CLT UPDATE
Wednesday, May 26, 2010
Proposition 2½ approaches its 30th anniversary,
is becoming a national model
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Gov. Christie wants to throttle the steady rise
of property taxes in New Jersey - already the highest in the nation
- by following Massachusetts' lead.
That state's property-tax cap, known as
Proposition 2½, has helped keep property taxes in check since it
took effect in 1981....
On Monday, Christie formally proposed a
constitutional amendment, which would require voter approval, to cap
local property-tax increases at 2.5 percent annually. Voters in each
town could vote to exceed the cap, and the only other exception
would be for debt service....
In Christie's March budget address, he said
Massachusetts had the third-highest property taxes in the nation in
1977, three years before Proposition 2½ was approved. By 2005, the
ranking had dropped to 33d, the governor said, citing figures from
the conservative Americans for Tax Reform.
The Associated Press, citing census figures,
reported that the impact of Proposition 2½ had been much less
dramatic, with Massachusetts dropping from third in property tax per
capita in 1981 to eighth in 2005.
Proponents of Proposition 2½ say it has
accomplished exactly what it set out to do: Slow the growth in
property taxes.
Frank Conte, director of communications at the
Beacon Hill Institute, a free-market think tank at Suffolk
University in Boston, said Proposition 2½ had helped keep the growth
of property taxes reasonable, but only because the state had
increased local aid over the years.
Chip Faulkner, associate director of
Citizens for Limited Taxation, estimated that had property taxes
continued to rise at their pre-Proposition 2½ rate, they would be at
least double what they are.
"It's worked out very well in Massachusetts, and
it can work in New Jersey," Faulkner said.
He said complaints about service cuts had been
overstated.
"Despite their cries of doom and gloom, we're
doing fine in the state," Faulkner said. "Police, fire, roads,
highways - everything is fine."
The Philadelphia Inquirer
Sunday, May 16, 2010
The Mass. model: Is property-tax cap a good fit for N.J.?
How you think of property caps depends largely on
how you think of government. If you see shortfalls in town and state
budgets as a revenue problem, you probably think property tax caps
are a very bad idea. The best examples here are all those California
pols who blame all their state's budget woes on the father of all
tax caps, Proposition 13 -- instead of on their spending like
there's no tomorrow.
If, by contrast, you think of budget shortfalls
as primarily a spending problem, you see a property-tax cap as a
tool to control that spending.
Into this debate now comes a timely study that
asks a simple question: "Do Property-Tax Caps Work?" Released
jointly by the Manhattan Institute and the Common Sense Institute of
New Jersey, the study takes for its model Proposition 2½. This was
the measure Massachusetts voters approved in 1980, limiting annual
property tax increases to just 2.5% of a home's assessed value....
In the study's executive summary, author Josh
Barro puts it this way: "Proposition 2½ has succeeded in restraining
growth of property-tax collections, total tax collections, and
per-pupil education spending in Massachusetts." ...
That may make the Massachusetts model more
attractive for blue states with budget woes. For Proposition 2½
didn't just shift the burden from property to other taxes. Though
tax collections in Massachusetts from sources other than property
taxes have risen faster than the national average since the cap,
overall the state and local tax burden grew significantly more
slowly in the Bay State than elsewhere. Today citizens pay a smaller
percentage of their income in taxes than in 1980.
The Wall Street Journal
Tuesday, May 25, 2010
The Tax Caps Cometh
Unionized pubic employees swarmed Trenton on
Saturday to protest Gov. Chris Christie’s cuts in the state
budget — and his “Cap 2.5” proposal to limit local property
taxes. The unions warn that a tax cap will lower the quality of
the Garden State’s public services, such as schools. Is that
right?
For the answer, we can look at Massachusetts,
which enacted a similar property tax reform back in 1980. As I
discuss in a report out this week from the Manhattan Institute
and the Common Sense Institute of New Jersey, that reform has
led to slow growth in taxation and spending compared to other
states....
At enactment, Massachusetts had the country’s
second-highest property taxes per capita. But since then,
property tax growth has been slow — just a 22 percent rise in
real terms from 1980 to 2007, compared to 68 percent nationwide
and 102 percent in New Jersey.
The Star-Ledger (Newark, NJ)
Wednesday, May 26, 2010
Tax cap proved its worth in Massachusetts,
can work in New Jersey
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Chip Ford's CLT
Commentary
Proposition 2½ recently
came under attack again, and once again CLT raced to its rescue and
saved it.
