A Glimmer Of Progress On Property Tax Reform
By Gioia Shebar
From Issue 25: Winter 2015
Most of us don’t hate paying for the services we use, but most of us do hate property tax as the means of funding because it feels extortionate and out of control. And it is. Until recently, contrary to sound tax policy, this tax had no upper limit or relationship to income. Governor Cuomo’s dramatic January announcement that he will fund our Omnibus Consortium Circuit Breaker—a relief package aimed at shifting funding for services from the property tax back to the state coffers—has changed that to some degree.
Members of Taxnightmare.org and The Omnibus Consortium are working to fully assess the plan. Initial response to the announced relief package is that the plan is a much better Circuit Breaker than hitherto offered, but may fall short of the measures proposed by Tax Nightmare.
This is how it will work. When your total property taxes (e.g school, county, local) exceed 6% of your income, the state will give you back part of the overage. The rebate depends on your income with the cut off being $250,000. Income probably means all household income, no exemptions or deductions, but that isn’t spelled out yet. This will be phased in over four years.
When phased in, the rebates will look like this: Property Tax graph
The Omnibus Consortium, coordinated by Ron Deutsch, is a partnership of pro bono tax reformers like Taxnighmare and progressive good government groups like the Fiscal Policy Institute. For some time we have been lobbying for the two-part Omnibus Tax Solution written for us by Frank Mauro. The two parts are the circuit breaker, and changes in funding of education and Medicaid for reform of the tax.
First, let me dispel the idea “it doesn’t matter which pocket pays for public services.” It does. State coffers have broader, more equitable, more elastic sources of income than ordinary homeowners, small businesses, and renters. Among the sources are individual, corporate, and business taxes, user fees, and penalties (the latest surplus comes from a bank misconduct resolution).
So, the Circuit Breaker now seems to be in hand, but there are still a number of things wrong with the property tax structure. For one, the taxing entity must stay within the State imposed CAP amount for this whole Circuit Breaker thing to operate. For example, if your school district decides to exceed the CAP—something they can do through certain legal measures—you get nothing. And we all know that the more money or political clout you have the more you can lawyer up and tailor your assessment or tax exemptions to suit yourself. That part hasn’t changed, nor has the fact that basing a tax on guesstimates of real estate value makes no sense. Changes in the funding of education and Medicaid will also have to occur in order to facilitate property tax reform. We’re are still working on that.
What’s more, tax exempt properties in NYS are valued at about 860 billion and climbing. Corporations and voting blocs routinely lobby, get tax reductions, and rarely deliver on the promises they made to get themselves declared tax exempt in the first place, and other unfunded corporate or religious exemptions or lowered assessments are picked up by other taxpayers (had DeNiro paid less you would have paid more).
Still, we have, by dint of intense citizen advocacy, achieved a breakthrough; the Governor’s proposed Circuit Breaker is near enough to our Omnibus version that Taxnightmare.org will support its enactment by the legislature.
This is not the end of our struggle. The Circuit Breaker is only a patch on a very bad tax. Eight years ago, six Gardinerites sat around a kitchen table looking for a name for our new citizen’s organization and Mike Calderone said, “I don’t know, but my tax is a nightmare.” So the story began. The nightmare is not over yet. But the Circuit Breaker just means the state is starting to wake up.