Analysis Offers Model for Meaningful Reform

Washington, D.C. –Americans for Tax Reform, the nation’s leading taxpayer advocacy organization, released a paper which points to spending as the reason for sky-high property tax bills. The paper, which includes a case study of Massachusetts and New Jersey, offers a model to address the question facing lawmakers across the country; what do we do about ever-growing property taxes?!

While states often resort to increasing sales and income taxes to fund property tax “relief,” the ATR analysis points to Massachusetts’ Proposition 2 1/2 as a model of reform. Proposition 2 1/2, enacted during the “property tax revolution” of the 1980s, addresses the source of high property tax rates by limiting local spending increases to 2 1/2 percent, unless voters agree to an override on the ballot.

Among the study’s key findings:
• In 1977, Massachusetts had the highest property taxes in the nation. However, after enacting
Proposition 2 ½ in 1980, Massachusetts has dropped to 32nd in terms of property taxes.

• New Jersey was second in terms of property taxes in 1977, and imposed an income tax as a “solution.”

• In 1977, Massachusetts residents paid $97 more per capita than New Jersey residents. By 1992, 10 years after Proposition 2 1/2, New Jersey residents paid $609 ($2004) more per person than their Massachusetts counterparts.

• From the time New Jersey’s income tax went into effect through 2002, the Garden State property tax burden increased 36 percent above the rate of inflation and population growth. In comparison, Massachusetts’s real per capita property tax burden declined 7.5 percent.

• From 1981 through 2000, property taxes in Massachusetts increased 36 percent slower than the national average and 64 percent slower than New Jersey.

• Since 1993, the average property tax bill in New Jersey increased 62 percent.

• Under current New Jersey law, the total property tax rate increased .32 per $100 of assessed value since 1993, but if had been in place over this period, the property tax rate would have declined .38 per $100 of assessed value.

• Had New Jersey enacted Proposition 2 ½ in 1993, the average homeowner would have received a bill nearly 24 percent lower than they did in 2004 and total cumulative savings over this period of $5,427.

The two contrasting measures produced very different results and should serve as an instructive guide for policymakers in dealing with property taxes. Meaningful property tax reform must limit local spending. The full study is available online: