New Jersey’s 564 towns all levy property taxes and invariably receive backlash over the cost — not surprising, as the state boasts the highest concentration of the highest property tax bills in the nation.
Its property tax rate on owner-occupied property as a percentage of home value leads the 50 states, according to a 2023 analysis by the Tax Foundation.
The rate is credited by experts to a number of factors, including the state’s emphasis on local control. Within New Jersey, there is a mixed bag of property tax rates based on its 564 towns. Different local needs can change tax rates, affecting what property owners pay.
The property tax issue sees resistance at both ends.
Complaints from residents who say they can no longer afford to live in New Jersey, especially in retirement, have Gov. Phil Murphy proposing a 50% cut in property taxes for those 65 and older in his “Stay NJ” initiative. Meanwhile, state legislators recently advanced a bill that would permit school boards to exceed the 2% cap on annual tax levy increases to avoid layoffs created by declining allocations from the governor’s education aid program.
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At their essence, property taxes are a fee for services. In New Jersey, they are the primary source for funding schools, roads, and services such as police, fire and emergency medical services.
The best way to keep property taxes low is to keep services to a minimum, various experts have argued over the years. Therein lies the success of Walpack in Sussex County, where almost no one lives, so few people require services. The 2020 census recorded a total population of seven.
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Roughly three-quarters of the few homes in Walpack are seasonal. Though rare in New Jersey, seasonal residences require minimal services and tend to bring lower rates to towns along the Jersey Shore and in the Northern Highlands.
Due to its unique characteristics, Walpack has no school tax, nor does it have a municipal tax. The town’s average tax bill for 2023 was a mere $456, state Department of Community Affairs records show. An extreme outlier in New Jersey, Walpack’s tax rate is 0.666 cents for every $100 of assessed value. Equalized for comparison within Sussex County, it is even lower, at 0.596.
Equalization adjusts property assessments to align them with their true market values uniformly across counties. It aims to correct discrepancies that arise from assessment methodologies, market conditions or assessor interpretations and can lead to unequal tax burdens among property owners within the same county.
Every other municipality in Sussex County had an equalized tax rate in 2023 of above 2%. Hamburg’s tax rate of 3.261 topped the county, primarily due to an outsized school tax rate, state records show.
Those with equalized rates hovering around 2.1% included Branchville, Frankford and Lafayette. Those are all towns with relatively average property values for Sussex County.
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While Walpack’s average property value is among the state’s lowest, high average property values are helping to keep tax rates relatively low elsewhere in North Jersey. According to a September 2022 study on municipal taxes by the New Jersey State Policy Lab, towns with more valuable properties are more likely than not to see lower tax rates than their neighbors, since the cost per property to provide local services is often similar for nearby communities.
Alpine is a prime example. There, the glut of multimillion-dollar mansions has helped make the total property tax rate the lowest in Bergen County. The disparity is such that a property owner could save more than $10,000 a year on taxes by selecting a comparably priced home there instead of one or two towns over. Conversely, due to the very nature of its relatively low tax rate, Alpine has few modestly valued homes within its boundaries, and the homes that are there often have the benefit of the low rate baked into their market price.
High tax rates can lower home prices because they are seen as a drawback. On the other hand, low tax rates can be used to command a higher home price and market valuation due to the disparity in real tax payments.
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Alpine’s average property owner pays about $21,700 a year in property taxes as of 2023. The total is lower than in Demarest, where the average tax bill is approaching $23,500 and the average property value at $804,500 in 2023 was about $1.95 million less than Alpine’s.
Consequently, Alpine was one of three towns in Bergen County with an equalized tax rate of less than 1% in 2023. It was ahead of Teterboro, which, like Walpack,…
Read More: NJ’s property tax rate leads the country. Where does your town stand?