Tuesday, July 6, 2010

"Spending controls are key," Letter to the Star Ledger, July 6

I wish Paul Mulshine would get off his Proposition 13 fixation. (“California dreaming on property taxes,” July 4). To be sure, New Jersey’s property taxes are way too high, but a Proposition 13-like solution is not the answer. I lived in California in 1978, the year Proposition 13 passed, and authored two academic articles (National Tax Journal and Southern California Law Review) on the subject.

Mulshine neglects two fatal flaws in Proposition 13. First, two identical houses standing side-by-side can and are taxed at substantially different levels. For example, it is not unusual to have one house taxed at $3,000 and another at $10,000 depending on the initial purchase price. Second, with property taxes cut back, California over-relies on volatile income taxes to fund public services. That is why the state is subject to periodic budget crises as flush times bring with them runaway spending that has to be cut back when an economic downturn causes a collapse in income tax receipts. Sounds familiar, doesn’t it?

The real solution is spending control at all levels of government. The compromise agreement announced over the weekend is a good start, but no real reform is possible without significant reductions in pension and health care benefits for public employees.

Full URL:http://blog.nj.com/ledgerletters/2010/07/new_jersey_property_tax_cap_wo.html

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