Now, Prop 2½ is
becoming a national model, with a version recently proposed by New
Jersey Governor Chris Christie. His bold policy moves since taking
office to save his state's taxpayers have the usual
tax-borrow-and-spend suspects in the expected frenzy.
As our Proposition 2½
approaches its 30th anniversary this November, too often we hear
about what a failure it has become, how everyone's property taxes
still increase as if it didn't exist. It's hard for many who were
around back then to recall, and appreciate how much CLT's
Proposition 2½ is saving them. And for those who weren't paying
property taxes thirty years ago, or weren't residents of
Massachusetts back then -- we'll, you don't know what you don't
know. Many simply have no perspective, or no imagination of just how
much worse things could (likely would) be without it.
Josh Barro, the Walter B. Wriston Fellow at the
Manhattan Institute, author of the recent study "Do Property-Tax
Caps Work?", wrote:
"Massachusetts
had the country’s second-highest property taxes per capita. But
since then, property tax growth has been slow — just a 22 percent
rise in real terms from 1980 to 2007, compared to 68 percent
nationwide and 102 percent in New Jersey."
Those who aren't
members of Citizens for Limited Taxation have so very, very
much for which to thank those of us who are for saving them
as well billions of their dollars while saving ourselves from a rapacious
and insatiable government.
And while on
celebrations, CLT's "Friday Morning Group" recently celebrated its
100th monthly meeting.
Citizen for Limited
Taxation hosts a meeting of conservative activists from all around
the state on the second Friday of every month. The Friday Morning
Group (FMG) meets from 9:30 to 11:30 in Lexington by invitation
only. We welcome individuals who are politically active in
center-right organizations, on town committees,
fiscally-conservative candidate campaigns, etc. The meeting is
patterned after the Wednesday morning meetings hosted by Grover
Norquist of Americans for
Tax Reform in Washington, DC. More detail about the issues
covered can be found in Grover’s book “Leave Us Alone.”
There are similar “leave us alone coalition” groups in almost every
state. Massachusetts has one of the top four or five most active
nationally, with an average attendance of over fifty activists.
On May 14th we celebrated the 100th meeting of the group – having
scheduled a meeting every month since December 2001. There’s always
a guest speaker, along with 8-10 others on the agenda. Grover
himself came to help celebrate the 100th as guest speaker; he drew a
record crowd of 81 attendees.
Chip Faulkner, CLT associate director hosts the meeting.
You can see Len Mead's photos of that
meeting and find further information. We also thank
Len for the large banner and Sue Blais and Howard Bibeault of the
Attleboro Republican City Committee, who brought the big birthday
cake and soda. Lastly we appreciate the FMG regular – who wishes to
remain anonymous – who paid the May fee for rental of the
auditorium.
You should have
received our spring membership mailing, or will in the next day or
two. It includes a "Revolution 2010" bumper sticker which
incorporates CLT's Minute Man logo. We hope you'll display it
proudly during this year of "The Second American Revolution," let
others who see it on your vehicle know that they are not alone.
And of course, we hope
you'll respond with your most generous contribution to keep a
struggling CLT at least able to continue struggling a while longer!
Especially those many of you who didn't renew your 2010 membership
yet this year from the February membership mailing.
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Chip Ford |
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The Philadelphia Inquirer
Sunday, May 16, 2010
The Mass. model: Is property-tax cap a good fit for N.J.?
By Adrienne Lu
Gov. Christie wants to throttle the steady rise of property taxes in
New Jersey - already the highest in the nation - by following
Massachusetts' lead.
That state's property-tax cap, known as Proposition 2½, has helped
keep property taxes in check since it took effect in 1981.
But experts warn that Massachusetts' experience also holds critical
lessons for any state considering a similar approach.
"New Jersey can't say, 'Look, it works in Massachusetts, and it will
work here.' It's not the same thing," said Iris Lav, a senior
adviser at the left-leaning Center on Budget and Policy Priorities
in Washington. Lav, who has studied Proposition 2½, briefed Garden
State legislators Thursday about her findings.
On Monday, Christie formally proposed a constitutional amendment,
which would require voter approval, to cap local property-tax
increases at 2.5 percent annually. Voters in each town could vote to
exceed the cap, and the only other exception would be for debt
service.
