Tax cap a bad idea

Promoted by Jason Springer: Check out Hank’s take on the tax cap and other budget issues. What are your thoughts?

The governor spoke before a joint-session of the state Legislature today and reiterated his desire to see a constitutional amendment be placed on the ballot that would limit tax increases to 2.5 percent — or, barring that, a state law that would do the same.

Gov. Chris Christie calls it tax relief, but it really is nothing more than an abrogation of executive and legislative responsibilities and an admission of failure.

Property taxes have been and continue to rise in New Jersey, driven upward by a mix of bad policy and the high cost of health insurance. The bad policy part — a belief that we could avoid making hard decisions without paying the cost of those decisions, cannot be addressed by a cap; rather, it takes one of the decisions out of the hands of the people we’ve elected and sent to Trenton — or that we have sent to town hall.

The problem in New Jersey is not just out-of-control spending. A good chunk of the money the state spends is on programs its citizens want: Good schools, police officers, open space, etc. The problem is that the state government has ignored the revenue side of the ledger for years, preferring to offset rising costs with one-shot gimmicks and magical sleight-of-hands that delayed the day of reckoning.

For 15 years, for instance, governor after governor has shorted the state pension fund, which reduced expenditures in the short-term, but shorted the fund for the longhaul.

We have sold roads from one the state to the Turnpike Authority, borrowed agagainst a settlement with the tobacco industry, and so on until we had run out of shell games to play.

All the while, property taxes continued to rise, angering taxpayers and leaving the state in the lurch.

The governor’s response has not been to put the state on sound fiscal footing, though he has talked as if that is his goal. His budget is balanced using an assortment of tricks — pension shortfall, anyone? — that are no different than those used by his predecessors. And now he wants to enact the biggest gimmick of all, an artificial cap that removes all fiscal flexibility from elected officials. That sounds good now but, as the folks in California and Colorado and elsewhere are finding out, it is going to come back to bite us hard on the ass in the future.

Comment (1)

  1. Winston Smith

    Hank. Here are some problems I see with a spending cap, without a cap on growth that is driving property tax increases.

    First of all, few if any towns in NJ have a zoning scheme based on fiscal impacts and ability to finance public services (one objective of a capacity based, timed/phased growth approach).

    Second, the NJ MLUL restricts the ability of towns to extract impact fees to pay for services of growth. This causes the “ratables chase” that is the engine of local property tax increase.

    Third, even if the fiscal reality and the economics of the ratable chase are recognized at the local level, changing zoning to reflect fiscal reality is a very slow process.

    During lags in down zoning revisions, growth will occur. And lots of growth is locked in by right under the Permit ExtensionActs.

    The timing mismatch between an immediately effective spending cap and long range zoning changes will creat fiscal chaos.

    This will lead to further erosion of public services as growth generates more costs than can be serviced under the cap. The exemptions fom the cap are not sufficient to address this mathematical reality.

    And then, consider the effect of tax appeals as the real estate and housing bubble furrther deflates.

    And economic recession drains state aid.

    Basic mathematical reality leads to rather dire conclusions..

    I am disppointed by the fact that I have seen virtually no  discusssion of this set of issues.

    Reply

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