NCPA - National Center for Policy Analysis


April 6, 2010

Taxpayers around the country these days are getting socked with new state fees and taxes on everything from electricity bills to traffic fines.  But there's good news in New Jersey, of all places, where newly elected Governor Chris Christie is making a big push to impose a constitutional 2.5 percent cap on the increase in annual property taxes. 

That's right, New Jersey, says the Wall Street Journal: 

  • The Garden State is the national champion in property tax bills, with an average cost to homeowners of $7,281 a year, far above the $5,617 national average.
  • Including a nearly 9 percent top income tax rate and a 7 percent sales tax, New Jersey taxes take 11.8 percent of residents' income, also the highest share in the United States, according to the Tax Foundation.
  • Fifty years ago, New Jersey's property taxes were about average and it had neither an income tax, nor a sales tax, while state services and schools were arguably better than they are today. 

Christie's effort is modeled after Proposition 2½ that voters in Massachusetts endorsed in 1980 and which capped real estate levies at an increase of 2.5 percent per year: 

  • Massachusetts went from having the third highest property taxes in the country to the 31st in 2005.
  • Homeowners pay less over time, while the lower tax burden tends to be capitalized into higher housing values.
  • This is a smart way to reverse the fall in home prices that has reduced the net worth of many New Jersey families. Massachusetts saw big gains in home values in the 1980s after Proposition 2½ became law, as did California after its voters passed similar limits via Proposition 13 in 1978.  

The property tax cap would certainly reduce the growth in state revenues, which in turn would force localities and school systems to economize the way everyone in private business has had to do.  Christie calls it "doing more with less."  That would be a big change in New Jersey where for half a century politicians have done less with more, says the Journal. 

Source: Editorial, "Garden State Rollback: Christie tries to limit property tax increases," Wall Street Journal, April 5, 2010. 

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