Property taxes grew two to three times faster than personal income from 2000 to 2004 in the suburbs surrounding New York City, a sharp reversal from the 1990’s, when incomes soared and property taxes climbed more modestly, a review of statistics by The New York Times has shown.
In Nassau County, the tax collections rose 29 percent from 2000 to 2004, while total personal income went up only 11 percent, according to data from the state and the federal Bureau of Economic Analysis. In Bergen County, N.J., property taxes jumped 26 percent, three times the growth rate of income, about the same ratio as in Westchester.
And in the sharpest rise in the region, property taxes soared 41 percent in Somerset County, N.J., while income inched up only 5 percent.
Most states experienced a similar squeeze, data compiled recently by the Census Bureau shows. After years of moderate growth, property taxes started climbing steeply when the steam went out of the stock market in 2000, slowing income growth. Nationwide, property taxes grew 28 percent from 2000 to 2004, though income went up only 16 percent.
But it is in New York, New Jersey and Connecticut that the reversal has been most dizzying, with the states faring better than the nation in the good years and worse since 2000.
“In 1997, my taxes were $2,600; now they’re $8,000,” said Dan Mackey, 42, a credit manager who lives in Somerset, N.J. “My salary certainly hasn’t tripled in the last nine years, and I don’t know anyone’s that has.”
In the suburbs of New York City, as in many other places across the country, property taxes are the main revenue source for municipal and county governments and, most expensively, their schools. But while property taxes are principally a local issue, they have major political ramifications in state capitols.
And so this sharp reversal in income and property tax growth helps to explain the building murmurs of a tax revolt not only in the New York region but around the country.
“People’s wealth may be growing if they own a house, but the census data show that their income isn’t keeping up with their tax bills,” said Gerald Prante, an economist with the Tax Foundation, a Washington-based group that favors lower taxes.
Consider the flurry of activity in the last year alone. New Jersey recently opened a special legislative session with the mandate of finding ways to reduce property taxes, a clear barometer of the pressure homeowners have begun to exert on the state’s leaders.
“It is all too clear to everyone: The property tax burden is simply overwhelming our citizens and their economic well-being,” Gov. Jon S. Corzine of New Jersey said to the State Legislature on July 28 as it gathered for the special session. “Our citizens pay through the roof for a tax that is imposed without any regard to income or ability to pay.”
Earlier this year, legislators in South Carolina and Texas — two states in which the rise in property taxes has outstripped that of income by a wide margin — approved measures to relieve the burden with rebates or caps. And in Idaho, the governor has called a special session of the Legislature to address the issue.
In the session that recently ended, the Assembly in New York State — where income growth from 2000 to 2004 was among the lowest in the country — increased school aid and approved property tax rebates that mainly benefit suburban homeowners.
“Politicians are feeling tense about this property tax situation,” said E. J. McMahon, the director of the Empire Center for New York State Policy, a conservative fiscal policy research group. “Both the leading candidates for governor are raising the issue. Everyone feels they need a strong appeal to property taxpayers.”
New York City property taxes are rising rapidly as well, up 47 percent since 2000, compared with just 5 percent from 1995 to 2000. But city property taxes are lower than those in the suburbs because most of the city’s revenue comes from income and sales taxes.
In each area the numbers represent total property tax collections, including both commercial and residential, and total personal income. Changes in the figures can reflect growth in the number of properties or population.
Ten years ago, homeowners could more easily afford the taxes. In the 1990’s, income growth in the United States easily outpaced the rise in property tax collections, and nowhere more comfortably than in the suburbs of New York, New Jersey and Connecticut.
Ray Kulberda, 67, an accountant in Somerset, said he was not too alarmed as he watched the taxes on his four-bedroom Cape Cod home rise from $3,400 in 1996 to $4,500 in 2001. Mr. Kulberda had a good job in the late 90’s, as financial director for an insurance company, and the tax increase amounted to about 5 percent a year, a rate he called “not too bad.”
Those were good years across the region. While the economy thrived, local governments kept property tax increases low, sometimes with the help of state tax rebates. From 1995 to 2000, personal income in the three states rose 33 percent, far outstripping the 14 percent increase in property taxes.
“In the 1990’s, we had this tremendous bubble in the stock market that boosted incomes everywhere, but more so in New York and New Jersey,” said Irwin Kellner, professor of economics at Hofstra University and the chief economist for North Fork Bank.
Most places around the country shared in the boom. California’s personal income rose 40 percent from 1995 to 2000, Michigan’s went up 29 percent, and Pennsylvania’s 27 percent. Even West Virginia, which was worse than all but Alaska and Hawaii in personal income growth, experienced a 21 percent increase.
With rising incomes came a flood of revenue from income and sales taxes. In New York and New Jersey, some of the states’ bounty was funneled to local governments in the form of increased aid and property tax rebates. In New York, for instance, the state enacted the School Tax Relief program, or STAR, which saved homeowners billions of dollars and provided billions to school districts starting in 1997.
In New Jersey, the state improved its fiscal health by slowing the growth of local government in the 1990’s, said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers, partly as a result of restrictions imposed after a recession in the early 1990’s.
“New Jersey had tremendous discipline in government employment expansion compared to the nation during the 1990’s, which led to slower property tax growth,” Dr. Hughes said.
Throughout the region, the result was a period of remarkable stability in property taxes.
In New York, counties and municipalities alike kept property tax increases under the annual inflation rate of 2.5 percent from 1995 to 2000, according to an analysis by the state’s comptroller, Alan G. Hevesi, that was released in April.
But since the stock market cooled in 2000, there has been a sharp reversal: Income growth slowed, stopped or in some counties actually declined for a year or two before recovering in 2004. Worse yet, property taxes began to soar. From 2000 to 2004, property taxes in New York, New Jersey and Connecticut rose twice as fast as income.
In Somerset, Mr. Kulberda said that his taxes started to rise steeply in 2001, and that now they had reached $6,600 a year, a jump of 50 percent in five years. Mr. Kulberda, who was laid off in 2003, is having a hard time finding work now, but he can’t afford to retire. “I have to keep working in order to cover the property taxes,” he said.
Of course, the tapering of income growth had a trickle-down effect: slower growth in state revenue and a corresponding downturn in state aid to local governments.
“State governments increase their aid during economic booms that generate surges in income and sales taxes,” said Mr. McMahon, the Empire Center director. “But when the boom wears off, the first spigot they turn off is school aid. And the schools shift to the property taxpayer to make up the difference.”
In addition, the government discipline of the 1990’s in New Jersey gave way to bloat in 2001, Dr. Hughes said. “Post-2000, New Jersey’s government employment grew twice as fast as the nation,” he said. “Local government employment, including education, has been a key driver of higher property taxes.”
Some form of this boom-bust mathematics has been going on throughout much of the country: Census figures show that 32 of the 50 states experienced more robust growth in income than in taxes in the 90’s, only to see the tables turn since 2000.
Bob Vena, 63, a plumbing contractor in Hazlet, N.J., has been a beneficiary of the real estate boom. He bought his home from his parents 25 years ago, and he also owns a bungalow in Matawan. Today the houses are worth many times what he paid for them.
But the taxes on his homes have been rising steeply, he said, and now total $13,500. Business is good enough that he can afford them, Mr. Vena said, though it is becoming a strain. He said there was little he could do to increase the income from his plumbing business to keep pace.
“Eventually,” he said, “I hope to sell everything and just get out of New Jersey.”