What does the 2% cap on tax increases in New Jersey limit?

The 2% cap on tax increases in New Jersey specifically limits the annual property tax levy increases. This means that local governments and school districts can generally increase the amount of property taxes they collect by no more than 2% over the previous year, excluding certain exceptions such as the addition of new construction or adjustments for increasing costs associated with debt service and capital expenditures.

This cap was enacted to help control the growth of property taxes, which had been rising at significant rates prior to its introduction, making it a crucial component of property tax reform in the state. The focus is on the levy, which refers to the total amount of money that local taxing authorities can raise from property taxes within a given year, rather than individual property tax payments or overall budgets. This targeted limitation aims to promote fiscal responsibility and provide some level of predictability for property owners with respect to their tax obligations.