THE NEW JERSEY PROPERTY TAX—SUBSTITUTE FOR STATE AID?*

Abstract

WHILE MOST OF THE states have been relegating the general property tax to a lesser role in their tax structure, New Jersey has been preserving its position. One state after another has adopted one or more of the so-called broad-based taxes, i.e., personal income, corporation income, and retail sales. New Jersey, in company with only two other states, has resisted this movement. Other states have developed formulas for paying over a substantial amount of state-collected revenues to local units of government. In common with the others, New Jersey does have some shared taxes and does have formulas of state aid for schools, roads, and welfare, but the amounts are nominal by comparison. A description of the present tax structure of the state is followed by a tax history from 1911 to date as a means of explaining its current revenue patterns. A detailed examination of the financing of local governments, municipalities, counties, and school districts reveals the relative importance of property taxes and state aid in their revenue structure. For each type of governmental unit, not only is the property tax analyzed, but all the formulas involving intergovernmental payments are studied. The administration of the property tax is discussed in detail. The law and the practice in the assessment process, the tax levy, and the collection procedure are explained. Equalization procedures at the municipal, county, and state levels are interpreted in historical perspective. A comparison of the tax structure of the 48 states indicates that New Jersey, like most of the other states, relies heavily on the property tax at the local level. Its uniqueness lies in the complete absence of any so-called broad-based tax in the revenue structure. Explanations are offered for the divergencies between the revenue and aid structure of New Jersey and that of almost all the other states. Economic factors which compelled other states at various crises in their history to adopt one and often two or three of the broad-based taxes were not strong in New Jersey.