States getting whacked by real estate slump

Even people who don't plan to either buy or sell a home are going to be hurt by the decline in the real estate market.

As the New York Times notes, growth in state tax revenues has slowed and in some cases dropped below projections this year. That's bad news in areas where property tax reform is a big political issue such as my homestate of New Jersey, which has the highest property taxes in the country.

New Jersey Gov. Jon Corzine, a former Goldman Sachs Group (NYSE: GS) chairman, has said that the state could face a $2.5 billion deficit by 2008. Among the ideas being considered to close the gap is a sale or lease of the Turnpike and the Lottery.

We New Jerseyeans are getting some property tax relief. A recently passed law will cut proprty taxes by 20 percent and cap tax increases at 4 percent. Still, the Associated Press points out that New Jersey taxes average $6,390, twice the national average.

I'm not expecting more relief from Trenton any time soon.

In fact, housing sales fell in February to their lowest rate in seven years, so people in other parts of the country shouldn't expect big tax cuts either.

States such as Arizona, Nevada, Florida and California, which especially benefited from the real estate boom, are expected to be hit especially hard by the slowdown in the real estate market, the Times said.

Remember, any short fall in the money that the states collect is going to have to come somewhere. Think about that when you file your taxes this year.