NEW BRUNSWICK, NJ-Recent studies by the Tax Foundation ranked New Jersey first in two categories residents and companies probably wished it did not: highest median property taxes and the least business-friendly tax structure in the US.
According to the Washington, DC-based nonprofit organization, New Jersey took the top spot for median real estate taxes paid in 2008: $6,320, well ahead of the second-ranking state, Connecticut at $4,603. Further, based on a median homeowner income of approximately $90,000, New Jerseyans plunk 7% of their paychecks toward property taxes, again, tops in the nation.
The Tax Foundation also put out its “2010 State Business Tax Climate Index.” The survey measures the competitiveness of each state’s tax systems and grades them on the levies that matter most to business and business investment: corporate and individual income; sales, property; and unemployment insurance taxes. The Garden State came in dead last.
The index represents the tax climate in each state as of July 1. Each state is scored on the aforementioned taxes. Those scores are then weighted based on the relative importance or impact of the tax to a business entity. “Keeping a state competitive in today’s global marketplace can be difficult, but there is one factor lawmakers have direct control over: the quality of state tax systems,” stated the Tax Foundation in a release. “The index measures how well a state’s tax system encourages investment by maintaining a broad tax base and low rates.”
The findings were no surprise to observers of the state’s corporate and political climate. They blame New Jersey’s multiple state and local bureaucracies for its high taxes. “There are too many municipalities , too many school districts [more than 600], high public-sector salaries and high service levels,” James W. Hughes, dean and professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, located here, tells GlobeSt.com. “New Jerseyans want Mercedes-Benz level services and these don’t come at Chevrolet prices.”
David Houston, Jr., president of Teaneck-based Colliers Houston & Co., agrees that the state is overburdened with a plethora of government agencies, resulting in high taxes. He also points a finger at politicians who, he says, appear unwilling to confront the situation. “One out of every seven people works for [state] government,” he tells GlobeSt.com. “We have these lucrative [labor] contracts that nobody thinks we can do anything about and we are driving ourselves out of business. We have politicians that get two, three or four pensions. We have more than 4,000 government or quasi-government organizations in this state. Yet it is perpetuated because no politician thinks they can stand up to anybody and get elected.”
The answer, Houston says, is to consolidate overlapping bureaucracies and deliver services in a more fiscally efficient manner. “The key to getting this state back on its feet is two-fold,” he says. “Number one is to grow the economy. Number two is to take the services that we need and figure out a way to deliver them far more cost effectively. I don’t buy that we can’t do either. Other states manage to do this much more efficiently than we do. Why don’t we find out what they are doing and copy it? Nobody has a big picture view and until we do, we will continue to lose jobs.”
Hughes notes that the business environment in the state isn’t all bad. New Jersey’s highly educated and skilled workforce, quality of life, public transit and geographic location all work in its favor. However, those factors may not be enough to offset its detriments.
“Our abysmal business tax climate position stands as a strong deterrent to job and economic growth, and will increasingly be so in the post-recession future,” he says. “States will become increasingly aggressive in their economic development activities, and use our business tax climate as a weapon against us.”