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Chris Christie's 'Cap 2.5' Plan

New Jersey governor pushes plan to limit property tax increase.

1:26 PM, Jun 24, 2010 • By PEYTON R. MILLER
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New Jersey’s Chris Christie continues to do a world of good.  At an event in Newark on Tuesday, the Republican governor promoted his “Cap 2.5” plan, first introduced in March, to constitutionally limit property tax increases.

Chris Christie's 'Cap 2.5' Plan

Democratic mayor Cory Booker was on hand to lend his support to the amendment, which he called an “historic opportunity.”  Booker is not alone: 210 mayors of both parties from across the state are demanding legislative committee adoption of the measure, which must occur by the first week of July for the proposed amendment to be on the ballot this November.

It’s not hard to understand the mayors’ concern. The Tax Foundation reports that New Jersey’s state-and-local tax burden, which constituted 11.8 percent of its income as of 2008, has been the highest in the country since 2006.  It has the worst business tax climate nationwide in large part as a result of its oppressive property taxes, which are levied substantially at the local level.

Property taxes in New Jersey have skyrocketed in recent years.  The state’s Department of Community Affairs reports that the average household property tax bill has gone from $4,239 in 1999 to $7,281 in 2009, which amounts to a 33 percent increase when indexed for inflation.  Local spending, of which public schools are by far the greatest beneficiary, has grown by almost as much.

While a legislatively imposed four percent limit has reduced the rate of increase since 2007, it includes numerous exemptions and allows towns and schools to apply for permission from the legislature to exceed the statutory cap if they see fit.  If endorsed by the legislature and approved by the electorate this November, Cap 2.5 would constitutionally limit both property taxes and spending on direct state services to a 2.5 percent increase per year.  It would be all-encompassing and could only be suspended by a local referendum.

Cap 2.5 is modeled on a similar proposal, Proposition 2.5, which Massachusetts adopted in 1980.  Josh Barro of the Manhattan Institute points out that real property taxes grew just 22 percent in Massachusetts from 1980 to 2007, compared to 68 percent nationwide and 102 percent in New Jersey.  While other Massachusetts taxes grew faster over the same period, they did not grow fast enough to make up for revenue lost as a result of the cap: overall state and local taxes increased 58 percent, compared to 70 percent nationwide and 108 percent in New Jersey.  Despite Proposition 2.5, Massachusetts public education continues to be the best in the country.  The Bay State consistently outperforms or at least ties New Jersey in academic performance even though New Jersey spent 26 percent more on education as of 2007.

The proposal is part of Governor Christie’s effort to eliminate a $10.7 billion budget deficit by cutting spending rather than raising taxes on what he calls the “most over-taxed” people in the nation.  Were Cap 2.5 to succeed, it would be a tremendous victory for small government advocates in a state whose government is expanding with no end in sight.

Peyton R. Miller is the editor of the Harvard Salient and a Student Free Press Association intern at THE WEEKLY STANDARD.

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