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Brigid Bergin: It's the Brian Lehrer show on WNYC. I'm Brigid Bergin, senior reporter in the WNYC and Gothamist newsroom, sitting in for Brian today. Now we'll continue our election series, 30 Issues in 30 Days. Today, issue number nine, taxation in New Jersey. Ask almost anyone in New Jersey what makes the state so expensive, and the first answer is usually property taxes. The average bill is now more than $10,000 a year, according to an NJ Spotlight analysis of data from the NJ Department of Community Affairs. That's before you even get to income taxes and the sales tax. It's no surprise that taxes and what to do about them are at the center of this year's governor's race.

Both Mikie Sherrill and Jack Ciattarelli say they'll tackle New Jersey's affordability crisis, but with very different approaches. Joining us is John Reitmeyer, budget and finance writer at NJ Spotlight News, to help us make sense of how New Jersey got here, what the candidates are proposing, and what the next governor could realistically change. Hey, John, welcome back to WNYC.

John Reitmeyer: Thank you. Thank you for having me today.

Brigid Bergin: Listeners, particularly those of you in New Jersey, we want to hear from you. When you think about affordability in New Jersey, which taxes hit you hardest? On the flip side, are there public services you feel you get your money's worth from, like schools, transit, or something else in your community? What would you change about New Jersey's tax system, and what do you want the next governor to change about New Jersey's tax system? Give us a call. The number's 212-433-WNYC. That's 212-433-9692. You can call or text that number. John, property taxes, perennial issue number one for a lot of New Jerseyans. Why are they so high, and why has it been so hard for governors of both parties to bring them down?

John Reitmeyer: I think that the answer to that question, why they're so high, is because they pay for so many services in New Jersey at the local level that people care a whole lot about. When we talk about property taxes, the largest typical single portion on somebody's property tax bills funds their local K through 12 public schools. We have very high-quality schools in New Jersey. We have to pay our teachers their salaries and benefits in an area that's very expensive to live in. A large portion of property taxes is funding something that people care a lot about, which is their schools.

At the municipal government level, property Taxes fund the local police departments and firefighting services. Again, these are things that people care a lot about, and the salaries and benefits for the employees of these services to live in the communities in which they serve, or at least near the communities in which they serve, they have to be paid the going wages. That helps drive property taxes. For sure, at the local level, county governments also receive property tax revenue.

Part of this conversation is inflation, because all of the inflation that we've been seeing as consumers in recent years, governments have been trying to keep pace when it comes to the costs that they face as well, including in the healthcare sector. One of the big drivers, most recently, that we've been seeing is public employee healthcare costs. When we talk about property taxes, it's really a bigger conversation. Some of these issues are out of the hands of our state and local politicians in the sense that they can't necessarily control some of the bigger economic issues that drive inflation. There are things that can be done along the edges to help offset.

The state spends billions of dollars annually to send back rebates or reimbursements to certain homeowners and now some renters within the last few years to help offset these property tax burdens. A lot of times, we talk about this just as property owners, but in New Jersey, landlords typically pass along these property tax levies in some form to their tenants. Really, there's been a policy recognition in recent years that the property tax burden is also carried in many ways by tenants because of that pass-through rent payments that they end up contributing.

Brigid Bergin: Both Sherrill and Ciattarelli talked about property taxes at the debate. As you have pointed out, this is an expansive issue to get at. How different would you say their approaches are to this issue?

John Reitmeyer: I think there are some clear contrasts. I've been reporting and trying to get more information from the respective campaigns to analyze or flesh out some of what they're talking about. When we hear Congresswoman Sherrill talk about property taxes, some of the conversation is what we call shared services. New Jersey has many, many, many local governments, whether that's municipal county, or even school boards in a specific community. There's been, for as long as I've covered, the State House and governor's administration's efforts to get these local entities to work together more to pool costs to share services.

One of the things that the congresswoman is talking about is continuing or carrying on those efforts. On the side of Jack Ciattarelli, the Republican, he's talked about doing some things related to assessments and some of the more in-the-weeds rules when it comes to how properties are assessed for taxing purposes. It's unclear. One of the questions about doing things like that, New Jersey currently has a tax-- I'm sorry, a cap on how much property taxes can rise on an annual basis unless voters sign off. That cap was lowered more than a decade ago when Chris Christie was governor in bipartisan legislation.

