Cut Taxes Now, Cut Spending “Later”

By Ryan McNeely

christieIf you’ve lived in New Jersey for any period of time, you’ve undoubtedly heard lots of griping about the state’s property taxes. And there’s a reason — the state has the highest property taxes in the nation. Following up on his plan to lower taxes on the rich, conservative darling Gov. Chris Christie has now successfully pushed through a draconian doubling-down of Corzine-era property tax reform, which Richard Perez-Pena of the Times bills as a “2 percent limit on annual property tax increases by local governments.”

The first point is that this framing, like much of the reporting on tax policy, isn’t particularly clear. Does it mean property taxes cannot increase by more than 2 pecentage points per year? No — that would not be much of a cap. For guidance, I called the tax collector’s office of my hometown of Chatham Borough, and the nice woman who answered the phone told me that she didn’t know what the new law would mean in practice, but that this year’s tax rate was 1.658% of a property’s assessed value. What I think the law says is that next year’s rate can’t be more than 1.691% (.02 * 1.658 = .03316; .03316 + 1.658 = 1.691), but I wouldn’t be surprised if New Jersey taxpayers are confused.

More importantly, however, this type of tax reform is simply an effort in political buck-passing:

At a time when Trenton has little good news to offer, the final vote by the Assembly on Monday, 73 to 4, was a political victory for Gov. Chris Christie, a Republican, and for lawmakers of both parties, allowing them to go back to restive voters and claim a popular move. The State Senate passed the bill last week, and the governor said he would sign it on Tuesday.

Next, lawmakers will take up a package of proposals by the governor to help local governments keep costs down, some of which are expected to be opposed by public employees’ unions. Mr. Christie and his advisers hope that having a cap in place will increase pressure to pass those measures.

Why push the tax cap first and the spending cuts “next”? It seems to me that a governor serious about deficit-reduction would have requested that a comprehensive package pass all at once. Unless, of course, all you care about is bravely starving local governments of revenue and then leaving it to small-town mayors to explain that firefighters will be laid off.

The fact is that spending by New Jersey local governments is up 70% since 2000, and local governments have a higher combined total budget than the state. Already, local officials are expressing skepticism about the feasibility of Christie’s “tool kit” plan for spending cuts. And instead of buckling down to follow through with the spending half of the equation, New Jersey lawmakers immediately started working on loopholes to the new tax law.

So instead of local and state government officials working together to implement a well-considered mixture of tax increases and service cuts in the name of deficit-reduction, we’ll likely have constant lobbying for exemptions from the new law, a shift away from (relatively progressive) property taxes to more complicated, less efficient “fee” systems, and elimination of essential services. But Christie will be nowhere to be found — he accomplished his goal of a crude cap on property tax increases, consequences be damned.