NEW YORK Capping New Jersey's property taxes may backfire, causing counties, cities and towns to slash essential services from funding schools to maintaining roads, a new report said on Tuesday.
Because the federal government sets standards for students with special needs, for example, New Jersey schools may have respond to a funding shortfall by increasing class sizes and slashing arts and sports programs for their other students, said the report by the Center on Budget and Policy Priorities.
Massachusetts capped its property taxes in 1980 and schools declined as a result, only improving after the state in 1993 raised curriculum standards and began offering "highly targeted state funding, the report said.
The Washington, D.C. think tank's report cited a 1991 Massachusetts Board of Education report that said there was "a state of emergency created by grossly inadequate financial support of the public schools."
New Jersey Republican Governor Chris Christie has proposed a 2.5 percent cap on property taxes as one of the key elements of his plan to rein them in.
New Jersey ranks third in the nation when property taxes are gauged as a percent of residents' personal income, said the report, which was based on U.S. Census data for 2007.
But the state's rankings plunge to 24th if the overall burden of taxes and fees schools, counties, cities, and towns collect is weighed as a percent of residents' income, the report said.
New Jersey's property taxes are high partly because it relies "almost exclusively on property taxes to support local services," instead of allowing counties, cities and towns to also charge sales or income taxes, the report said.
Maryland, Pennsylvania, Ohio all allow local income taxes, while most states let counties, cities and towns assess sales taxes, the report said.
A Christie spokesman said by email that the administration disagreed with the study's premise and conclusions.
Christie has proposed 33 bills to rein in property taxes, including allowing local governments to exit the civil service system which protects public employees.
"This is not about tying the hands of schools and towns to fund the services New Jerseyans need, but providing the tools to make education and government affordable again for taxpayers," his spokesman said.
The report said states could "guarantee" residents property tax relief with tax credits; Christie proposed ending the cash-strapped state's property tax rebates.
New Jersey's property taxes also are high because it has so many school districts -- 591 -- and some of its special education students go to private schools or are bused to other public schools, the report said.
New Jersey's property taxes were the subject of a May report by the Manhattan Institute, a conservative think tank, which said Massachusetts' schools had improved after it enacted a cap.
A Manhattan Institute spokesman had no immediate comment.
(Reporting by Joan Gralla)