Local officials and experts react to new federal tax reform plan that has caused unease among Essex County homeowners and businesses.
WEST ESSEX AREA, NJ — In response to the apprehension and confusion surrounding the recently passed federal tax bill as it relates to Essex County, local professionals and political leaders are weighing in on the subject to help homeowners, businesses and non-profit organizations understand its possible short-and long-term effects.
This particular article, which focuses on real estate issues, will be the first of a series that will provide local perspectives on how the tax reforms will affect the Essex County region.
The local political leaders and real estate experts interviewed for this article agreed that the federal tax reform and the restriction to itemize real estate taxes up to only $10,000 pose challenges for homeowners in suburban Essex County—but several of the experts cautioned people not to hit the panic button and to put things into perspective.
“I believe that the tax hit will not be as bad as people anticipate,” said Michelle Casalino, a West Orange councilwoman and regional business director for Madison Commercial Real Estate Services. “The bigger concern from my perspective is the threat of rising mortgage interest rates.”
Casalino added that a township like West Orange, which offers lower-priced homes than many nearby towns, might benefit from the new tax picture.
“There is more demand now for lower-priced homes, and West Orange might be helped by overflow from towns such as Maplewood, where houses tend to be more expensive,” she said. “There are many families coming from places such as Brooklyn to West Orange because they can get a larger home here for less money.”
Casalino also added that New York is dealing with the same high real estate tax issues.
Ken Baris, president of Jordan Baris Inc. Realtors, which serves the Essex County region, was not as optimistic. He stated that he has seen a major uptick in the number of people who have called him over the past few weeks who want to sell their homes and move to lower real estate tax states such as Florida.
“The federal tax reform bill pushed them into action,” said Baris. “This will have an effect on home values. Just how much it will reduce home prices remains to be seen, but a 10-percent drop in values is not unrealistic.”
On the positive side, Baris said that he is still seeing many transactions to buy the West Essex area, and that he does not see real estate cratering in value in West Orange and other suburban Essex towns.
“Long-term, the federal tax reform changes might be helpful if they stimulate ways for the state to take action to reduce taxes in our area,” said Baris.
Essex County Executive Joseph DiVincenzo has recently expressed concern that homeowners throughout New Jersey, and especially in Essex County, will be hurt by the passage of the tax reform measure, which he added is “more like a tax penalty for those who did not support the president.”
“Not only are we losing the federal deduction for property taxes, but the incentive for home ownership will be lost and home values are forecasted to decline by as much as 10 percent,” he said. “Now more than ever, we need the 2 percent cap on interest arbitration.”
Sobel & Co. LLC accounting firm member Ken Bagner, CPA, MST, CGMA, who works primarily with medium-sized businesses and individuals in the Essex County area, clarified that although people were scrambling to placate their real estate taxes prior to the New Year, the tax returns being completed in 2018 for 2017 will not have a drastic change.
After homeowners do their returns in 2019 for 2018 and fully understand the changes, however, Bagner projects that there will be a major dip in the real estate market in Livingston and surrounding towns due to the restriction on itemizing real estate taxes up to only $10,000.
“A lot of people aren’t going to be able to itemize their tax deductions, and that’s going to probably depress the real estate market,” said Bagner, whose office is headquartered in Livingston. “I know Livingston has been steadily up over the last five years—and over the last year it has been kind of flat—but it will likely have a dip in the market. More people will probably decide to rent because the benefits of owning a home are severely reduced without these deductions.”
Livingston Mayor Ed Meinhardt was more upbeat about how the new law will affect his township. He said that people move to Livingston for the high quality of life and outstanding schools it provides, and that taxes are not the major driver in their decision-making.
Meinhardt said that even with the current uncertainty, he is encouraged by the strong business interest in Livingston.
“Our town center now has an occupancy rate of almost 95 percent, which is the highest it has been since it opened up,” he said. “We have more stores and restaurants moving in.”
Meinhardt also praised the Livingston Board of Education for “keeping standards way up there.”
“Our outstanding public schools are a big factor in why people move to and stay in our township…No matter what happens in Washington, you can’t take that away from us,” said Meinhardt, who added that he is looking forward to collaborating with state officials to fend off the negative effects that the federal tax package will have on real estate deductions.
Casalino said she was proud that the West Orange Township Council passed a resolution in January encouraging the state legislature to work on ways to offset the increased payment on real estate taxes that will be brought about by the federal law.
“It’s all about balancing taxes with services,” she said. “People are moving here for our excellent schools and services. We remain optimistic in West Orange.”
This weekly series will highlight some of the changes that will affect non-profit organizations, businesses and employees, the entertainment and restaurant industries and more. Keep an eye out for more in the coming weeks.