What happens when you end up putting different legal restrictions on how much local entities can collect in property taxes, remember that these revenues fund things like the local police and local schools. One of the follow-up questions for the campaigns is if you are talking about freezing or capping property tax collections, what are the local entities doing? Are they collecting less revenue themselves or at least not keeping pace with those rising costs? Then how does that affect the ability to deliver services from local law enforcement, snow removal, and your public schools?

This is all part of the conversation. The state is spending more than $4 billion annually right now on a nearly $60 billion budget to fund these property tax relief, rebates, or reimbursements. There was some talk during the debate about the programs. One of the most popular is called ANCHOR in New Jersey. The checks for ANCHOR benefits are currently being distributed by the Department of the Treasury. This is another thing where we've heard Jack Ciattarelli talk in some ways disparagingly about these programs because the state collects revenue through the income tax, and then--

Brigid Bergin: John, let me-- I'm sorry, let me jump in there and just-- Since you're mentioning that-- We have a clip pulled of the candidates talking explicitly about these property tax relief programs and ANCHOR. Let's play that clip, and then you can talk a little bit more about it.

Mikie Sherrill: I've been laser-focused on driving down costs for New Jerseyans. Jack, on the other hand, has voted at every single level of government to raise your taxes. In fact, he's voted against over a billion dollars in property tax relief, and he supported Trump in implementing over $30 billion against property tax relief. In every way, he's raised costs on New Jerseyans. That's why I'm going to get into office and make sure I'm lowering them by sharing services and school administrative costs in municipal courts and continuing to hammer home the way in which we can support seniors with ANCHOR and Stay New Jersey so that they aren't here susceptible to the constant increases in property taxes. I'll continue to lower your cost, and Jack's going to raise them at every level.

Brigid Bergin: 30 seconds, Jack Ciattarelli.

Jack Ciattarelli: A couple of things about the ANCHOR and Stay New Jersey program. I don’t think somebody making $500,000 a year should get a property tax rebate in this state. Now, that, to me, is not right. I think we should use the money to spread it out. Let me say something else. I think it’s insulting here in New Jersey when we take money out of your right-hand pocket, put some back in your left-hand pocket, and call it a fancy name. One other thing about the affordability crisis, remember, one thing that she’ll never remind you of, the Democrats have controlled our state legislature for 25 years. The Democrats have controlled the executive branch, the governorship, for eight years, and look where we are today.

Brigid Bergin: A lot of finger-pointing there. John, you were explaining, really, how effective these relief programs actually are at easing the burden on New Jersey residents. What do you make of where the candidates are coming at these issues, and what can you tell us about how effective they actually are?

John Reitmeyer: Yes, one of the things that Jack Ciattarelli seized on in that exchange is the new program that's coming online early next year called Stay NJ. Governor Murphy and fellow Democrats who control the state legislature have set aside $600 million in funding to pay for enhanced property tax relief benefits for a group of senior homeowners who can make up to $500,000 annually in New Jersey. When we layer in the discussion about the ANCHOR program, the ANCHOR benefit for renters is $450 for a non-senior renter.

The idea that senior homeowners who make up to $500,000 are now in line to get enhanced benefits, ranging easily could be capped at $6,000 or $6,500 while renters are struggling and getting a $450 annual rebate. That's an issue that a lot of people on the left have seized on and have called on the current administration to provide more at the lower end for renters who have not reached the success of homeownership yet. Now we hear some criticism from the right as well of this new program, which we also have a legislative election ongoing in New Jersey.

The 80-member state assembly is up for grabs this year, and we have the Democrats running pretty heavily, talking about these property tax relief programs, including ANCHOR and this new one, Stay NJ. That was an interesting part of that exchange, and it will be interesting to watch, no matter who wins, what happens with this new Stay NJ program. It's funded in this fiscal year, but the funding going forward, which is that the expense is only projected to grow, it's not funded beyond this fiscal year.

Brigid Bergin: Interesting.

