On the Tax Cap

The New Jersey General Assembly is going to pass a very tough property tax increase cap, and the governor is going to sign it. The only question is what the final statute is going to look like.

I'm sympathetic to this idea, but wary of its practical consequences. For example, if Jersey City had to abide by a law that says property taxes can only be raised by 2.9 percent in the next budget, which nearly no exceptions, essential city services will disappear. There's no way around that.

Now, this isn't because of the cap per se; it's because of years of incompetent management in which the city's fiscal strategy was "let's just get through the year, whatever that takes." So while I have no sympathy for the bind city officials will be in, I have tremendous sympathy for the citizens who will lose essential services because Mayor Healy finally is forced to deal with decades of mismanagement by party hacks.

My other reservation is this: New Jersey's legislature, like California's, has a habit of forcing unfunded mandates on local governments. Combined with a property tax cap, which has been in California's constitution since the 1970's, such habits will, as in California, create year after year after year of wild mismatches between required spending and available resources. 

Another huge problem with a cap is that many of the leading drivers of property tax increases, such as contractual raises, pension contributions, and debt service, would have to be excepted (because the state can't void its contracts). Even Governor Christie acknowledged them when he was calling for a cap in the form of a constitutional amendment. Without addressing these costs, the cap is a palliative, as was the last one, set at four percent with many exceptions.

What I'm saying is, slow down. New Jersey needs a property tax cap. Another decade like the last and people are going to leave the state and leave behind empty houses. Without some statutory cap, I can't see a reason why property taxes won't increase another 70 percent between now and 2020. But passing a bad law now without knowing the consequences will be much more painful than accepting another year of high taxes and using the time to develop a cap that will actually work: meaning, one that will curb excessive tax increases while maintaining the local services New Jerseyans depend on.

(I'll take this opportunity to interject a bit of partisan wisdom. Christie's 'base' would be least effected by huge reductions in municipal services. There simply isn't that much crime, or that many fires, in Mendham or Upper Saddle River or Brick Township. And many of the residents of those towns could easily pay the city a fee for hauling their trash. You cut those services in Newark and Jersey City, you'll get social chaos and trash piling up on the curb.)

None of this is simple. Christie loves to turn everything into a morality play, and it seriously damages his credibility when the issue is what politics is actually about: weighing costs and benefits, and finding a way to work with what we have.

D.C.