LESSON ONE First Remember that: THE LOCAL PROPERTY TAX in New Jersey is in fact a LOCAL TAX. This means that the tax is assessed and collected at the local municipal level for the support of: LOCAL SCHOOLS MUNICIPAL GOVERNMENT COUNTY GOVERNMENT THE STATE RECEIVES NO PORTION OF THESE PROPERTY TAXES. As a matter of fact the State pays out 48 of every State revenue dollar collected to counties, municipalities and schools in some form of State Aid. In 1961, some 44 years ago, the State paid out 43 cents of every State revenue dollar collected. In FY 2005 the State budgeted approximately $12,465.6 million in State funding for property tax relief programs for the following purposes: ($Millions) Schools Aid $8,657.3 Municipal Aid 1,757.0 Other Local Aid 716.0 Direct Taxpayer Relief 1,335.3 TOTAL $12,465.6 LESSON TWO Next we must understand that: THE LOCAL PROPERTY TAX in New Jersey is a RESIDUAL TAX. A Residual Tax is one which is levied to raise the amount of money required over and above the total revenues available from other sources. For example, in Jerry's Small Town, total budget requirements are: For Local Schools $ 149,000 For Municipal Services 175,000 For County Services 75,000 Other Items 1,000 TOTAL BUDGET REQUIREMENTS $400,000 Available Revenues to offset these requirements: State School Aid $ 75,000 Other Revenues 25,000 (Parking Meters, Licenses, Court Fines, Etc.) TOTAL AVAILABLE REVENUES $100,000 AMOUNT TO BE RAISED BY LOCAL PROPERTY TAXATION $300,000 This $300,000 is the RESIDUAL amount to be raised by Taxation after giving effect to all other sources of revenue. LESSON THREE Now we must also understand that: THE LOCAL PROPERTY TAX in New Jersey is an AD VALOREM TAX. Don't let that fancy name frighten you. An AD VALOREM tax simply means that each taxpayer shares in the total tax burden of his town in the direct proportion as the value of his property bears to the total value of all the property in his town. AD VALOREM means each taxpayer pays according to the value of the property he owns. The amount of property he owns is used as a yardstick in determining his ability to pay. For Example: Jerry owns a house and lot having a market value of $ 300,000 The total market value of all property in Jerry's towns is $60,000,000 ACCORDINGLY: Jerry's share of the total Local Property Tax base is $300,000 / $60,000,000 $300,000 equals of 1% of the total property tax base of $60,000,000. Reducing this to a decimal, Jerry's share of the total Local Property Taxes in his community is of 1%, or .005. This percentage is usually shown as a Tax Rate charged for each $100 of Assessed Valuation. (See Lesson Four) AD VALOREM means nothing more than PROPORTIONATE OR FAIR SHARE. REVIEW So far we have learned that the Local Property Tax is a - LOCAL Tax RESIDUAL Tax AD VALOREM Tax LOCAL TAX levied at the local municipal level for the support of local schools, municipal and county governments. RESIDUAL TAX levied to make up the difference between available miscellaneous revenues and budget requirements. AD VALOREM TAX, which means that each taxpayer pays his proportionate share based on the value of the property he owns. LESSON FOUR Now, we must learn the answer to the question: WHAT IS THE MEANING OF TAX RATE? TAX RATE is the number of dollars per $100 of Assessed Valuations which must be applied to the assessed valuation of all property in a taxing district in order to produce the amount of money required to support school, county and municipal budgets. TAX RATE is another method used to arrive at the amount of each taxpayer's proportionate share of local taxes. The TAX RATE is determined by a simple arithmetic calculation similar to the method illustrated in Lesson Three. Total Amount to be Raised by Taxation - $300,000 Total Value of all property in Town - $60,000,000 $300,000/ $60,000,000 = .05 The Tax Rate is then 5 per $1 of Assessed Valuation or $5.00 per $100 of Assessed Valuations EXAMPLE: Jerry's house and lot have an Assessed Valuation of ------------------ $300,000 Tax Rate per $100 of Assessed Valuation ------------------------- X $5.00 Jerry's Tax Bill is --------------------------- $ 1,500.00 LESSON FIVE What is the meaning of - TRUE VALUE ASSESSMENT RATIO ASSESSED VALUATION TRUE VALUE means market value - the amount a parcel of real property would sell for at a fair and bona fide sale. ASSESSMENT RATIO is that percent of True Value used by the assessor in making up his assessment rolls as prescribed by his/her County Board of Taxation).
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