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Proposed Cap No Solution to New Jersey’s Property Tax Problems

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“For every complex problem there is an answer that is clear, simple, and wrong.”  That line is often attributed to H. L. Mencken, and it’s certainly true about New Jersey, where Governor Christie is proposing a constitutional amendment to limit yearly property tax revenue growth to 2.5 percent.

Yes, property taxes are a problem in the state. With more municipalities per square mile than any other state and over 600 school districts, New Jersey pays a price for delivering services inefficiently.

But a cap is like cutting off your feet because you’ve outgrown your pants. It doesn’t solve the problem. New Jersey cap supporters tout Proposition 2 ½, a similar measure Massachusetts adopted 30 years ago. But they ignore critical differences between the two states:

  • Massachusetts’s cap came with a big increase in state aid to make up for the lost property tax revenue. No one in New Jersey proposes increasing state aid.
  • In Massachusetts, public school enrollment fell 20 percent in the decade after the state adopted Proposition 2 ½, cutting school costs substantially. New Jersey’s enrollment is projected to drop only 2.4 percent.

Nor has the Massachusetts cap turned out so well in the long run, as my colleague Iris Lav has explained. Limiting revenues didn’t reduce the cost of health insurance for public employees, heat for school buildings, gasoline for police cars and fire trucks, and the many other costs communities face.

So they had to cut other spending. And that meant deferring road and building maintenance, closing schools, laying off teachers, increasing class size, and eliminating sports and language programs and pupil transportation. Communities shut down fire houses and eliminated police and firefighter positions.

Keeping taxes down while providing high-quality public services requires a hard look at the structure of local governments and their tax and budget systems. Sound-bite solutions like tax caps only make the job harder.