Candidates for governor bank on growth to pay for tax cuts


Charles Stile and Dustin Racioppi size up the race for NJ governor.
Dan Sforza/

There isn’t much in common politically between President Donald Trump and the front-runners for governor in New Jersey. But they do share one optimistic vision to further their policy plans: economic growth.

While Trump anticipates a brisk job market to make up for billions in proposed tax cuts, the leading candidates for governor here are similarly relying on the economy to support their proposals to cut property tax bills for businesses and homeowners.

No issue has so consistently frustrated voters and bedeviled candidates than property taxes, the “third rail” in New Jersey politics, said Patrick Murray, director of the Monmouth University Polling Institute. And after many years of unfulfilled pledges to once and for all lower bills, Murray said in a recent interview, “the problem is we have reached a point where the public doesn’t trust a politician when they make promises about property taxes.” 

The most significant reforms, Gov. Chris Christie’s 2 percent property tax cap, has slowed the growth of tax bills, but they are still rising and the average bill of $8,549 is the highest in the nation. 

This year, candidates have lined up with ideas to build on the cap with promises to finally bring the long-lasting relief to a seemingly intractable way of life in New Jersey. The field is led by Phil Murphy, a former U.S. ambassador to Germany who is seeking the Democratic nomination, and Republican Lt. Gov. Kim Guadagno.

So far, policy groups have been underwhelmed by the offerings.

“We’re encouraged anytime someone brings attention to New Jersey’s lack of affordability and property tax crisis, but few are outlining a plan on how to get there,” said Erica Jednyak, state director of Americans For Prosperity. “It will take reforming the school funding formula, incentivizing shared services where cost-effective, overhauling the pension and health benefits system, and reducing the size of bloated government.”

Candidates have proposed combining any number of those ideas to ease the property tax burden for New Jersey’s homeowners and businesses. But one consistency among the front-runners, at least, is that economic growth is a central feature of their proposals.

Murphy has laid out a multi-point plan to reduce property taxes, including fully funding public schools and promoting municipal consolidation and shared services, two of the largest drivers of tax costs. But campaign spokesman Derek Roseman said the first point is key.

“Growing the economy and creating good jobs is how to make property taxes less of a burden,” Roseman said.

Murphy’s plan anticipates 3 percent annual revenue growth – just less than the average of 3.4 percent the last two decades, according to the campaign — to support his tax plan. He’s also banking on at least $1 billion a year in added revenues through a so-called millionaire’s tax and marijuana legalization — two policies that Christie has rejected — as well as reducing Wall Street fees and closing tax loopholes. The other major Democratic candidates also support the millionaire’s tax and marijuana legalization and have estimated the combined revenue at $1 billion. 

Guadagno’s plan, which she calls a property tax “circuit breaker,” is a temporary one until the school-funding formula can be revised. The circuit breaker plan would cap the school portion of a homeowner’s property tax bill to 5 percent of their income. Her campaign said that a family making New Jersey’s median household income of $72,000 would save an average of $895 each year.

Guadagno anticipates $1 billion in revenue growth, plus another $500 million in other savings, to pay for the tax relief.

Counting on increased revenues to pay for a tax cut has echoes of Trump, whose treasury secretary, Steve Mnuchin, said that the administration’s multi-billion dollar tax cut proposal “will pay for itself with growth.” And in New Jersey, banking on an additional $1 billion may be optimistic. Christie had anticipated revenues of $34.8 billion in the current 2017 fiscal year, $1 billion more than in 2016. But Treasurer Ford Scudder said two weeks ago that the state is facing a $527 million shortfall after slower-than-anticipated income tax collections in April, and that it reflected a national trend in lagging revenues. The shortfall continues a trend in the Christie administration — all but two of the last seven budgets have fallen short of revenue projections. 

Even if the money is not there, Guadagno said “it’s a question of priorities” and political will to follow through on her plan.

“You can go back and find someplace else to cut,” Guadagno said in a recent interview. “Property tax relief has to be the No. 1 issue and everything else takes a second place,” she added.

Guadagno’s plan has plenty of critics, but New Jersey Policy Perspective, a left-leaning think-tank, has proposed a similar tax relief plan in the past and said Guadagno’s idea has “some merit.”

“If you’re trying to reduce property taxes, it makes a lot of sense to do it for the people who are hit hardest,” said Jon Whiten, the group’s vice president. “But then the huge question,” he said, is how it’s being paid for. “It’s pretty loose, in terms of her revenue sources.”

Other candidates have proposed plans for property tax relief with undefined costs to the state. Guadagno’s top rival, Assemblyman Jack Ciattarelli, has outlined education aid reforms and cutting aid to school districts that are “extremely overfunded,” then redirecting that money to poorer districts. John Wisniewski, D-Middlesex, said the fastest way to provide property tax relief is for the state to fully fund public schools. Sen. Ray Lesniak, D-Union, has a three-point plan to lower property taxes: cutting waste, increasing government efficiency and economic growth. 

Another Democrat, Jim Johnson, said property taxes and home foreclosures are tied together. He has proposed tax relief by combining foreclosure reforms, pursuing shared services among municipalities and a constitutional amendment to allow large corporations and businesses to be taxed at higher rates than residential properties. 

While many of these different proposals could chip away at property tax bills, none of them, including economic growth, can be relied upon to solve the state’s property tax crisis, said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities. He said school funding should be “an essential part” of any property tax plan, as should other “cost drivers.” One major driver, he noted, is the state’s repeated diversion of energy tax receipts, money that is supposed to be returned to municipalities for tax relief but has instead been used to help balance the state budget. 

“You’re always hopeful of economic growth in the state, which would then lead to stronger tax receipts. That’s fine,” Cerra said. “That can be part of an overall plan. But you absolutely have to address the chronic factors that have contributed to the property tax crisis.” 

Read or Share this story: