Tuesday, August 08, 2006

An Unwelcome Byproduct Of The Housing Boom

And it is the rise of property tax.

Today’s New York Times article offered a glimpse on how personal income increases since 2002 were outpaced by the rise of property tax. According to the article, from 2000 to 2004, personal income went up 16 percent nationwide, while property tax soared 26 percent. In the tri-state area (NJ, NY, and CT), property tax grew two to three times faster than the gain in personal income. This, however, was not the case ten years ago during the internet boom of the late ‘90s. From 1995 to 2000, personal income was up 33 percent, topping property tax increases during the same period by 19 percentage points.

As the stock market cooled off in 2001, municipalities throughout the country felt the pressure as revenue from income and sales taxes sharply lowered. For most local governments, property tax, commercial and residential, became the main source to fund the municipal and county governments and the public schools, and the stable period of property tax increases residents experienced in the late ‘90s came to an end. On the other hand, while many people in the tri-state area saw their house values doubled or even tripled in recent years, a steep rise in property tax has become a burden, especially for those who bought their houses at the peak of the real estate boom.

In New Jersey, which already has the nation’s highest property tax rate, situation is even worse. After 2000, the New Jersey’s government employment rate went up twice as faster as the national average, and that in turn dramatically drove up property tax while personal income kept pace with other areas in the nation. According to the Times’ article, in Bergen County, NJ, property tax jumped 26 percent from 2000 to 2004, three times the growth rate of income. The sharpest rise happened in Somerset County, NJ, the county I am living in, where a 41 percent jump in property tax is more than eight times of the income growth rate.

And the solutions?

"Sell my house and move out of New Jersty."

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