Dear Mr. Mulshine – Please check your “facts”

I was reading this column by Paul Mushine yesterday in which Mr. Mulshine opines about the exorbitant property taxes being paid by our Governor. Now, personally, I’d prefer to keep our Governor out of this. This isn’t about him. It’s about an expensive house in a relatively wealthy suburban town in Morris County and the property taxes you have to pay when you live in an expensive house. Let’s keep it at that. Mulshine points to the rather eye-popping annual property taxes on the house which are over $37,000.

Mulshine attributes the high property tax bill to state policies which take suburban money and give it to poor urban cities and school districts, referring more than once to the state school finance formula.

As Mulshine argues:

Just when the heck is he going to demand we change the formula for handing out state property-tax relief?

Under the current formula, suburban taxpayers get socked to transfer wealth to the cities. And few suburbs fare quite as badly as Christie’s own home town, Mendham Township in Morris County. I like to bring that thorny fact up when I question him at press conferences.

(emphasis added). Thorny fact? Really?

Mulshine seems to forget that the primary reason that a tax bill would be high is…well… because the tax is being paid on a property that has a very high taxable assessed value! In other words, the main reason someone pays a higher tax bill is because they live in a more expensive house. And, by the way, it has to be a pretty expensive house to generate a tax bill that high (over $2 million).

By Mulshine’s metric of fairness – property tax bill – the most disadvantaged people in the state must therefore be those who live in the most expensive houses – because those are the houses with the largest tax bills, even if we all paid the same tax rate on our homes.  So, owning an expensive house is the root of the greatest unfairness of New Jersey tax policy?

Let me offer up a few alternative metrics drawn from data (albeit a few years old) on municipalities and school districts from’s “jersey by the numbers.” Let’s take a look at two better measures across municipalities in Morris and Essex county. I’ve included Essex to bring some of the poorer urban communities into the picture, since Morris has few.

Let’s look first at the effective tax rate with respect to home values. That is, are towns with higher value homes paying a higher or lower percent of their home value in property taxes?

Now let’s look at whether individuals are paying a higher percent of their income in property taxes in towns with higher or lower income.

While these data are now somewhat old, there is little reason to believe that these patterns have shifted much if any, especially due to state tax and spending policies. First, these things tend to be relatively stable. Second, 2005 was around the peak of Abbott funding, the end of the major scaling up of funding from 1998 to 2005, prior to the new formula which actually spread money more widely.

Now, these are important metrics for evaluating Mulshine’s premise of the wrongs of current redistributive policies. Why? Because if current policies really do go overboard at redistributing suburban wealth to the urban core, then we should see that a) effective tax rates on properties are actually higher in the suburbs – that is the tax bill divided by the home value, and b) that property taxes paid as a share of income are higher in the suburban districts than the urban core.

Both of the above charts suggest that current NJ policies of school and municipal aid have not, in fact, over-corrected by driving too much relief into poor urban communities. In fact, effective property tax rates remain much higher in places like East Orange, Irvington and Orange than in Mendham or Essex Fells. Further taxes as a percent of income are much higher in East Orange, Nutley and Belleville than in Mendham.

But, Mendham and some other more affluent suburban communities do tend to be quite high on this measure and there are a few explanations for this. First, many of the towns high on this measure have very little commercial or industrial property to tax for public services. A tax equity oriented policy remedy to this problem is to require regional redistribution of property tax revenues from these non-residential properties (a topic of some academic literature in the past). Second, in some of these towns, we may see more individuals living beyond, or at least at the edges of their means – perhaps purchasing more house than their income can afford.

So, what is one to do if they are unhappy with a $37,000 annual property tax bill? The simplest answer is to move into a cheaper house.



Published by schoolfinance101

Bruce Baker is an Professor in the Graduate School of Education at Rutgers, The State University of New Jersey. From 1997 to 2008 he was a professor at the University of Kansas in Lawrence, KS. He is lead author with Preston Green (Penn State University) and Craig Richards (Teachers College, Columbia University) of Financing Education Systems, a graduate level textbook on school finance policy published by Merrill/Prentice-Hall. Professor Baker has written a multitude of peer reviewed research articles on state school finance policy, teacher labor markets, school leadership labor markets and higher education finance and policy. His recent work has focused on measuring cost variations associated with schooling contexts and student population characteristics, including ways to better design state school finance policies and local district allocation formulas (including Weighted Student Funding) for better meeting the needs of students. Baker, along with Preston Green of Penn State University are co-authors of the chapter on Conceptions of Equity in the recently released Handbook of Research Education Finance and Policy, and co-authors of the chapter on the Politics of Education Finance in the Handbook of Education Politics and Policy and co-authors of the chapter on School Finance in the Handbook of Education Policy of the American Educational Research Association. Professor Baker has also consulted for state legislatures, boards of education and other organizations on education policy and school finance issues and has testified in state school finance litigation in Kansas, Missouri and Arizona. He is a member of the Think Tank Review Panel, a group of academic researchers who conduct technical reviews of publicly released think tank reports on education policy issues.

%d bloggers like this: