New Jersey Property Tax Cap: Putting the Cart before the Horse


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On Thursday, the New Jersey Senate voted 36-3 in favor of a deal between New Jersey Republican Governor Chris Christie and Democratic Senate President Stephen Sweeney to place a 2 percent cap on annual increases in property taxes. With Democratic Assembly Speaker Sheila Oliver signaling support and a vote set for Monday, the property tax cap will likely be signed into law shortly.

The passage of the property tax cap will systematically damage local governments' ability to provide basic public safety and education services. In testimony to the New Jersey Assembly, Rich Brown of the New Jersey Education Association noted that a hard cap would disproportionably harm poor and minority residents and would constitute a “racist cap.” Similarly, local fire fighter officials note that the property tax cap would certainly force layoffs and even cost lives.

The compromise is based on Christie’s proposal to put a constitutional amendment on the ballot which, if approved, would have placed a 2.5 percent cap on property tax increases. The measure allowed for increases beyond the 2.5 percent if the revenue went to debt service repayments or if the tax increase was approved by local referendum with a 60 percent majority vote.

As Citizens for Tax Justice has noted previously, Christie’s original proposal is as misguided as it is hypocritical. The proposal would not only harm local governments, but it comes on top of the $800 million in cuts in state aid to local governments. Had Christie truly wanted to provide property tax relief, he would not have cut off $635 million in property tax relief for 600,000 seniors and people with disabilities.

The Democratically controlled legislature countered Christie’s proposal with the passage of a statutory cap limiting property tax increases to 2.9 percent, but which left intact the wide range of existing exceptions.  

Although the Democrats' plan passed both chambers of the legislature, Christie signaled that he would veto the measure. Unfortunately, the Democratically controlled legislature was unable to override his veto and pass the Democratic plan. Similarly, Christie could not get the votes to support his plan for a constitutional amendment.

The impasse between the two sides was broken after days of tense negotiations, with both sides agreeing on the 2 percent cap with exceptions for rising health care costs, pension payments, debt service payments and capital expenditures, including new equipment and public works projects. The compromise also allows the cap to be overruled by a simple majority in a local referendum instead of the 60 percent Christie previously proposed. One final piece of the compromise is that local governments that raise taxes under the cap will be able to bank the difference for up to 3 years and then raise taxes higher in other years.

Even with the changes from Christie’s original plan, the new property tax cap will cripple local governments' ability to provide the basic services that residents require of them. Despite having significant majorities in the legislature, Democrats abandoned their much better property tax cap proposal in favor of a harmful compromise.

As five New Jersey mayors testified to the New Jersey Assembly, passing the tax cap before providing local officials the means to fix their fiscal problems is simply “putting the cart before the horse” and will place an unfair burden on local governments.

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