Property taxes can be cut in half for most older homeowners in NJ

New Jersey has one of the highest property taxes in the country, a fact often cited by older residents who choose to sell their homes to downsize or move out of state.

But on Wednesday, Democratic lawmakers plan to work with the governor to announce a final deal on a sweeping plan to dramatically cut those taxes for nearly all homeowners age 65 and older.

Most older homeowners would see their property taxes cut in half, with a maximum benefit of $6,500. The agreement has yet to be approved as part of a proposal Budget of $53 billionwhich is expected on July 1, but passage in the Democrat-led legislature is deemed likely.

Under the program, known as StayNJ, any homeowner age 65 or older with an annual income of $500,000 or less would be eligible for the tax cut beginning in January 2026.

“This is really an opportunity to do something transformative,” Craig J. Coughlin, the Democratic leader of the state assembly who first proposed the framework for StayNJ last month, said in an interview late Tuesday.

“We have an opportunity to do a little more to make New Jersey the best place for seniors to retire — with the family they love, in the city they helped build,” he added.

The cut, if passed, would represent one of the largest tax cuts in state history.

The annual price tag of about $1.3 billion and the lack of a permanent source of funding – as well as the potential to undermine New Jersey’s recently improved credit rating – were stumbling blocks that threatened to undermine the deal after overnight negotiations ended without consensus Tuesday morning. .

According to people involved in the negotiations, leaders are meeting early Wednesday to refine the bill text, and the governor’s program includes an afternoon announcement at the State House with Mr. Coughlin and Senate President Nicholas Scutari.

The governor’s office declined to comment, citing the formal announcement on Wednesday.

When Mr. Coughlin proposed StayNJ, unleashing a month of often contentious negotiations, the plan had no qualifying income limit and would have allowed older homeowners to cut their property taxes by as much as $10,000.

Gov. Philip D. Murphy, a Democrat, and his aides initially vehemently opposed the concept, arguing that taxpayers’ money should not be used to benefit the state’s wealthiest residents — including multimillionaires like him and his wife — at the expense of the poorer tenants.

It became a source of tension during budget negotiations after some of Mr. Murphy’s closest associates publicly questioned the wisdom of the plan. Mr Murphy even suggested he would be willing to endure a government shutdown on the proposal – a stalemate last seen in New Jersey in 2017, when former governor Chris Christie was photographed lounging on a state beach that was closed to the public during the 4th of July weekend. .

William Glasgall, senior director of public finance at the Volcker Alliance, a nonprofit founded by former Federal Reserve Board chairman Paul A. Volcker, said tax cuts, once enacted, are hard to reverse, even if funding dries up .

“It really strains the entire state’s tax base,” said Mr. Glass gall. “That’s not really a solution. It just moves the money.”

The scaled-down Consensus Plan includes an additional $250 annual discount for most renters. The rent benefit, as well as the income threshold and $6,500 savings cap, made the proposal more appealing to Mr. Murphy, according to aides involved in the negotiations. The plan also contains non-binding language that seeks to safeguard the state’s budget surplus and its commitment to fully fund its pension obligations even in the event of an economic downturn, officials said.

New Jersey homeowners pay the highest property taxes of any state in the country, according to a analysis by the tax authorities, a non-profit organization based in Washington. Last year, the average property tax bill was $9,490, state records show, though homeowners in much of the state most affluent communities paid much more.

Some owners are currently eligible for $1,500 rebates through a program known as ANCHOR, which the governor and his Democratic allies in the Assembly and Senate have championed. Only families with an income below $250,000 qualify.

StayNJ is instead designed to reach virtually all but the wealthiest older New Jersey residents, though nearly 85 percent of recipients are expected to have incomes of less than $200,000, according to legislative aides.

State leaders plan to set aside $600,000 over the next three years to begin paying for the first year of the tax cut and may allocate unused federal Covid-19 stimulus funds to do so, officials involved in the negotiations said. Future legislators should commit to maintaining the tax cut after Mr Murphy’s second term ends in 2026.

The governor’s support for StayNJ comes as one 2.5 percent business surcharge for companies with net income over $1 million also expires. have leftist groups urged Mr. Murphy to keep it in placeincluding some organizations now vehemently opposed to StayNJ.

New Jersey Policy Perspective, a nonpartisan think tank, released an analysis of the original StayNJ proposal showing that it is only exacerbate the already large racial wealth gap in the state.

Peter Chen, a senior policy advisor at the think tank, called StayNJ a “massive transfer of wealth to older homeowners” and said it “definitely” widened the racial wealth gap.

He also questioned giving senior high earners a break.

“If you make $400,000 when you’re over 65, you should be able to pay your property taxes,” he said, “without government assistance.”