John Reitmeyer: Yes, New Jersey spends about a billion dollars more right now than it takes in annually in taxes. The governor and lawmakers have been managing that gap by spending down surplus and doing some other one-time maneuvers like raiding a fund that is supposed to be used to pay down debt. Going forward, there's going to be a reckoning with these types of programs that don't have dedicated funding because eventually you run out of surplus, and you run out of these one-time maneuvers, and Stay NJ would be one of them. That was an interesting issue to see debated. Then just this-- Go ahead. Sorry.

Brigid Bergin: I want to bring some of our callers in in just a moment. Let's go to Joseph in Princeton, New Jersey.

Joseph: Brigid, thank you.

Brigid Bergin: John, we're hearing a little echo of our station ID there. We have a bunch of New Jersey callers, and so I want to get some of them into this conversation. I know that you had one more point there to make when I interrupted with that station ID. If you want to make it quickly, and then we'll get to Joseph.

John Reitmeyer: Yes. I was just going to mention the ANCHOR program that was also discussed. ANCHOR is oriented more with lower-income ceilings, although you can make as much as $250,000 annually and receive an ANCHOR benefit. That program is directed more at getting bigger amounts of money to people who make under $150,000.

Brigid Bergin: John, thanks for that. Joseph in Princeton, New Jersey, you're on.

Josseph: Brigid, good morning. Thank you. Always good for your reporting.

Brigid Bergin: Thanks so much.

Joseph: I just want to make one point. Princeton and Princeton Township, which I live, they merged and we save a lot of money on taxes. This issue of taxes is coming every year. New Jersey is the biggest state with so many municipalities, they have to merge. Let's go around the Clifton, nine municipalities. Why? Why these municipalities are not being merged? I travel to Georgia. You have only maybe five municipalities around Atlanta, but we go here from maybe less than a mile, you have a new city. By the way, I'm going to give a credit even if I'm not Republican to Christie. He want to change it, and it was a law.

All these ANCHOR program, all these governors races, every year, they want to save us. No, you need to eliminate, and I'm sorry to say that, Brigid. I'm a longtime listener, Brian, and I love your recordings. We have a racist state. We created these boundaries to keep certain people out of our neighborhoods. Please don't decide not to do it. You got benefits for the cops, you got benefits for administration. Obviously, you have to raise the taxes. None of these governors' ANCHOR program will assist anything. It's a crop of nonsense.

Brigid Bergin: Joseph, thank you for your call. John, I've got so many listeners who have texted in some variation of what Joseph was saying there in terms of the number of municipalities. How does that figure into this debate over property taxes and taxes in general in New Jersey?

John Reitmeyer: It's a big part of it. I've done a lot of reporting in this area, including covering the merger of Princeton Borough and Princeton Township several years ago. At times, some of the hiccups with the mergers, you have different labor contracts in different towns. Stepping back, a big part of New Jersey's DNA is the fact that we have localities and strong local rule. While a lot of people are upset about the financial cost of that, when you start talking about the types of things that would unwind some of that cost, like having a regional police force, which is something that has been done in some places, that's where some of the coalitions start to unravel, or when we talk about expanding into, say, like a county school district, that's where we have debates in New Jersey over neighborhood schools, let alone pushing further. It's probably worth bringing up. There's a nexus between what the state spends on schools through the school funding formula and property taxes, because--

Brigid Bergin: You jumped right into my next question. Ciattarelli does say that New Jersey needs a new school funding formula to get these property taxes under control. How much would that really change things, and what would it mean elsewhere in the budget?

John Reitmeyer: The school funding formula, right now, the income tax, constitutionally, pays for state aid to schools and for the direct property tax relief programs. A big, big portion of the annual budget is what they call formula aid that goes directly into the classroom. The concern when we talk about changing the formula is due to language in the state constitution related to public education. There's a certain standard of education that has to be met in each school district. If the local tax base is not robust enough for the local district to meet that standard, the state steps in with state aid. This is all governed by New Jersey Supreme Court doctrine.

The current school funding formula, which gets criticism from both the left and the right, does have the endorsement currently of the State Supreme Court, and so anytime you reopen the conversation, it brings in the question of, can you get the Supreme Court to sign off? Just as when we talk about taxes and the different tax plans that these candidates have put forward, governors, of course, cannot unilaterally enact tax policies in New Jersey. Those originate, by the Constitution, in the legislature, at least as a bill.

