The following email was sent to the Borough Council in Little Silver today. Many towns across New Jersey are charging exorbitant late fees for property taxes. Much thanks go to John Paff for his contributions to this effort.
Hon. Robert Neff, Jr., Mayor and members of the Little Silver Borough Council
480 Prospect Avenue
Little Silver, NJ 07739
Dear Mayor Neff and Borough Council members:
I write in my capacity as chairman of the New Jersey Libertarian Party. As you may be aware, Libertarians take a pretty dim view of taxation (Note1) and, if we had our way, we would a substantially reduce the size and scope of government causing a corresponding decrease in the tax burden presently shouldered by New Jersey citizens. While we don't expect the Little Silver Borough Council to adopt a Libertarian viewpoint overnight, we would like for you to effect a small change that would help reduce the burden on some of the Borough's most vulnerable residents.
The Council's January 5, 2012 reorganization meeting's consent agenda contains an item regarding the amount of interest the Borough is permitted to collect from Borough property owners who are delinquent on their property taxes. Little Silver, like most municipalities, routinely passes this resolution year after year without much thought.
The resolution that is presently in effect--passed at the Council's January 3, 2011 reorganization meeting--sets the annual interest rate on overdue taxes at 8% for the first $1,500 and 18% for delinquencies in excess of $1,500. These interest rates are authorized by N.J.S.A. 54:4-67(a).
Yet, this statute doesn't require the Borough to charge interest rates that high. Rather, the law allows the Borough to establish an interest rate UP TO those figures. In other words, the Council, if it wanted to, could charge property owners less interest than what the statute allows. I write to request that the Council consider lowering these rates--especially the 18% figure--at the January 5, 2012 meeting.
The 8% and 18% rates were established by the Legislature in 1979 (Note2). Back in 1980, however, the interest rate on three-month certificates of deposit were over 13%. (Note3)
Given the high interest rates of the time, the legislature and the courts were concerned that if the interest on delinquent taxes were too low, it might "be worth the taxpayer's while to [withhold payment of taxes and thus] make the municipality his involuntary banker." (Note4).
Now, however, the 3-month certificate of deposit rate is only about a half percent. So, there's no likelihood that taxpayers will withhold tax payments in order to obtain better interest rates elsewhere.
With today's economy, many homeowners have lost their jobs or live on a fixed income. And, property taxes are now so high that many homeowners who are delinquent owe more than $1,500 and are therefore paying 18% interest to the Borough.
In sum, while 8% and 18% interest rates may have been compensatory back in 1980, they are fairly viewed as punitive in 2012.
Thank you for your attention and consideration. I would appreciate it if you could let us know your thoughts on this issue.
Very truly yours,
Chair, NJ Libertarian Party
Note2: L.1979, c. 435, § 1, eff. Feb. 14, 1980
Note4: Serkin v. Township of Ocean, 201 N.J.Super. 392, 402 (Law Div., 1983) quoting City of East Orange v. Palmer, 52 N.J. 329, 334 (1968)