New Jersey now has a 4 percent cap on property-tax increases and
much more wiggle room for exceptions.
In Massachusetts, voters approved Proposition 2½ in 1980 through a
ballot initiative. As in Christie's proposal, local voters may
override the 2.5 percent cap. Proposition 2½ also mandated that
property-tax revenue not exceed 2.5 percent of the assessed value of
a town, something Christie is not suggesting.
Lav said Massachusetts in 1980 looked very different from New Jersey
today.
Massachusetts' economy was booming - so much so that it was called
the "Massachusetts Miracle" - while school enrollment was dropping,
for example. New Jersey is just starting to recover from a deep
recession, and school enrollment is more stable.
The intent of Proposition 2½ was to keep property taxes in line, not
necessarily to reduce government spending, Lav said.
After Proposition 2½, Massachusetts directed additional state
funding to towns to make up for some of the property-tax
restrictions and help prevent some cuts in services.
But during tough economic times, including the latest recession, Lav
said, state aid has not kept up and towns have had to cut services,
including laying off teachers, police officers, firefighters, and
other employees; closing fire stations, libraries, senior centers,
and recreation centers; and trimming school programs.
"The principal lesson learned is that it works only if the state is
willing to give additional assistance to cities and towns," said
Michael J. Widmer, president of the Massachusetts Taxpayers
Foundation, a nonpartisan public-policy research organization. "A
state thinking about this needs to do it with its eyes open to the
reality that it means reduced services at the local level because
recessions are inevitable. There's no magic here."
Christie has not proposed increasing state aid to municipalities.
His budget proposal for the next fiscal year would cut state aid by
$446 million, or about 23 percent.
Mary Forsberg, research director of the nonpartisan New Jersey
Policy Perspective, said property-tax caps didn't encourage
efficiency so much as they resulted in smaller government, which
inevitably means reduced services.
"Caps in general are a lazy person's way of doing government,"
Forsberg said.
In Christie's March budget address, he said Massachusetts had the
third-highest property taxes in the nation in 1977, three years
before Proposition 2½ was approved. By 2005, the ranking had dropped
to 33d, the governor said, citing figures from the conservative
Americans for Tax Reform.
The Associated Press, citing census figures, reported that the
impact of Proposition 2½ had been much less dramatic, with
Massachusetts dropping from third in property tax per capita in 1981
to eighth in 2005.
Proponents of Proposition 2½ say it has accomplished exactly what it
set out to do: Slow the growth in property taxes.
Frank Conte, director of communications at the Beacon Hill
Institute, a free-market think tank at Suffolk University in Boston,
said Proposition 2½ had helped keep the growth of property taxes
reasonable, but only because the state had increased local aid over
the years.
Chip Faulkner, associate director of Citizens for Limited Taxation,
estimated that had property taxes continued to rise at their
pre-Proposition 2½ rate, they would be at least double what they
are.
"It's worked out very well in Massachusetts, and it can work in New
Jersey," Faulkner said.
He said complaints about service cuts had been overstated.
"Despite their cries of doom and gloom, we're doing fine in the
state," Faulkner said. "Police, fire, roads, highways - everything
is fine."
Some communities in Massachusetts have suffered more than others.
The wealthiest towns have voted to override the 2.5 percent cap much
more frequently than less-wealthy towns, widening the disparity
between the towns, according to several experts.
"As a general matter, the wealthier communities, of course, have
been more likely to pass overrides, but a city like Boston has never
even attempted one, and [it] wouldn't pass if they did," said Widmer,
of the Massachusetts Taxpayers Foundation.
Some observers argue that because Massachusetts has directed state
funding to the poorest communities to protect them, middle-class
communities have suffered the most, rarely approving overrides but
not receiving enough new state funding to offset the caps.
When Christie introduced his cap proposal last week, he said he
expected critics to argue that education in New Jersey would suffer.
"This is absolutely wrong," he said. "Massachusetts has accomplished
this astonishing drop in property taxes while maintaining the No. 1
K-12 achievement in America."
But, Lav says, Massachusetts' enrollment in kindergarten through
12th grade fell 21 percent between 1980 and 1989.
"If there had been a level number or increasing number of children,
it would not have been possible to implement Proposition 2½ without
massive budget cuts, even if the local aid increases," said Geoffrey
Beckwith, executive director of the Massachusetts Municipal
Association.
