New Jersey Cuts Property Taxes by Half for Most Senior Homeowners

New Jersey Cuts Property Taxes by Half for Most Senior Homeowners

In New Jersey, property taxes have long been a concern, particularly for older residents who are looking to downsize or relocate to other states. However, a recent development brings hope for these homeowners. On Wednesday, Democratic leaders in the legislature joined forces with the governor to announce a final agreement on an extensive plan aimed at significantly reducing property taxes for individuals aged 65 and above.

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Under the proposed program, known as StayNJ, the majority of older homeowners would experience a 50% reduction in their property tax bills, with a maximum benefit of $6,500. While the agreement is still pending approval as part of a $53 billion budget due on July 1, its passage in the Democrat-led Legislature is highly anticipated.

Beginning in January 2026, StayNJ would provide tax cuts to homeowners aged 65 or older with an annual income of $500,000 or less. The architects of this plan believe it has the potential to bring about transformative changes, as expressed by Craig J. Coughlin, the Democratic leader of the State Assembly who first proposed the framework for StayNJ.

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The potential reduction in property taxes, if implemented, would mark one of the largest tax cuts in the state’s history. However, there are concerns about the plan’s $1.3 billion annual cost and the absence of a permanent funding source, as these factors could undermine New Jersey’s recently improved credit rating. These stumbling blocks threatened to derail the plan after lengthy negotiations that ended inconclusively early Tuesday. Nevertheless, leaders convened early Wednesday to refine the bill’s language before announcing the program at the State House, where Mr. Coughlin, Governor Philip D. Murphy, and Senate President Nicholas Scutari gathered to make the formal announcement.

Initially proposed by Mr. Coughlin, StayNJ sparked contentious negotiations over the course of a month. The original plan lacked an income limit and allowed older homeowners to potentially reduce their property tax bills by up to $10,000. Governor Murphy and his team initially opposed the concept, arguing against using taxpayer funds to benefit the state’s wealthiest residents, including individuals like the governor himself, at the expense of poorer renters.

During budget negotiations, tensions escalated as some of Governor Murphy’s closest aides publicly questioned the wisdom of the plan. Governor Murphy even suggested that he would be willing to face a government shutdown to defend his stance—an impasse reminiscent of New Jersey’s 2017 government shutdown, which saw former Governor Chris Christie photographed on a state beach closed to the public during the Fourth of July weekend.

William Glasgall, senior director of public finance at the Volcker Alliance, a nonprofit organization founded by former Federal Reserve Board chairman Paul A. Volcker, highlighted the challenges associated with undoing tax cuts once they have been implemented, even if funding becomes scarce. Glasgall emphasized that simply shifting money around without addressing the underlying issues does not provide a long-term solution.

The consensus plan, which emerged after negotiations, includes an additional $250 annual rebate for most renters. Governor Murphy stated that the rental benefit, along with the income threshold and $6,500 savings cap, made the proposal more acceptable than its original version. Nonbinding language aimed at protecting the state’s budget surplus, commitment to fully fund pensions and public schools, and preparedness for potential economic downturns was also added to the plan.

According to an analysis conducted by the Tax Foundation, a nonprofit organization based in Washington, New Jersey homeowners face the highest property taxes in the nation. Last year, the average property tax bill in the state amounted to $9,490, although homeowners in affluent communities often paid significantly more.

While some homeowners currently qualify for rebates of $1,500 through the ANCHOR program, championed by Governor Murphy and his Democratic allies, eligibility is limited to families with incomes below $250,000. In contrast, StayNJ is designed to benefit nearly all older residents of New Jersey, excluding only the wealthiest. Legislative aides anticipate that approximately 85% of recipients will have incomes below $200,000.

To fund the first year of the tax cut, state leaders plan to allocate $600 million over the next three years and may consider utilizing unspent federal Covid-19 stimulus funds, according to officials involved in the negotiations. Maintaining the tax cut beyond Governor Murphy’s second term, which concludes in 2026, would require future legislatures to commit to the program.

Governor Murphy, who initially positioned himself as a progressive during his first term, has since shifted towards a more centrist approach after narrowly winning re-election. His support for StayNJ aligns with the expiration of a 2.5 percent business surcharge for companies with net incomes exceeding $1 million. Left-leaning groups have urged Governor Murphy to extend the surcharge, including organizations that are now strongly opposed to StayNJ.

Critics of StayNJ, such as the nonpartisan think tank New Jersey Policy Perspective, argue that the program exacerbates the existing racial wealth gap in the state. They consider StayNJ to be a significant transfer of wealth to older homeowners, which worsens the racial wealth gap. Peter Chen, a senior policy adviser at the think tank, questioned the rationale behind providing assistance to higher-earning older individuals, stating that those with incomes of $400,000 or more should be able to pay their property taxes without government assistance.

Correction: On June 21, 2023, a correction was made regarding the amount of money set aside by New Jersey leaders to pay for the first year of the property tax cut. The corrected amount is $600 million over the next three years, rather than $600,000.

Christopher Charles spent 6 years in the mortgage industry before moving into the world of digital media. He's helped thousands of families buy and refinance real estate at banks and mortgage companies and now continues that mission through industry-leading content. Chris is known for his expertise in the mortgage & real estate industry and continues to produce content all over the web.

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