Tuesday, February 26, 2013

Property tax revenue crisis in New Jersey since Hurricane Sandy

The municipalities in the state of New Jersey expect to undergo a magnificent decline in property tax revenue. Hurricane Sandy destroyed a tremendous number of houses and other commercial properties. Therefore, the municipalities cannot collect same amount of property tax as before the storm wiped off the region. The reduced property tax revenue will inevitably result in deep cut in spending on schools, police, fire fighting and other services. In fact, Cowan explains that dozens of municipalities in the state of New Jersey could face loss of at least 5 percent of their tax bases. Borough of Tuckerton lost about 20 percent of its property tax base. Moreover, almost half of houses are now inhabitable in Sea Bright. In this circumstance, it is difficult for the municipal governments to raise tax rates to reduce deficit, because the homeowners are already facing critical economic loss after Sandy destroyed their homes and businesses.
On February 26, New Jersey governor Chris Christie proposed budget partly as resolution of recovery after the catastrophe. However, property tax relief is deferred maintaining the tax increases to 1.4 percent this year. One of notable decisions is that the residents whose homes survived are expected to pay higher property tax according to the budget. However, Mulvihill and Rahman point out that the residents in the state are already paying the highest property tax in the country that is $7,870 per household on average. Instead, the state counts billions of dollars from the federal Sandy relief fund to restore damaged economy and help municipalities that lost property tax base. Budget Officer Declan O’Scanlon says the priority will be closing the gaps in property tax.
I understand the state government faces in a tough situation to deal with massive revenue loss and still fund to rebuild infrastructure that were destroyed. Therefore, it totally make sense Mr.Christie do not want to lose further revenue so he is reluctant to provide property tax rebate for the residents . But, his plan to impose higher property tax on the residents whose homes survived from Sandy could double the burden for the residents who are already suffering from huge loss. First, it is possible that some of them whose homes are not completely destroyed are low income households because hurricane does not selectively damage poor neighborhoods. Thus, if this is the case, charging higher property tax on the low income families could violate equity in taxation. Moreover, although the damage may not be severe, most of residents may still need to cost substantial dollars on repairing partial damages. Therefore, imposing higher tax would be adding more burdens over what they already have to pay. Last, the economic cycle in the region would have been critically compromised because of Sandy. According to Cowan’s article, many businesses have been closed down. It is still possible that the some of the victims are ones who pay higher property tax since their houses avoided destruction from Sandy.
I think the governor should still contemplate other ways to recover revenue from deficit.  For example, the state could supplement the revenue from high income tax from high performing economic groups. I can speculate that the damage may not be as catastrophic as lower income groups. Then, the state government can provide income tax rebate after New Jerseyan communities recover from the disaster to a reasonable level. Furthermore, the state government could also request aid from other states, not only from the federal government until recovery. The solutions may not be feasible, but I believe at least the g state government must find a way to strengthen its budget without hurting the residents.



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