Later, in 1993, the state overhauled its education-funding system to
increase state aid overall and direct more dollars to urban areas.
Beckwith warned that New Jersey should consider a property-tax cap
with caution.
"The only way Proposition 2½ was implemented without causing major
fiscal chaos was because the state stepped in and increased local
aid substantially," he said. "If the State of New Jersey is not
prepared to do that, then the cap would likely trigger much greater
fiscal distress than people are envisioning."
The Wall Street Journal
Tuesday, May 25, 2010
The Tax Caps Cometh
Massachusetts shows how to put a lid on education spending increases
By William McGuran
If you are an American homeowner, you know you're in trouble when
the Communist Chinese are making more sense on taxes than your own
state officials. In China, stocks have been bouncing up and down on
rumors that the government will soon introduce a U.S.-style property
tax. Whatever the wisdom of such a tax, Chinese officials at least
appreciate that the effect would be to dampen their property market,
which they fear is turning into a bubble.
Here in America, by contrast, most states and towns are dealing with
depressed home prices and large budget gaps. Yet few are rethinking
their property taxes. Two exceptions are Indiana and New Jersey, and
-- if the candidates for governor are to be believed -- New York.
In Indiana, Republican Gov. Mitch Daniels has succeeded in lowering
property taxes on homes to 1% of assessed value. In New Jersey,
another Republican, Gov. Chris Christie, has introduced a reform
package that would cap property tax increases to 2.5% each year. And
in New York, Democrat Andrew Cuomo has just announced his candidacy
for governor with a call for a 2% cap on property tax increases --
lower than the caps proposed by two of the state's leading
candidates for the GOP nomination.
How you think of property caps depends largely on how you think of
government. If you see shortfalls in town and state budgets as a
revenue problem, you probably think property tax caps are a very bad
idea. The best examples here are all those California pols who blame
all their state's budget woes on the father of all tax caps,
Proposition 13 -- instead of on their spending like there's no
tomorrow.
If, by contrast, you think of budget shortfalls as primarily a
spending problem, you see a property-tax cap as a tool to control
that spending.
Into this debate now comes a timely study that asks a simple
question: "Do Property-Tax Caps Work?" Released jointly by the
Manhattan Institute and the Common Sense Institute of New Jersey,
the study takes for its model Proposition 2½. This was the measure
Massachusetts voters approved in 1980, limiting annual property tax
increases to just 2.5% of a home's assessed value.
While California gets the most attention, the Bay State cap helped
the state shed its hated Taxachusetts label -- going from the second
most taxed state in the union when the proposition was passed to
23rd today, according to the Tax Foundation. In the study's
executive summary, author Josh Barro puts it this way: "Proposition
2½ has succeeded in restraining growth of property-tax collections,
total tax collections, and per-pupil education spending in
Massachusetts."
This study pays particular attention to the effect of the
Massachusetts cap on public education. As it turns out,
Massachusetts does not bear out the scare stories. Despite spending
far less per pupil than New Jersey ($12,857 versus $16,163 in 2007),
Massachusetts students in almost all demographics achieved better
results than their Jersey counterparts. Indeed, on the most common
measure of achievement, the National Assessment for Educational
Progress, Massachusetts remains the clear leader, and the
achievement gap has grown over time.
The education comparison is important because so many public schools
depend on property taxes for funding. In many New Jersey towns, for
example, school spending consumes more than two-thirds of the town's
budget. That makes the public school budget the de facto municipal
budget. Mr. Barro argues that here the Massachusetts cap offers an
advantage over Proposition 13 in California, giving Massachusetts
citizens the right to override it and spend what they want if they
vote to do so.
That may make the Massachusetts model more attractive for blue
states with budget woes. For Proposition 2½ didn't just shift the
burden from property to other taxes. Though tax collections in
Massachusetts from sources other than property taxes have risen
faster than the national average since the cap, overall the state
and local tax burden grew significantly more slowly in the Bay State
than elsewhere. Today citizens pay a smaller percentage of their
income in taxes than in 1980. As Mr. Barro says, "Massachusetts
proves you don't need to be Texas to give your citizens a relatively
large improvement in their tax environment."