The governor can certainly inspire or encourage the drafting of a bill, but lawmakers actually have to introduce and pass legislation. When we change the school funding formula, which does relate directly to, or at least indirectly, to how much is collected in property taxes in a community for local schools, that generally gets oversight from the State Supreme Court. A lot of these issues are really complicated, even though in politics they like to talk in more simple ways and sound bites.

Brigid Bergin: Sure. If you're just joining us, this is the Brian Lehrer show on WNYC. I'm Brigid Bergin, filling in today. My guest is John Reitmeyer, budget and finance writer at NJ Spotlight News. It's issue number 9 in our election series, 30 Issues in 30 Days. We're talking about taxes in New Jersey. We've spent a lot of time talking about property taxes. Of course, I want to shift gears, though, John, a little bit. Let's talk about sales tax. It's not usually the first thing people mention when they talk about affordability, but it does bring in more than $14 billion a year. How has sales tax been an issue in this gubernatorial election?

John Reitmeyer: This has been an issue that has really been driven in the ad wars that the candidates have been trading. Primarily because of some comments that Jack Ciattarelli made at an event in Bergen County, where he was talking more broadly about tax policies, including in a state he had recently visited. A snippet of that conversation related to the sales tax and how sales taxes are levied in another state, the Sherrill campaign has jumped on that, where people who are supporting the Sherrill campaign to amplify ways in which Ciattarelli talked about sales taxes.

In New Jersey, because of the way the budget is structured, so that income tax that I talked about earlier, that's the biggest source of revenue for the state budget, but the revenues are all constitutionally dedicated to a specific purpose, which is property tax relief or public education. The sales tax is the biggest source of funding for the state budget's general fund. It pays for everything else. The sales tax is actually one of the taxes that New Jersey in state-by-state national rankings is not at the top of the list in terms of tax rates. Some places allow local sales taxes. New Jersey state and local burden is middle of the packet. We're around 30 in a lot of the state-by-state analyses.

There's been the idea that because Ciattarelli had talked about ways in which other states levy higher or rely more heavily on sales taxes, that he was somehow musing that that's something he wanted to do in New Jersey. That's been vehemently opposed by the Ciattarelli campaign. During the debate, where we've played some clips from, both candidates were asked about the sales tax. Ciattarelli affirmatively said he is not going to raise the sales tax. Sherrill said she wasn't going to just give an answer at a debate about something, but promised to, in general, be a steward of the state's fiscal resources. That's less in their proposals and more in the ads.

Brigid Bergin: Interesting.

John Reitmeyer: If we look at specifically what the candidates are calling for, neither candidate is actually calling for any change to New Jersey's current sales tax, which is a 6.625% rate, although certain items, including groceries and clothing are excluded.

Brigid Bergin: Interesting. Not the highest. It could be, certainly, I believe, lower than here in New York. Let's go to Yarrow from Union, New Jersey. Yarrow, you're on WNYC.

Yarrow: Hi. I want to talk a little bit about child care. It's so expensive. It rivals the cost of mortgages. It's not only important for parents so they can afford child care, send their kids to child care so they can work. It's important for employers, too. If you can't find affordable child care, you can't work. I think that's an issue for everyone, the overall economy. It's just something that the state isn't addressing. They're actually making it harder. They recently froze childcare subsidies in New Jersey, so they've cut off thousands of families from being able to afford child care.

I hear about it in the New York race, but I don't hear too much here in New Jersey. I want the governor, the candidates to really lean into this issue and say what they would do to address this and invest in it so that we can actually afford to have a functioning child care system here.

Brigid Bergin: Yarrow, thanks so much for that call. John, it's another topic that I'm sure that, as she mentioned, she's hoping to hear from the candidates. I guess part of what I would wonder is, has there been any discussion about when it comes to revamping the school funding formula, taking into consideration how you might expand it to offer more child care options?

John Reitmeyer: Yes, and the caller is really well informed, and is spot on in terms of talking about the latest developments in this area coming out of the new fiscal year budget that was enacted at the end of June. One thing that's probably worth noting is Congresswoman Sherrill's affordability platform includes a proposal to expand New Jersey's child tax credit, which was just put in place a few years ago and has already been expanded once in the face of the types of dramatic increases in childcare costs. Again, the caller's completely right in saying that this holds back a lot of people from participating or participating in a bigger way in our state economy.

