Wednesday, November 2, 2016

Dawn of the Dread

What’s the scariest thing about Halloween? It’s that the following day is November 1, due date for the dreaded 4th-quarter real estate taxes. Taxes are no fun anywhere and never have been: a Sumerian proverb inscribed on a clay tablet dated c. 2400 BCE reads, “You can have a landlord, you can have a king, but the man to fear is the tax-collector.” Indeed. The advantage of property taxes over other kinds to the powers-that-be is that the owner can’t pretend the land doesn’t exist; it can’t be hidden away as gold nuggets can be. And if he doesn’t pay up, the property can be located, seized, and sold. Easy-peasy
Sumerian tax receipt

November 1 is particularly scary in New Jersey, since NJ has the distinction of the highest property taxes of any state in the nation. Despite a 23-cent per gallon increase in the gasoline tax that also went into effect this month, our gas tax is still only the 6th highest, but for real estate we’re #1. Back in 2011 the state legislature put a 2% annual cap on local property tax increases but left escape clauses. An obvious one is revaluation: in Prospect Park last year, for example, the tax rate went down but the tax levy rose 5.2% anyway due to revaluation. Also, towns and counties can exceed the 2% limit to meet certain types of commitments. This year 60% of towns and counties exceeded the nominal cap.

I sometimes hear homeowners (especially those who pay taxes through a mortgage holder, and so don’t examine the tax bills closely) tell me, “My taxes went down for 2017.” No they didn’t. That impression is an artifact of the way taxes are calculated. A tax bill shows the last two quarters of the current year and the first two quarters of next year. The amount owed for each of the first two quarters of next year is based on an average of all four quarters of the current year – this average is always lower than the last two quarters of the current year. When a 2017 budget is passed (almost certainly higher than the 2016 budget) the extra cost will show up in the 3rd and 4th quarters of the 2017/2018 bill. If you compare the first two quarters of 2016 (by digging out last year’s bill) to the first two quarters of 2017, 2017 will be higher.

The good news, if one can call it that, is that it is fully three months to the next quarterly payment. The other good news is that this particularly nightmarish election season will be over on November 8 – good only in the sense of “over.”

Then there are Thanksgiving and November birthdays, including my own. I can eat away my grumpiness with turkey and cake. Hmm… I’m already feeling better.

The Kinks: “The tax man's taken all my dough... All I've got's this sunny afternoon


  1. Yeah I heard that New Jersey had a really high property tax, but us in California are probably right behind you. :)

    1. They stagger folks from most other states. A quick look at this year's tax stats shows that, despite Proposition 13, California's average tax ($3,021) on the median priced home ($371,400) is 10th on the national list, which is pretty high; NJ, however, clocks in at $7,335 on median price home that is $50,000 lower in price than the CA median. Those median prices aren't valid in the most sought-after conurbations, of course, so the tax burden there is much higher.

  2. I got my property taxes in the mail for 2017 the other day, and they are all due by Jan. 31st. If you do not pay by then, there's a penalty of 7% for Feb. and 9% for March, and I guess that continues onward. I had to pay a penalty one year and swore to not let it slip my mind again. Still I think Texas has pretty reasonable taxes.

    I'm part owner in a small man-made lake nearby that my grandfather built way back when. It's all in one lump and not split up by the property owners. It's an antiquated way to do things, and probably should have been changed a long time ago. I wonder how one would go about splitting that up (probably have to talk to a lawyer), but I think whatever it cost, I wouldn't want to pay someone to do it.

    1. That is an interesting tax collection method, and it makes a certain amount of sense for budgeting purposes. In NJ however, where $15,000 and $20,000 tax bills are not at all uncommon on even modestly upscale homes, paying it all at once would be a problem for most taxpayers.

      Yes, there are a lot of jointly owned properties like that -- joint ownership of a beach on a lake, for example, in lake communities. I suppose one could buy up the shares of the other owners (assuming they would sell and that the deeds don't restrict trades of that kind). Otherwise, that lawyer's fee looks likely.