Back when Californians were debating Proposition 13, Milton Friedman
endorsed the measure on the grounds that it is "desirable for the
people to limit their Government's budget, to decide how much in
total they are willing to pay for their Government." A limitation on
taxes, he wrote, would enable citizens "to say to the legislature,
we assign you a budget. Now it's your job to spend that in the most
effective way."
In the three decades since, no one has improved on Friedman's logic.
But this timely new study from the Manhattan Institute and the
Common Sense Institute suggests that in Massachusetts we may have
found a better model for implementing it.
The Star-Ledger (Newark, NJ)
Wednesday, May 26, 2010
Tax cap proved its worth in Massachusetts,
can work in New Jersey
By Josh Barro, Guest Columnist
Unionized pubic employees swarmed Trenton on Saturday to protest
Gov. Chris Christie’s cuts in the state budget — and his “Cap 2.5”
proposal to limit local property taxes. The unions warn that a tax
cap will lower the quality of the Garden State’s public services,
such as schools. Is that right?
For the answer, we can look at Massachusetts, which enacted a
similar property tax reform back in 1980. As I discuss in a report
out this week from the Manhattan Institute and the Common Sense
Institute of New Jersey, that reform has led to slow growth in
taxation and spending compared to other states.
But Massachusetts is the clear national leader in educational
outcomes, showing that a well-designed property tax cap can
constrain taxes and spending while maintaining high-quality
government services.
Massachusetts’s Proposition 2.5 limits any town’s property tax levy
increase to 2.5 percent per year, unless voters approve a greater
increase. At enactment, Massachusetts had the country’s
second-highest property taxes per capita. But since then, property
tax growth has been slow — just a 22 percent rise in real terms from
1980 to 2007, compared to 68 percent nationwide and 102 percent in
New Jersey.
This reform has allowed Massachusetts to shed the “Taxachusetts”
label. In 1980, its residents faced the second highest state and
local tax burden in the country. But because Proposition 2.5
effectively controlled property tax growth — and because legislators
responded to the drop in revenues by restraining spending and not
just raising other taxes — Massachusetts has fallen from the
second-most taxed state to 23d.
Meanwhile, New Jersey taxes have kept rising, and New Jersey
residents have the dubious distinction of paying more of their
incomes in state and local taxes than people in any other state,
according to the Tax Foundation. Christie is saying he won’t raise
taxes anymore — and that Massachusetts shows that’s not necessary.
There are two usual criticisms of property tax caps, and oddly, they
run in opposite directions. One is that they starve government of
needed funds, reducing the quality of public services. The other is
that they fail to constrain growth in government, because other
taxes rise to offset the capped tax. Neither applies to Proposition
2.5 or its New Jersey clone.
On the first point, it is hard to call Massachusetts a state where
government has been cut “to the bone.” The primary purpose of
property taxes in both Massachusetts and New Jersey is to fund
schools, yet Massachusetts consistently posts the country’s best
educational outcomes on the National Assessment of Educational
Progress exams administered by the Department of Education.
While New Jersey also scores above the national average, it
consistently ties or (more often) trails Massachusetts overall and
within most demographic groups, including both black and white
students. This is despite the fact that New Jersey leads the country
in education spending, outspending Massachusetts by 26 percent per
pupil. Massachusetts has demonstrated that you do not need to be the
top spender to be the top achiever in public education.
On the second point, a property tax cap alone does not shrink
government. New Jersey residents have good reason to be wary, since
they’ve been repeatedly promised property tax relief to no avail.
Even when New Jersey first adopted an income tax in 1976, its stated
purpose was to relieve property taxes.
Today, New Jersey ranks eighth in income tax collections per capita,
which should be paying for a lot of property tax relief — yet
property taxes are the highest in the country.
Christie recognizes these past failures, and would pair his property
tax cap with a “tool kit” designed to help localities provide
quality services while spending less money. Particularly, he would
roll back civil service rules that drive up local spending. He would
also reform binding arbitration rules that have pushed employee
salaries and benefits skyward in defiance of the weak economy.
New Jersey does not need to emulate Texas or South Dakota to provide
significant tax relief. The recovering taxaholics in Massachusetts
have shown a path for a wealthy, northeastern state to tax and spend
somewhat less, improve competitiveness, and maintain high quality
public services. It’s a much more appealing choice than yet another
round of tax hikes for New Jersey.
Josh Barro is the Walter B. Wriston Fellow at the Manhattan
Institute.
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Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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