Democratic leaders bolster proposed property tax relief program
Tax credits raised to as high as $1,500
Gov. Phil Murphy in South Brunswick on June 15, 2022, unveils an expanded version of a tax relief program he announced in March. (Courtesy of New Jersey Governor’s Office)
New Jersey Democrats will use a swell of unexpected revenue to expand a new property tax rebate program planned for the coming fiscal year, Gov. Phil Murphy and legislative leaders from both chambers announced Wednesday.
The proposed changes will more than double the amount of money set aside in the first year for what Murphy has called the ANCHOR tax relief program, pushing its cost from $900 million to $2 billion, raising award levels, and expanding eligibility.
“Today we are providing truly historic tax relief. We are keeping our promise to make New Jersey more affordable for our middle-class and working families,” Murphy said at a press conference in South Brunswick Wednesday. “Many have said it, but alongside the Senate president and the speaker, we are doing it.”
Homeowners with household incomes of less than $150,000 would receive a refundable $1,500 property tax credit, while those making between $150,000 and $250,000 would be eligible for $1,000 credits. That would cut average property tax bills by 16%, effectively dropping them to 2011 levels.
Credits under the version of ANCHOR Murphy announced in March would have averaged $700 for all homeowners with annual income of $250,000 or less in its first year before ramping up to an average of $1,150 in fiscal year 2025, when its annual cost would have reached a peak of $1.5 billion.
“We don’t generally go backwards in Trenton … but in this instance, it’s not a bad thing,” said Assembly Speaker Craig Coughlin (D-Middlesex). “Bringing the average tax rate down to a level that was only seen perhaps a decade ago is something that is a good step backwards because it’s really a step forward for all the people who are going to benefit from this program.”
Renters with incomes of up to $150,000 can expect to receive $450 in annual tax rebates under the program. In March, that number was $250, and they would have gone only to renters who make up to $100,000.
The awards are expected to reach 2 million households, or about 5.5 million of New Jersey’s residents. It’s not clear how many renters would receive rebates.
“This unprecedented economic growth that we’ve seen here in New Jersey has increased state revenues to historic levels, and we have an obligation to give that money back,” Senate President Nicholas Scutari (D-Linden) said, adding, “Not everyone has felt that expanded economy, so we’re going to give that money back to everyone.”
Coughlin, who in May said he wanted the state’s budget to include “the largest tax relief program in state history,” said the $2 billion program will fall just $90 million short of the mark, but yet-unannounced programs may fill the gap.
Murphy signaled the state would deliver more aid to businesses impacted by the pandemic. Shortly after lawmakers made their announcement, the New Jersey Business and Industry Association, which praised the ANCHOR expansion, called for additional business aid.
Only residential property tax payments are eligible for rebates under ANCHOR.
“There’s more to come. We’re still working on other things to get the tax relief program. That’s why I can so boldly say we’re going to get there,” Coughlin said.
The announcement comes amid a surge in revenue expected to boost budget reserves above $10 billion. Lawmakers are expected to use some of those funds to increase annual spending past the $49 billion Murphy proposed in March, though officials from the Treasury and Office of Legislative Services have warned collections are likely to slow in the coming years.
A panel of former top budget officers and other fiscal experts convened by former Sen. Steve Sweeney earlier this month warned the state is likely to spend down its surplus in the next five years, or earlier if a recession takes hold.
Their analysis assumes ANCHOR would phase in over three years, and the expansion announced Wednesday is likely to accelerate the depletion of the state’s reserves.
The governor declined to say how the state would pay for the rebates in future years, and such programs are often first in line at the chopping block when the economy makes a downward shift. Gov. Jon Corzine in 2008 required the Homestead Benefit Program to calculate benefits using 2006 property tax bills. The program was updated to use 2018 tax bills only last year.
“You’re only seeing an element of the budget today, so bear with us. Over the next two weeks, you’ll get the fuller picture,” Murphy said.
The governor said he expects the final spending bill to include a “historic” surplus and funds for paying down the state’s debts or avoiding new ones. The state budget, like ANCHOR, must be approved by the Legislature before July 1 to avoid a shutdown of state government.
Though Democratic lawmakers rushed to praise the announcement, it got a cooler reception from Trenton Republicans.
“Injecting steroids into Murphy’s recycled rebate program won’t get anyone more excited about it than when Murphy announced it in February,” said Assembly Minority Leader John DiMaio (R-Warren). “It doesn’t deliver meaningful changes in fiscal policy and will be the first program to get cut when money is tight.”
ANCHOR would replace Homestead, which provides an average award of $626 to a smaller pool of homeowners.
In late May, Senate Republicans unveiled their own tax relief plan. It includes $4.5 billion in tax relief for one-time rebates of $1,000 or $1,500 — depending on their filing status — plus permanent tax cuts that include inflation adjustments for the state’s income tax brackets.
Sen. Michael Testa (R-Cumberland) said the GOP plan would provide “double the relief and help twice as many people.”
“This is likely a sign that Democrats are more focused on divvying up billions of pork in the budget than providing New Jersey families with real tax relief this year,” Testa said.
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