This recent story from Egg Harbor New Jersey is a sober reminder of why Prop 13 was enacted in California. Unlike California, where property tax increases are maxed out at 2% annual increases, New Jersey, like most other states, taxes property based on its current fair market value. In other words, as your property values increase–so do your property taxe–even if your income remains the same.
Egg Harbor Mayor Sonny McCullough is now claiming that as a result of New Jersey property taxes he is being “taxed out” of his home as he can no longer afford annual property taxes. The mayor bought his home in 1985 for about $350,000. It is now worth approzimately $1.1M, which means he now must pay $35,000 a year in property taxes.
In the words of the mayor, “property tax is the unfairest tax in the world. It’s not based on someone’s ability to earn money. It’s based on the property value.”
Fortunately, for Californians, Prop 13 puts a cap on the amount that your property taxes can be raised each year. In fact, even if you transfer property to a child or grandchild there are certain exemptions and exclusions which may enable the transferee to perpetuate the low tax assessed values.