Why is Property Tax So High In New Jersey?

New Jersey has the highest average property tax bill than any other state in the US. According to a 2022 report, the average property tax amount in NJ in 2022 was $9,284. 

Even though property taxes depend on home value, the home price in NJ isn’t that high compared to New York City or Los Angeles, but NYC and Los Angeles have lower property tax bills on comparable homes.

There are two fundamental reasons why property taxes in New Jersey are so high, and there’s no way to get them lower. 

New Jersey is Rife With Corruption

NJ isn’t the most corrupt state in America in a criminal context. However, state officials use their power to bend the rules so that it benefits them, but no one can hold them accountable in criminal cases (source). These are called soft corruption. These activities are shady, dishonest, unethical, and cost taxpayers billions of dollars but enrich government officials and their private businesses.

Here are a few examples.

Exhibit A:

A 2019 ProPublica report shows that a government official used his power to provide tax breaks for his companies. A company named Holtec got $260 million in tax breaks, where the state official named George E. Norcross III was a board member. This tax break was the second-highest in New Jersey’s history. 

However, before even applying for a tax break in New Jersey, Ohio state officials canceled Holtec’s tax break in Ohio. It’s because Norcross’s company failed to hire the required number of employees that they were obligated to get a tax break in Ohio. Norcross knowingly misrepresented the application in New Jersey and got the tax break.

More to the story: 

Source 1: A False Answer, a Big Political Connection, and $260 Million in Tax Breaks – ProPublica

Source 2: https://www.propublica.org/article/emails-show-how-much-pull-political-bosses-had-over-state-tax-breaks-new-jersey-norcross

Exhibit B:

A 1999 investigation by the New Jersey State Commission of Investigation found that government officials used their influence and inappropriately placed proprietary specifications for school roofing projects. Then they forced roofing contractors to hire companies that many government officials own to help with those projects. Sometimes, they also created artificial barriers where only government officials’ companies could bid on those school roofing projects.

The summary findings of the investigation committee can be found here.

Here are two key findings of the report:

  • Conflicts of Interest and Professional Misrepresentation: School districts across New Jersey have paid millions more than they should have for roof repairs and replacements because projects were riddled from start to finish with conflicts of interest and deception.
  • Manipulation and Subversion of Public Bidding and Contracting: The process by which boards of education award contracts for roof repairs and replacements was found to be rife with abuses that thwart the public’s ability to obtain quality work at the most reasonable price.

Exhibit C:

A 2018 investigation by the New Jersey State Commission of Investigation (SCI) found that government officials and employees unethically profited from the used car sales business. They used their influence to weaken the enforcement of laws that oversee the used-car business. 

Here are two key findings from the report:

  • Despite the best efforts of line personnel at the State Motor Vehicle Commission (MVC) to scrutinize these dealers and enforce official regulations, the SCI found that meaningful oversight routinely was thwarted by MVC managers. In numerous instances, their actions, and in some cases, inaction, coincided with outside influence helped this to proliferate. 
  • Favored treatment by government employees allowed MDLs (multi-dealer locations) and their tenant-dealers to be exempt from certain standard inspections and audits for other types of vehicle dealerships in New Jersey. 

More Evidence:

  • Four New Jersey local politicians indicted on bribery charges – source.
  • $10,000 in a Coffee Cup: 8 Swept Up in NJ. Political Corruption Cases – by New York Times
  • 5 NJ Public Officials, Political Candidates Snared in Huge Corruption Probe – by NBC
  • New Jersey mayors and rabbis arrested in corruption investigation – by Guardian
  • 44 arrested in NJ corruption probe – by NBC
  • In the 2010s, NJ couldn’t shake its reputation as home for crooked politicians – by NorthJersey.com
  • Is NJ the most corrupt state in the nation? The man who ran the state’s investigations answers – by NJ.com

We can give hundreds of examples that show wasteful spending, government oversight, and unethical practices by government employees to benefit themselves. This extra spending doesn’t go to benefit taxpayers but into a handful of people’s pockets. These are called soft corruption because what they are doing is legal but unethical and rife with conflict of interest.

The government employees and politicians are supposed to use public money to help the NJ residents. But in most cases, officials and employees are using it to enrich themselves.

Because of this corruption and wasteful expenditure, New Jersey needs a lot of money to do a basic job that other states complete at a lower cost.

As most of this soft corruption happens at the county and city level, the property tax needs to be high to raise tax revenue. It’s why New Jersey property taxes are so high. The correlation is striking. The county where more corruption happens has higher property taxes. 

New Jersey is Technically Bankrupt

New Jersey has the highest debt in the US. According to the Financial State of the States report, New Jersey has the worst financial and debt crisis in the US. On average, they have $58,000 debt per taxpayer. This is the amount of money each taxpayer would have to contribute if the state were to pay all of its debt accumulated to date.

Moreover, New Jersey also has America’s worst pension debt situation. They don’t have money to pay retired government officials’ pensions. They spent all their pension funds decades ago. Currently, New Jersey uses the pay-as-you-go method, where they are using current revenue to pay off retirement liabilities. 

New Jersey’s unfunded pension liabilities and post-employment benefits (OPEB) are staggering. OPEB is the money states have promised in retirement benefits to employees, including teachers, firefighters, and police, but the state governments have not put enough money aside to fund these benefits. 

Here are the two key facts from the financial reports:

  • New Jersey had $24.9 billion available to pay $214.5 billion worth of bills. 
  • The outcome was a $189.6 billion shortfall, which breaks down to a burden of $57,900 per taxpayer.

Because of these debts and pension obligations, New Jersey needs a lot of money. The only way to increase tax revenue apart from state income and sales tax is the property tax. It is why New Jersey has the highest property tax bill in America.