New York: Setting the Stage for a Property Tax Battle


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New York Governor David Patterson just kicked off what is sure to be a heated property tax debate by proposing legislation to institute a 4% cap on annual increases in school property taxes. His proposal is the result of a report put out by the New York State Commission on Property Tax Relief, released just days earlier.

As was explained two weeks ago in the Digest and in a recent report from the Center on Budget and Policy Priorities, these caps are bad policy for a number of reasons. Most importantly, to the extent that the caps actually do result in a net tax reduction, (rather than merely a shift toward increased state aid) that reduction is poorly targeted and is done arbitrarily without regard to any district's future needs.

Oddly, the Commission believes that this "blunt instrument" is precisely what the state needs, suggesting that it will "force some tough, necessary choices". What the Commission failed to realize is that another proposal contained within its report, if used properly, could remedy the property tax problem at a much lower cost that would make far fewer "tough choices" necessary.

That proposal, of course, is an income-based property tax circuit-breaker. The Commission attempted to minimize the importance of circuit-breakers by claiming that such programs address only the "symptoms of the problem, rather than the problem itself". Apparently, the Commission believes that the "problem" requires crudely slashing taxes for everyone regardless of their financial situation, and that providing fiscally responsible and targeted property tax relief to those who need it is only a band-aid fix. Since circuit-breakers don't provide windfall benefits to wealthy property taxpayers like "blunt instrument" caps do, they are also a much safer route for providing property tax relief that allows policymakers to avoid having to gut school budgets. A property tax system that emphasized this kind of relief would be preferable to one with arbitrary constraints on growth.

To learn more about property tax caps and their shortcomings, see this ITEP Policy Brief.

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