Constitutional Foundation
New Jersey Constitution, Article VIII - Taxation and Finance
Section I, Paragraph 1(a)
"Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district."View NJ Constitution
What This Means
- 1 Uniformity is required. The Constitution mandates that all property be assessed by the same standard - not different rules for different owners.
- 2 Property tax is the primary local revenue source. Unlike the federal government, NJ municipalities cannot levy income taxes. Property tax funds schools, police, fire, roads, and local services.
- 3 Assessment = market value. By statute (N.J.S.A. 54:4-23), "true value" means what a willing buyer would pay a willing seller - fair market value.
The bottom line: The Constitution requires fairness. When assessments drift from market value, some owners pay more than their fair share while others pay less. That's why the system has mechanisms - like Chapter 123 and the ADP program - to keep assessments aligned with reality.
How the Money Flows
Your property tax bill funds multiple layers of government. Here's how it breaks down:
School District
~55-65%K-12 education, teachers, facilities, transportation
Municipal
~20-30%Police, fire, DPW, parks, administration
County
~10-15%County roads, courts, social services, parks
Special Districts
VariesFire districts, library, open space, etc.
Each entity sets its own budget. The municipal government doesn't control school spending, and the school board doesn't control county taxes. Your total bill is the sum of all these separate levies.
Two Problems the System Must Solve
Fairness / Allocation
Assessments don't create the tax levy - they allocate it. Freezing assessments locks in winners and losers as market values diverge. Properties that appreciate faster pay less than their fair share; others overpay.
Fiscal Risk / Appeals
When the average ratio drifts below ~87%, Chapter 123 mechanically turns properties at 100% into "overassessments." Commercial owners appeal, and the municipality alone pays refunds plus interest (N.J.S.A. 54:3-27.2).
Stopping reassessments does not stop tax increases if budgets rise. It just freezes the split.
The Core Principle
Property taxes in New Jersey follow one fundamental rule:
Used by every New Jersey taxing district
Think of It Like a Pie
Spending/budgets drive the size of the pie.
Assessments decide how it's split.
Three Concepts That Drive Everything
The Levy (the total tax to be collected, also known as the amount to be raised by taxation — the portion of the budget funded by property taxes after other revenues)
The levy is the total amount of property tax a district needs to collect. It's set by budgets - municipal operations, schools, county services, and special districts.
Key insight: The levy is set before assessments are considered. Changing assessments doesn't change how much is collected - only who pays what share.
The Tax Rate (Levy ÷ Total Ratables)
The tax rate is calculated by dividing the levy by total ratables (sum of all assessed values), then multiplying by 100. In NJ, rates are expressed as dollars per $100 of assessed value.
Your Share (Assessment ÷ Total Ratables)
Your property's share of the levy equals your assessed value divided by total ratables. If your assessment rises faster than the average, your share increases - even if the levy stays flat.
Example: How shares work
Town needs $10,000,000 in property taxes.
Home A
Assessment: $300,000
Share: 30%
Pays: $3,000,000
Home B
Assessment: $700,000
Share: 70%
Pays: $7,000,000
If the levy rises 5% next year and assessments are frozen, both bills go up 5% - their shares didn't change. But if Home A's market value rose 20% and Home B's rose 0%, the frozen assessments hide this shift.
What Annual Reassessment Does & Does NOT Do
"Annual" doesn't mean "real-time." Per N.J.S.A. 54:4-23, all property must be assessed as of October 1 preceding the tax year. Values are set once per year on a fixed date - not adjusted month-to-month as market conditions change.
Annual reassessment DOES:
- • Keep property values aligned with current market conditions
- • Reduce long-term assessment errors and inequities
- • Distribute the tax burden more fairly
- • Correct errors sooner, not years later
Annual reassessment does NOT:
- • Raise tax rates or create new taxes
- • Increase school, municipal, or county budgets
- • Eliminate protections under the Freeze Act
- • Change the total amount of tax collected
Common Misconceptions
Myth
"Higher assessments mean higher taxes."
Reality
Higher assessments only raise your taxes if your assessment rises faster than the average. The levy is set by budgets, not assessments.
Myth
"Revaluations are a tax grab."
Reality
Revaluations redistribute the existing levy more fairly. They don't change how much is collected - only who pays what share.
The Mechanics
How Drift Creates Unfairness
When assessments aren't updated regularly, they "drift" away from market values at different rates. Properties that appreciated faster end up underpaying; those that appreciated slower overpay.
The Average Ratio
The state calculates the "average ratio" - the typical relationship between assessed values and market values in each district. A ratio of 80% means assessments are, on average, 80% of market value.
Chapter 123 and the Corridor
Chapter 123 creates a ±15% "corridor" around the average ratio. Properties assessed within this corridor are considered fairly assessed. Those outside may have grounds for appeal.
Learn about Chapter 123Historical Context: Decades of Study
The problems aren't new. Official state commissions have documented the same structural issues for over 50 years. Technical solutions exist - political feasibility has been the barrier.
NJ Tax Policy Committee Q&A on Property Tax Reform
Early documentation of NJ's property tax challenges. The issues identified - overdependence on property tax, uneven assessments, school funding burden - remain unresolved today.
View Document (PDF)Local Budgetary Limitations Review Commission
Examined caps, limits, and the structural constraints on local government finance in New Jersey.
View Document (PDF)Property Tax Assessment Commission Report
Acknowledged significant problems with how NJ's property tax is imposed and administered. Noted that property taxes raised over $5.5 billion annually - by 2024, the levy reached $34.5 billion. The first conclusion: "New Jersey is a high property tax state."
View Document (PDF)OLS Background Report: Options for Replacing Local Property Taxes
Office of Legislative Services analysis of NJ's heavy reliance on property tax compared to other states. Examined various swap/relief options including replacement with income and sales tax revenue.
View Document (PDF)Joint Legislative Committee on Public School Funding Reform
Final report examining school funding structure and its impact on property taxes. School levies remain the single largest driver of property tax growth.
View Document (PDF)Recurring Themes Across 50+ Years
- • Overdependence on property tax - Nothing structural has changed in NJ's revenue model
- • Uneven assessments - A crisis in 1972, 1986, and still today in towns without modern reassessment
- • School funding structure - Consistently identified as the largest driver of property tax growth
- • Home-rule fragmentation - Makes shared services and consolidation difficult
- • Political resistance - All commissions acknowledge "technical solutions exist, but political feasibility is the barrier"
Want more? View all primary sources, citations, and official documents.
Sources & CitationsExplore Further
Tax Bill Math
Calculate your bill and see how levy and share changes affect it.
CalculateChapter 123
The fairness test for assessments and the ±15% corridor.
Learn moreADP Program
How annual reassessment prevents drift and maintains fairness.
ExploreGlossary
Definitions of key terms: levy, ratables, COD, and more.
View terms