The Jersey Tax Hustle: How Mayoral Elections Influence Municipal Tax Levies in the State of New Jersey

Abstract

This thesis investigates how political pressures shape local tax policy by analyzing the relationship between mayoral elections and changes in municipal tax levies in New Jersey. Grounded in principal-agent theory, the concept of voter myopia, and political budget cycles, the study explores whether elected officials strategically adjust their fiscal behavior in response to electoral incentives. Using a mixed-methods approach, it combines original statistical analysis of tax levy changes across hundreds of municipalities with a registered voter survey and qualitative interviews with local finance professionals. The findings provide strong evidence that political pressures routinely factor into municipal tax levy decisions made by mayors and city council members. Voters favor stable or lower taxes and often vote against those they perceive as responsible for burdensome increases. Anticipating this, local officials moderate tax hikes and sometimes implement temporary cuts during election years when political and fiscal conditions permit, aiming to appeal to constituents. This study sheds light on a state and tier of government frequently overlooked in political science, laying a foundation for future research on the intersection of politics and public finance at the local level.