It's showtime in New Jersey. But I'm not talking about anything on stage at the Tropicana in Atlantic City or on the dance floor at the Bamboo Bar in Seaside Heights (sorry to disappoint, Snooki). Rather, the big show is at the State House in Trenton as state lawmakers begin debating important budget and tax legislation. Today, lawmakers will debate and possibly vote on Governor Chris Christie's $29.4 billion budget and Senator Stephen Sweeney's 2.9 percent property-tax cap. Both are worth debating, but only the budget is worthy of lawmakers' support.
Upon entering office this past January, Governor Christie faced an $11 billion deficit that is the result of years of overspending. While many governors facing similar budgetary woes have been trying to outdo each other in enacting more spending or massive tax hikes on things like personal income, tobacco, and Internet shopping, Governor Christie has rejected more huge spending increases and broad tax hikes on overburdened taxpayers in New Jersey. This is welcome news, especially when you consider that New Jerseyans already live under the second highest tax state and local tax burden in the nation. The Governor's proposal relies largely on reductions in local aid and other forms of state spending to close the deficit. But one problem with the budget is a proposed hospital tax. Hopefully, this proposal will be dropped before the debate concludes.
One proposal that is not a problem is the reduction in state aid. Some fiscal conservatives have argued that the reductions in local aid constitute tax covert tax increases. But as my friend and colleague Joshua Culling points out, this argument is flawed because it assumes that localities are exempt from living within their means and ignores the governor's proposal to cap property taxes, thus preventing local tax increases. While the budget is not perfect, it is, on balance, a positive development for New Jersey and deserves lawmakers' support.
Speaking of property tax caps, lawmakers will also debate and vote on a property tax cap proposal offered by Senator Sweeney, the Senate Majority Leader. He proposes enacting a statutory cap that would limit property tax increases to 2.9 percent annually, with exemptions for health care, energy, and pension costs. Although the proposal sounds good at first, the details make it problematic.
First, the cap's exemptions would allow for tax increases beyond the cap's limit. These exemptions create loopholes that you could drive a Mack truck full of tax increases through them. Every municipality in New Jersey that wants to raise property taxes will argue that the cap should not apply because it must raise taxes to pay for spending in one of the areas covered by the cap. Second, as a statutory cap, there is nothing stopping a future legislature and governor from raising the cap's limit or broadening the exemptions. Given the legislature's penchant for spending over the last several years, repealing the cap could be the first thing a new legislature and governor set out to do upon taking office.
Rather than debating a weak cap, I join with Josh in saying that the legislature should instead take up Governor Christie's proposed constitutional amendment that would impose a 2.5 percent cap on property taxes that could be waived only through a popular vote. This proposal is modeled on a similar cap enacted in Massachusetts that has been successful in keeping taxes in check. It is our hope that the legislature will take up this better property tax proposal sooner rather than later, as New Jersey's taxpayers could use some relief.
NTU will be watching the big show in Trenton over the next few days. If you pay taxes in New Jersey, you should be watching it too.