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Taxes in New Jersey State

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Taxesin New Jersey State

Taxis the major source of revenue for all governments. Taxes are changedat different levels of government (including the state, local, andfederal) in order to finance various development programs as well asthe recurrent expenditure. The ability of a given jurisdiction tomeet its obligations and facilitate long-term as well as short-termdevelopment depends on the effectiveness of the policies put in placeto enable the government raise revenue from diverse sources (Putnam1). These policies and laws vary from one jurisdiction to another.New Jersey is one of the states that run its affairs using the taxesgenerated from the citizens and businesses, besides and grantsreceived from the federal governments and well wishers. This paperwill provide a discussion of taxes in the state of New Jersey. NewJersey, one of the Northern states, is located about one hundred andthirty miles from the coast of Atlantic Ocean. The paper will addressdifferent types of taxes that the state uses to collect revenue andthe perception of its citizens regarding the policies that guides thegovernment.


Therole of the state government in the New Jersey is to manage theprocess of collection of property tax in order to ensure that allcitizens within the tax-districts pay their fair share. However, thetotal amount of property tax that is collected is spent by therespective local authorities, which means that the state does nottake any money. Although New Jersey is classified as states with thehighest property tax rates (2.19 %) compared to the national average(1.19 %), it experiences some struggles in trying to finance some ofits sectors, especially the education (Strauss 1). This challenge isattributed to different factors, including the lack of effectivelong-term policies to help the government in forecasting the state’sfuture revenue as well as expenditure.

Propertytax is charged on different types of assets. In most cases, statescharge it on fixed assets (such as land and buildings, but there aresome jurisdictions that include mobile and intangible property. TheNew Jersey is considered as one of the states with the most unfairproperty tax laws in the U.S. The unfairness has motivated investorsto engage in property tax scandals and avoid doing business incertain regions (Strauss 1). The occurrence of the property taxscandals is associated with the tendency of business people todevelop methods of avoiding the payment of government charges thatcould cripple their investment since they are quite high (Barstow 1and Borchers 1). The education sector is mainly funded through theproperty tax. This implies that the current policies allocate fundsto schools, depending on the value of property in their localjurisdiction. This has resulted in overtaxing of investors in lessdeveloped local authorities as the state government tries to raisemoney to finance education in those areas (Strauss 1).

TheNew Jersey has been struggling to establish a fair property taxpolicy that will enhance equity in the allocation of funds to schoolsand avoid discrimination in the manner in which investors are taxed.The policy proposed by Governor Christie will ensure that all schoolsget $ 6,599 per students, irrespective of the value of property intheir respective jurisdiction (Strauss 1). The successful enforcementof this policy will protect investors in less local jurisdictionsthat are less endowed by ensuring that they are not overtaxed tofinance the education sector.

PunitiveMeasures to Maintain Public Infrastructure

TheNew Jersey is one of the states that charge highest tax rates, butthe effectiveness with which the government managed the revenue hasbeen questioned in the recent past. For example, the declaration ofthe state of emergency in July 2016 regarding the poor state of roodswas a surprise to the taxpayers (Ingraham 1). This declarationfollowed an assessment of the status of the roads, which indicatedthat most of them (42 %) had become impassable. Surprisingly, thestate government announced that the transportation trust fund wouldget depleted before the end of the financial year (Ingraham 1). Thepoor status of the roads cost drivers about $ 2,000 each year in carmaintenance. The jam associated with poor status of the roads costsdrivers approximately $ 5.2 billion annually (Ingraham 1).

Thestate decided to raise the tax charged on gas by 14.5 cents for everygallon in order to generate funds required to improve the status ofthe state roads. The taxpayers in New Jersey have enjoyed the secondlowest gas tax since 1980s (Ingraham 1). It is estimated that themoney raised through the new tax policy will help the state raiseabout $ 32 billion and help the government to finance the maintenanceof the roads over a period of eight years (McGreehan 1). This ratehas been kept low in order to offset the high property tax that hasbeen considered as punitive. The punitive nature of the new tax raiseis confirmed by the fact that over 54 % of the citizens in the stateoppose the changes (The New York Times 1). The state of emergence isan indication of the ineffective tax policies and laws that increasethe vulnerability of the state to a serious crisis.


Salestax refers to amount that is charged by the government agencies onthe amount of revenue generated by businesses. The state of NewJersey considers the sales tax as one of its most reliable sources ofrevenue. It is estimated that sales tax is the second largest sourceof revenue for New Jersey (Christie 1). It is ranked the secondafter the income tax. Effective policies that have been developed tohelp the state raise more funds from the sales tax have beendocumented since 1935, when the rate was set at two percent of thetotal sales (Christie 1). This rate has been revised over the years,and all new rates favor the state government while oppressing thetaxpayers. Reports indicate that the sales tax rate in New Jersey wasincreased from two percent to three percent in 1966, five percent in1970, six percent in 1983, and seven percent in 1990 (Christie 1).Although the sales tax rate of seven percent is considered as one ofthe highest in the country, the state does not allow the localgovernments to make similar charges, thus reducing the burden on theresidents.

Thereluctance of the state government to lower the sales tax rate asrequested by the residents to compensate for the proposed rise in gascharges is an indication of its significance to the department offinance. The government has refused to lower the sales tax since itschange by one percent would lead to a loss of about 1.5 billion ofrevenue annually (Christie 1). The citizens requested the state taxesshould be lowered from about seven percent to 6.8 %, which will havea negative impact on the amount of revenue that is collected by thegovernment each year (Livio 1). This data suggests that the measurestaken to raise additional funds required to repair the state roadsthrough an increase in the gas tax will be counterproductive. Inessence, the frequent increase in the amount of sales taxes andcomplaints raised by the citizens indicates the lack of effective taxpolicies that can help the state achieve sustainable development andsatisfy the interests of all stakeholders.

HowPunitive Tax Rates in New Jersey Scare Away Investors

Thereliance on one type of tax subjects the government to the risk ofrunning its programs on debt of failing to meet its obligations. Theincome tax is the largest and the most single most important sourceof revenue for the state government of the New Jersey (Putnam 1).Although it is a common practice for the governments to generate mostof their revenue from income tax, relying on a few individuals orcompanies is a risk. It is estimated that 40 % of the total revenuein the state of New Jersey comes from income tax (Putnam 1). About athird of it is obtained from one percent of the taxpayers. A proposalto increase the rate of income tax on the wealthiest citizens from8.97 % to 10.75 % have subjected the state to the risk of losing alot of revenue, in case the affected individuals and companies moveto other jurisdictions (Putnam 1). One of the key taxpayers who areplanning to leave the state is David Tepper, who pays about $ 140million in the form of income tax every year (Putnam 1).


NewJersey, similar to other state governments, finances the developmentas well as recurrent expenses using taxes that are generated fromindividuals and companies. However, the most common categories oftaxes include income, sales, and property. Although the state hasmanaged to distribute the burden of taxes to different parties, itexperiences some struggles in trying to raise the money required tofinance different programs, such as the road maintenance. The factthat the rates at which different categories of taxes are chargedkeep on changing indicates that the state has no effective long-termpolicy that should guide its revenue generation and expenditure. Thelimited capacity to finances the road maintenance projects and thepublic education programs is the major challenge that the New Jerseyfaces. The man challenge is attributed to the fact that thegovernment faces a lot of resistance from the stakeholders who feelthat they are already over-taxed.


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