Origins of the Property Tax in New Jersey

Our property tax goes back to the earliest years of English rule. In 1670, a levy of one half penny per acre of land was imposed for the support of the colonial government. In 1682, with the establishment of counties, the property tax became the primary source of funding for local government. And four years later, townships were given permission to raise revenues for public improvements. Until the middle of the 19th Century, property taxes were levied on real estate and certain personal property at arbitrary rates within certain limits, referred to as “certainties.”

The Public Laws of 1851 brought to New Jersey the goals of uniform assessments based on actual value and a general property tax, meaning that all property classes were to be treated the same, for the purpose of taxation. In 1875, the concept of uniform assessments was enshrined in the State Constitution. Our Courts held that the amendment, however, permitted the classification of property for tax purposes and the exemption of certain property classes from taxation. A long period of the erosion of the “general property tax” concept followed. 

In 1884, a State Board of Assessors was created to assess the value of railroad and canal property. The State, thereby, inserted itself into the local property tax assessment process.

As a local tax, the property tax is, generally, locally assessed and collected for the support of municipal and county governments and local school districts. No part of it directly supports State government, but a large part of it supports functions that the State has imposed on local units. All taxable property is assigned a value - assessed - by a local assessor in each municipality. An assessment is given as “taxable value,” except in the case of qualified farmland, which is specially valued. The amount of the tax is annually determined each year, in every municipality, to provide sufficient revenues to meet the budgeted expenditures of municipalities, counties and school districts, minus revenue available from other sources.

Each year school districts, municipal governing bodies, and county governing bodies notify the County Tax Boards of their budgetary requirements through submission of adopted budgets. The various levies are totaled to represent the “amount to be raised by taxation” for each taxing jurisdiction. The tax levy is divided by the total assessed value of all taxable property within the municipality—or the tax base—to determine the general tax rate. The general tax rate is then applied to the assessed value of each individual parcel of property to determine the property owner’s tax liability. Local budgets, assessed value and the availability of other revenues, then, are the prime determinants of each taxpayer’s burden. The rate is annually adjusted to account for these factors. Because of this, you will see our property tax referred to as a "residual tax".