From City Journal:
“New Jersey needs tax reform to guarantee relief from soaring taxes.” That was the plea Brendan Byrne, a Democratic former governor of the Garden State, made 43 years ago to a group of mayors. Byrne, who died on January 4 at 93, has been widely mourned as a man who could work across the aisle to get things done. A prosecutor and World War II bomber-navigator, Byrne will be remembered by some for his life of public service, but for many New Jersey residents his legacy is evident whenever they look at their tax bills.
In 1975, with the state facing a budget shortfall, Byrne told mayors that the state would need a “large revenue package” to close a looming $413 million budget gap and raise the $300 million required to meet a state Supreme Court order for refinancing New Jersey’s public schools. The heart of the package would be a new statewide income tax, which went into permanent effect in 1977. Byrne promised that the additional money would help relieve the high property-tax burden on New Jersey’s citizens and reduce the disparity between rich and poor school districts.
Four decades later, the plan has failed on both counts. New Jersey’s property taxes have continued to climb at alarming rates, and the gap in quality between rich and poor school districts is, if anything, worse.
Two useful lessons emerge from this experiment. First, politicians and special interests don’t see new streams of tax revenue as a means to replace or eliminate an existing stream, but rather as a way of adding to the public coffers. (For those who entertain fantasies of a value-added tax replacing the federal income tax, take heed.) New Jersey’s income tax started with a top rate of about 2.5 percent; it’s now around 9 percent. Even with such an increase, the income tax has never had much of an effect on the property-tax burden. The Census Bureau reports that the average property-tax bill in New Jersey was $4,820 in 1992; by 2014 (the most recent year for which data are available), it had grown to $12,960, among the highest in the nation.
The second lesson is that education spending is not correlated with educational quality. When politicians demand more money for education funding—usually at the behest of teachers’ unions—schools are not likely to improve. Take Newark, which spent more than $22,000 per pupil in 2016. For all this largesse, the percentage of third-graders who met or exceeded expectations on state exams that year was less than 28 percent in math and 24 percent in reading. In nearby Maplewood, meanwhile, where the school district spends only $18,351 per pupil, more than 70 percent of third-graders are meeting or exceeding expectations in reading and more than 60 percent in math.