What grade would you give the property tax system in your state?
In 2019, the Council on State Taxation (COST) and the International Property Tax Institute (IPTI) graded the property tax systems in all 50 U.S. states and select international jurisdictions. This scorecard compares property tax systems based on three broad characteristics - transparency, consistency and procedural fairness in tax appeals. The Scorecard didn’t consider the amount of property taxes (you can breathe a sigh of relief, New Jersey) but rather administrative practice based on the jurisdiction’s laws and regulations.
On the A-B-C-D-F scale, the highest grade given was a B+, which went to only two U.S. states and three non-U.S. jurisdictions. On the low end, the U.S. had two state systems with an “F”, while the three lowest-ranked non-U.S. systems came in at a C-.
The Scorecard breaks the general categories into three subcategories with three questions each, for a total of twenty-seven questions for each state. For transparency, the Scorecard examines the availability and clarity of centralized information from the state, notice of assessments and valuation practice. For consistency, the Scorecard questions central oversight of the state system, assessment practices and assessor requirements and training. Finally, the procedural fairness subcategory looks to the initial review, appeals to an independent tribunal and a catchall category for miscellaneous issues. Scores are given a rating of 0 (good), 1 (average) or 2 (poor).
Let’s look at New Jersey first. The Garden State tied with the worst of the worst from abroad with a C-. It scored a “C” for both transparency and consistency, with a “D” for procedural fairness. That’s generous, in my experience.
The biggest “hits” NJ’s system took included the high burden of proof on appealing taxpayers, fees for initial appeals to the county tax board, the requirement of keeping taxes current to appeal, higher interest rates on delinquent property tax payments compared with interest on unpaid refunds, the ability of municipalities and third parties to appeal a taxpayer’s assessment, inability to challenge a valuation based on the assessments of similar properties, lack of a formal pre-assessment review, lack of a formal revaluation schedule and lack of a separate, centralized website for property tax laws and regulations.
The Scorecard has a few misses that would have brought NJ’s score even lower. For example, the Scorecard reports that all ratios applied to properties equally at 100%; while this is true at the county percentage level, individual municipal rates differ widely. Also, while the Division of Taxation does make property tax forms available, they are mixed in with forms for other real estate related matters, such as realty transfer and other sale-related fee forms, development forms and assessment-related forms. Finally, because the Scorecard doesn’t take into account how the systems is implemented at the local level, there are a fair number of problems glossed over in NJ’s C-. Now, it’s a fair assumption that such problems occur in any state system, but it’s hard to overlook them as they can be some of the biggest headaches faced by appealing taxpayers.
A full copy of the COST-IPTI Scorcard is available here.
Next time, we’ll look at how Pennsylvania did on the Scorecard.