is projected to raise $637 million, much of which would return to residents in the form of property tax rebates.