Maybe this is a missed opportunity for the Congresswoman because I've been trying to get more details about her plan to expand the child tax credit in New Jersey. The current tax credit caps both how much you can receive, the age of the child for which you would qualify as a parent, and the maximum amount of income that a parent can make annually in order to qualify for a credit. It would be interesting to find out from the congresswoman exactly how she would expand this credit. Would she talk about getting more parents eligible by either increasing the age of the child that would be allowed or increasing that income ceiling? Would she be talking about expanding the size of the credit so parents would have a bigger write-off on their taxes?

These are the types of things that I've actually been attempting to get more information from the candidates on their tax plans. I'm still waiting to get some of that. It seems like, for whatever reason, in the political calculus, the candidates have put out proposals related to affordability. Then maybe there's a decision to not get too caught up in the details because somebody might say, like, "Well, that's a great plan, but I won't qualify." That's some of the frustration in terms of the observer's perspective here.

Brigid Bergin: Sure. John, before we let you go in our last couple minutes, I wonder if we could do a lightning round of a few more. There are more taxes in New Jersey. Let's talk for a moment about the so-called mansion tax. What is that? Who is paying that, and how much does it generate?

John Reitmeyer: That's a tax that New Jersey has traditionally levied on home sales worth more than $1 million. Based on there were about $600 million in tax hikes approved at the end of June by Governor Murphy and the Democratic legislature, including an expansion of the mansion tax. We now have a new graduated system of taxes that go up higher than $1 million. The argument that was made in Trenton during the run-up to the adoption of the budget was that, really, because of the acceleration in home prices, especially in many communities in northern New Jersey, you're not really living in a mansion if the property is selling for a million dollars or more. That's really reserved for the much bigger homes.

I don't have a number off the top of my head for what the current rate of revenue collection is from what we call the mansion tax in New Jersey, but that number is going up as part of the new budget that was enacted at the end of June.

Brigid Bergin: Then let's talk for a minute about corporate tax revenues. They have been lagging this year despite a fairly strong economy. What's driving that, and what does that mean for the state's fiscal health?

John Reitmeyer: Yes, I think we're a little early in the process, although there are some concerns being raised about the current rate of receipts for the corporation business tax. We have data for the first two months of the fiscal year, so July and August, and we were well off the pace from last year. Officials from the Department of the Treasury note that it's really in September that the first big quarterly payments of the fiscal year come due. We can't really draw any conclusions, although there is a lot going on in the economy right now when we talk about changes in federal policy. Tariffs are starting to have an impact. Mass deportations in certain sectors of the labor economy are starting to have an impact.

We're waiting for more data to determine whether this is a blip or whether this is a bigger sign. We talked earlier about the structure of the state budget. The corporation business tax is another big source of revenue for New Jersey's general fund. It is worth keeping an eye on. It raises more than $4 billion annually. There are also slices that fund by constitutional dedication environmental programs in New Jersey, including land preservation efforts. Then another portion statutorily has levied against the highest earning corporations to fund NJ Transit, another big issue in New Jersey right now, NJ Transit funding.

We do have a candidate, Jack Ciattarelli, who's been talking about lowering corporate tax rates or at least at the high end. That's all part of this conversation in terms of the latest with the CBT, what we call the CBT, because if we lower, we're seeing lagging revenues, at least initially. If we were to lower the rates, it goes back to that debate about whether lower rates generate more economic growth or whether lower rates will just generate lower revenues. Then with dedications like environmental programs and NJ Transit, how do we then come up with a revenue to fund those services at the current levels if the desire is to keep them funded?

Brigid Bergin: We're going to leave it there for now. I want to thank John Reitmeyer, budget and finance writer for NJ Spotlight News. This has been the latest installment of 30 Issues in 30 Days. Issue number nine, taxation in New Jersey. John, I want to thank you. You teed up the issue we are going to be talking about tomorrow, which is, of course, funding of NJ Transit. John, thank you so much for so much great information.

John Reitmeyer: You're welcome. I really appreciate the in-depth conversation that you guys are having.

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