Column: Tax Relief Is Not Always Fair

On a quiet, tree-lined street in, say Chatham–though it could be Parsippany, Morristown, or anywhere else in New Jersey—a 67-year old widow lives in a three-bedroom home. Across the street is a middle-aged couple with two children who live in an almost identical Colonial.

Having lived 30 years in the neighborhood, the widow has paid her home off. Her recently deceased husband had been a pharma executive, and his retirement, added to her own teacher’s pension, plus Social Security, has left her comfortably wanting for nothing on an annual income of just under $100,000.

The couple, meanwhile, still has about 15 years left on their mortgage and has had to take out additional loans to help cover their elder son’s $25,000 bill for freshman year at a state college. They have always lived frugally, but life has really been a struggle since she was laid off from her teacher’s aide position a year ago, forcing them to rely only on his middle-management salary of $76,000.

Here’s the question: Which one of these families is more deserving of, or more in need of, a Homestead Benefit credit to help cover its high New Jersey property tax bill?

Seems pretty clear that the family with the lower income is more deserving of the tax credit—averaging $540 this year but ranging as high as $1,000.

New Jersey’s program, however, places a greater emphasis on age than need (which is another story that has something to do with pandering to a certain group of voters). So the relatively wealthy senior is going to get the reduction on her property tax bill, while the couple struggles to pay a mortgage and college loans, not to mention feed and clothe a larger family, and to meet a five-figure tax tab.

Basing the benefit (it used to be called a rebate and just a few years ago almost everyone got one, remember?) primarily on age is the first problem with the program that began in 1976 as a way to soften the blow of the state’s new income tax.

The program has undergone several transformations over the years, typically giving larger amounts to most homeowners and sometimes renters in good times, and getting cut to the bone in years of hardship. Then-Gov. Jon Corzine changed the rebate two years ago to one that was more generous to senior citizens and the disabled and cut all payments to everyone else with incomes of more than $75,000. Last year, Gov. Chris Christie slashed that tax relief by about two thirds and changed it to a tax credit, rather than a check mailed right before the November election, thus changing the name to a benefit.

This year, Christie doubled the homestead benefit budget.

But, it still rewards wealthy seniors at the expense of middle-income residents.

Wealth does figure somewhat in the benefit calculation for both classes. A senior with an income of less than $100,000 can get a maximum of $1,000–10 percent of his 2006 property tax bill up to $10,000. One with between $100,001 and $150,000 in income gets only 5 percent of the tax bill, amounting to a benefit of up to $500.

To get the maximum benefit, a non-senior must have an income of $50,000 or less, while those with between $50,001 and $70,000 can get 6.67 percent of their taxes credited to a maximum $667.

There’s lots of income not subject to taxation in New Jersey, and so not subject to those limits. Several of these put seniors at an even greater advantage: Social Security, life insurance and death benefits payments, and Senior Freeze payments. That last program protects those age 65 and older with incomes $70,000 or less from property tax increases and, increased by Christie this year, will send checks averaging more than $1,200 to those eligible this year. Yes, that freeze payment is in addition to the rebate.

It gets even more ludicrous, though.

The income limits under the Homestead Benefit program are irrespective of filing status. Single or married, living separately or together, the limit is the same. That’s different from state and federal income tax liabilities, which are calculated based on filing status, in recognition of the fact that two (or three or four or more) cannot live as cheaply as one.

Yet, under New Jersey’s Homestead Benefit program, a single senior with an income of $99,999 can get $1,000. An elderly couple getting $149,000 a year can get $500. A family of four or five or a dozen with an income of $75,001 gets $0.

Is that really targeting property tax relief to the most needy?

Colleen O'Dea is a writer, editor, researcher, data analyst, web page designer and mapper with almost three decades in the news business. Her column appears Mondays.