The term property tax burden is an apt one.
In New York state, local taxpayers pay 79 percent more than the national average. People cite high property taxes as one of the top reasons they leave the state.
And the problem isn’t getting any better. According to a recent Siena Research Institute poll, 48 percent of New Yorkers believe that the state’s financial condition is poor; 37 percent say it’s fair. More than two-thirds of state residents, including nearly 75 percent of Upstaters, feel that New York is in the worst fiscal shape it’s been in since the 1970s.
In response to the crisis, Gov. David Paterson has called for deep cuts to the state’s budget, summoned legislators back to Albany for an emergency legislative session and, in a highly controversial move, asked for a cap on the amount school districts can increase their property taxes.
The growth rate of property taxes in this state is unsustainable, especially for the elderly, working families and small businesses just starting out, Paterson has said. All of us understand that the tax cap is a blunt instrument, but it is needed to force hard choices.
Paterson sounded the call for a tax cap this spring after the release of a report from the New York State Commission on Property Tax Relief, a state committee chaired by Nassau County Executive Thomas Suozzi. Earlier this month, the state senate passed a tax cap bill. In the same Siena poll noted above, 66 percent of New Yorkers support a tax cap of some kind (23 percent are against, and 11 percent are undecided).
But not everyone is enthusiastic about the proposal. The state teachers’ union is decrying it as detrimental to education, and others question whether it will deliver the relief it promises. Still others are proposing a circuit breaker, which would limit the amount of income people spend on property taxes. The Siena poll said that 75 percent of New Yorkers would support a circuit breaker compared to 18 percent who wouldn’t; in fact, the poll found that the circuit breaker had the edge over the tax cap (58 percent to 33 percent) if the legislature were to choose just one.
Tax cap: Pros and cons
The tax cap proposal outlined in the Commission on Property Tax Relief report seeks to decrease expenses by putting a limit on the amount school districts can increase the amount of their budgets to be raised through the tax levy from year to year.
The tax cap proposal outlined in the report, a version of which was passed by the state senate (Bill No. S.8736), would:
‘ Limit the tax levy increases to 120 percent of the Consumer Price Index or 4 percent, whichever is lower.
‘ Allow districts to bank any amount below the tax cap for use in future years – up to 1.5 percent per year.
‘ Provide an option for school boards to increase the tax levy by more than that amount by putting it to a public vote. The budget would have to be approved by 55 percent of the voters if the district received less than a 5 percent increase in state aid, or 60 percent if the district received more than a 5 percent increase in state aid (override vote).
‘ Provide an option for voters to put a proposition on the ballot to limit the tax increase to less than the statutory amount (underride vote).
‘ Allow a debt service vote to have no effect on the amount of the tax cap.
‘ Exempt the so-called Big Five school districts (Syracuse, Buffalo, Rochester, Yonkers and New York City) because the are fiscally dependent and do not levy their own taxes.
New York is not the first state to consider a tax cap. Massachusetts, considered by proponents to be a success story, passed one in 1980. According to a fact sheet released by the Commission on Property Tax Relief, the tax cap in the Bay State hasn’t hurt education – state test scores are the highest in the country for fourth and eighth grade math and reading – and it has significantly reduced taxes, causing Massachusetts to drop from third in the nation to 33rd in state and local tax burden.
State Sen. John DeFrancisco (R-Syracuse) is also a big supporter of the bill; he spoke on the floor of the senate calling for its passage.
The bill we passed is taken directly from the governor’s proposal, DeFrancisco said. I think this is the first step toward reversing the state’s financial situation.
That support may have cost him; the New York State Union of Teachers [NYSUT], which covers some 600,000 educators statewide, voted to rescind all endorsements of legislators who supported the tax cap.
New Yorkers want and deserve real property tax relief, said Richard Iannuzzi, president of NYSUT. But those who choose political expediency over the future of New York’s children and public schools – and favor a gimmick that offers only the illusion of tax relief over a real reduction in property taxes for over-burdened homeowners – will not earn our endorsement.
Circuit breaker, broken down
Instead of a tax cap, NYSUT supports a circuit breaker, another proposal mentioned in the Property Tax Relief commission’s report.
A tax cap would only slow the growth of property tax increases in parts of the state, said Alan Lubin, vice president of NYSUT, while a circuit breaker would provide real tax relief to New Yorkers who need it most, based on their ability to pay.
The circuit breaker would:
‘ Create a percentage of income that anyone would pay for school taxes, based on income range (about 6 to 8 percent) and location.
‘ Force the state to shift the money currently going to School Tax Relief (STAR) Exemptions and rebates to replace the amounts that are eliminated from property owners by the limits.
‘ Be limited to primary residences.
‘ Should not fully relieve the tax burden for any taxpayer or exceed certain maximums.
The proposal builds on the existing STAR program, which was originally established in 1978 and has not been modified since. According to proponents, the circuit breaker, since it is based on income, would more fairly distribute the burden of payment.
A bill incorporating these elements was passed by the state assembly last week. Assemblyman Al Stirpe (D-North Syracuse) supported the legislation.
If you make less than $250,000 a year, the circuit breaker will limit the amount you pay in school taxes, Stirpe said. The assumption is that, if you make more than $250,000, you can afford to pay more in school taxes.
Stirpe said he also wasn’t convinced that Massachusetts was a success story.
It’s not as great as they make it out to be, in my opinion, he said. Their tax cap was effective in the boom years of the 1980s, when the state could make up the lost revenue. But in the 1990s, when things went bust, it didn’t work.
In addition, Stirpe said the legislation by nature increases the disparity between rich and poor districts.
In their community colleges, about 50 percent of the kids were from less-wealthy districts, and they needed remedial classes, he said. Their education was not up to par.
For those reasons, Stirpe said he supported the assembly’s circuit breaker bill over the senate’s tax cap.
But DeFrancisco wasn’t so sure.
The devil’s in the details, and [the circuit breaker] does nothing to control spending, he said. And the governor hasn’t voiced any support for a circuit breaker.
Stirpe said he wasn’t opposed to a tax cap with certain modifications.
I don’t feel that any type of cap is a bad thing, he said. The big question is, do people want a cap or a cut? They’re not the same. That’s the big issue.
