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, benefits from minimal services and residents, and just edges out Rockleigh.
Home values also benefit Rockleigh, where the average home was valued at $1.63 million — the second-highest in Bergen County — and accounted for about $12,600 in taxes in 2023.
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Still, Rockleigh has other advantages. While it has had one of the highest child dependency ratios in the state in recent years, the town has also had a relatively large ratio of residents in retirement age. The result is a low school tax rate. An older population benefiting from a low school tax can also be found in Cape May Point in Cape May County and Mantoloking in Ocean County. Both of those towns have among the lowest effective tax rates in their respective counties.
In Morris County, Harding Township is the standout. Not quite an Alpine relative to its county neighbors, Harding still boasts the lowest tax rate and the highest average home value in its county, at $1.29 million. The municipality is the only one in Morris County with an equalized property tax rate of less than 1% and an average home value in the seven digits.
Outside of Harding, Florham Park, Madison and the Hanovers all boast relatively low equalized tax rates relative to other Morris County towns. Those towns also have midtable average home valuations for Morris County.
In Passaic County, the variation among equalized tax rates was more closely grouped in 2023 than in other North Jersey counties. None was higher than the rate of 2.921 in its smallest town, Prospect Park, where economy of scale is a hindrance to efficient service delivery.
Totowa, a midsized community in Passaic County, had the lowest effective tax rate, at 1.593, and the highest average property valuation, at roughly $402,000, state records show. Ten of the county’s 15 other towns had average tax bills in excess of its $10,431 average last year, records show, as Totowa had among the lowest municipal tax rates in Passaic County.
Essex County’s Millburn follows the trend, as it also had the highest average home value and lowest effective tax rate in the county in 2023. Still, it was not far ahead of Fairfield’s rate of 1.611, which state records show is boosted by a combination of relatively low school and municipal taxes.
