Property Taxes – What Can be Done?

Last week’s column drew a big response. Not that any of the reporters or citizens who contacted me were surprised to learn that Upstate New York has remarkably high property taxes. But they were startled to learn that we claim 9 of the top 10 counties in the nation in property taxes as a percentage of home value.

If we agree that this is a problem (and, of course, some don’t, seeing high taxes as the fair price for a high level of government services), the question becomes, what can we do about it?

Property taxes are poised to be a big focus of this year’s legislative session in Albany. The three major players – Gov. Eliot Spitzer and the Senate and Assembly – each have ideas for addressing the issue.

Spitzer

We can expect to see Spitzer elaborate on his campaign promise to expand the existing School Tax Relief program in his upcoming budget proposal, due Jan. 31. Spitzer has pledged to increase home-value exemptions that reduce the amount homeowners pay in school taxes. According to a release from his campaigning days last fall, the details work as follows.

In the first year, the Spitzer plan would cost the state (which pays school districts the difference) an additional $1.5 billion, on top of the $3.4 billion current STAR expense.

Most of the additional benefit, $960 million, would go to nearly 2.2 million New Yorkers with incomes at or below the statewide median (this figure would be adjusted upward in high-cost areas downstate). New York City residents, who now don’t benefit much from STAR, would see an income-tax cut costing a total of $250 million. Another $290 million would go to taxpayers left out of the first two groups, except that the wealthiest 2% of New Yorkers with incomes exceeding $235,000 would not see any additional STAR benefit.

Most of the academic and fiscal watchdogs who have evaluated STAR judge it harshly and question why Spitzer is building upon it, considering that New York’s experience has shown it provides at best temporary relief from high taxes and has numerous other flaws. Some analysts, concerned about the fact that the original STAR program benefits wealthy homeowners the most, are gladdened to see Spitzer at least target more relief toward those with more modest incomes.

But school taxes are the bane of many a homeowner, and anything that sounds like it will cut them can have a nice ring to it. If Spitzer has done any rethinking of this plan, he hasn’t said so.

The Senate

Senate Majority Leader Joseph Bruno has proposed a more expensive plan that builds upon the Legislature’s action last year in sending school tax “rebate checks” to homeowners across the state. If that sounds a little like what you might get from a car dealer, the checks were viewed in a similar light by many New Yorkers, especially since they arrived in mailboxes weeks before every legislator faced re-election at the polls.

The amount of the rebate is based on the current STAR program, which sends more relief to taxpayers in counties with high home values. Bruno would triple the rebates, boosting their cost from $900 million last year to $2.6 billion this year – remember that’s on top of the existing $3.4 billion cost for STAR.

Bruno and fellow Senate Republicans also want a Blue Ribbon Commission to study the property-tax problem and they want to allow for voter-initiated tax rate limits. Voters fed up with high taxes could collect signatures, place a proposition of the ballot, and enact a three-year cap on tax rates.

The Assembly

Democrats in the Assembly plan to look at the problem in a Feb. 6 hearing in Albany. The hearing looks to be more focused on the technical, but critical, questions of ensuring that property is accurately assessed for tax purposes. But it will also touch on a bill by the Assembly’s property-tax committee chairwoman, Sandra Galef, to create a Blue Ribbon Commission to study the property tax and possible alternatives to raising money for schools.

For more ideas from experts inside and outside of state government, check out CGR’s report on our Jan. 10 property tax conference at www.newyorkmatters.org.

The fact that Albany is paying attention will encourage or scare you depending on your view of the Capitol. Whatever action state government ends up taking, the impact on local property taxes could be minimal. After all, local taxes are determined at the local level. Yes, they are heavily influenced by what happens in Albany, whether state aid to schools and local governments goes up, what happens with the Medicaid subsidized health program and more.

But ultimately, those of us who complain about property taxes need to get involved. Start thinking about what government services you would be willing to give up in order to reduce your tax bill. Would you surrender your local village or school district to merge into a larger entity and save money? And, if you think the problem is politicians who spend too much, are you willing to vote against them? To some extent, politicians view the electorate like spoiled children who can’t be satisfied (we want our services and low taxes BOTH, and we’ll keep voting for incumbents until they give them to us!) because that’s how we act.