NJSpotlight March 10, 2022 by John Reitmeyer, Budget and Finance Writer
New Jersey’s lowest-income senior and disabled homeowners would get the biggest benefits under the expanded direct property-tax relief program Gov. Phil Murphy is calling on lawmakers to enact later this year.
Many renters would become newly eligible for rebates, if lawmakers approve. And lower-income senior and disabled renters would also collect the largest of those checks, according to details provided by the Department of Treasury. Murphy included the property-tax relief proposal in the nearly $49 billion state budget he unveiled to lawmakers earlier this week.
Murphy’s proposal would expand income limits and allow more than 1 million homeowners to receive the state-funded relief benefits.
But with that expansion, the biggest benefits will still be targeted to the thousands of homeowners who are making less than $150,000 annually, according to Treasury.
Meanwhile, renters earning more than $100,000 annually would be locked out of the new program altogether, which will serve to further direct the state’s relief funding to those who likely need it most in a high-cost state like New Jersey.
In all, Murphy, a second-term Democrat, is proposing to increase funding for the state’s Homestead property-tax relief program from $340 million to just under $900 million when a new fiscal year begins July 1, according to budget documents.
His proposal, which would also rebrand the Homestead program as “Anchor,” comes as the state has enjoyed a major tax windfall for the second straight year amid the coronavirus pandemic.
Under Murphy’s plan, homeowners making up to $250,000 annually would qualify for direct property-tax relief benefits averaging roughly $680.
The current Homestead program funds direct benefits that total closer to $630, with those benefits only provided to senior and disabled homeowners earning up $150,000 annually, and all other homeowners earning up to $75,000 annually.
Meanwhile for renters, Murphy is seeking to restore rebate checks suspended after the 2007–2009 Great Recession ravaged the state budget. Using a $100,000 income limit, most seniors would get checks or a direct deposit, totaling $250. Other qualified renters would receive $150 via check or direct deposit, according to Treasury.
To be sure, increasing state-funded relief benefits does not stop ever-rising property tax levies, which climbed on average in New Jersey last year by more than $170, to a record-high total of $9,284, according to data collected by the Department of Community Affairs.
As a result, prior iterations of state-funded relief programs have often been derided by critics as nothing more than a gimmick that does nothing to address the core drivers of property-tax growth. Such programs are also prone to funding reductions whenever state revenues tumble, putting recipients on a never-ending roller coaster.
However, under a reform of the Homestead program that was enacted more than a decade ago, the property-tax relief benefits for homeowners are now provided as a direct credit on quarterly property-tax bills instead of as a rebate check.
That means the state funding does serve to effectively lower the property-tax bill a homeowner is ultimately forced to pay, at least in the quarter during which the credit is accounted for on a homeowner’s quarterly tax bill.
Rolling back property taxes
Murphy played up that feature during his budget address Tuesday, suggesting the increased tax-relief funding he’s proposing in his budget plan would effectively roll back the average property-tax bill to the totals seen several years ago.
In addition, more homeowners would see those rollbacks under the expanded income limits he’s also asking lawmakers to approve, which would restore eligibility standards that were slashed during the Great Recession.
“This is one of the few times when going back is how we move forward,” Murphy said during the address.
Meanwhile, Murphy’s proposal calls for carrying on the architecture of the Homestead program, including features that ensure the most tax relief is targeted to those on fixed incomes and others who likely need it the most in a state where property taxes historically have been among the highest in the country.
For example, under Murphy’s proposal, senior and disabled homeowners making less than $100,000 annually would get the largest relief benefits, totaling on average more than $850, according to Treasury. The next highest average benefits, totaling $787, would go to senior and disabled homeowners making between $100,000 and $150,000 annually.
For all other homeowners, those making less than $100,000 annually would receive average benefits totaling $648, with those making between $100,000 and $150,000, receiving $677.
Under Murphy’s plan, the smallest benefits would go to homeowners making between $150,000 and $250,000; senior and disabled homeowners in that category would receive average benefits totaling $571, and for all other homeowners in that category, the average benefits will total $537.
In all, Murphy’s plan would expand the number of homeowners who can qualify for the direct-relief benefits from an estimated 470,000 under the current Homestead program to more than 1 million, according to Treasury.
Further, the restoration of renter rebates would add more than 630,000 to the total number of residents who could qualify for the state-funded tax relief. Senior and disabled renters making between $70,000 and $100,000, and all other renters making up to $100,000, would get $150 rebates, while senior and disabled renters making up to $70,000 annually would get the $250 rebates, according to Treasury.
Not the first time
Murphy is not the first New Jersey governor to propose an expansion of a state-funded relief program at a time when the state economy was generating healthy year-over-year revenue increases. And he’s billing his “Anchor” proposal as just the first installment of a three-year push to ramp up total funding for the direct benefits to $1.5 billion. That would enable average benefits to top $1,100 for those eligible in the third year, according to Murphy.
It remains to be seen, however, whether the state’s current economic roll will last long enough to sustain Murphy’s lofty ambitions for increasing property-tax relief spending.
The last time state funding for direct property-tax relief was significantly beefed up — following a special session on property taxes that was convened by the Legislature — the higher appropriation was short-lived due to the revenue losses triggered by the 2007–2009 recession.
And Murphy himself “de-appropriated” funding for Homestead benefits in 2020, when the onset of the pandemic triggered near-term revenue losses.