Mon November 8, 2010
Experts Say Property Tax Cap Won't Solve All of NY's Tax Problems
By Karen DeWitt
Albany, New York –
Governor- Elect Andrew Cuomo has proposed a property tax cap for New York, to limit what has been an exponential growth in the tax in recent decades. But experts say the tax cap would just be the first step in a long and painful process that would require deep cuts in government spending.
Governor- elect Cuomo made clear in the campaign that he would pursue plans to impose a property tax cap, likely limited to a 2% increase each year, or the rate of inflation, whichever is lower. It would take 60% of voters to override the cap and raise taxes higher.
If approved by the legislature, the cap would put an end to the unpredictable increases in property taxes that have left New York with 9 out of the 10 highest taxed counties in the nation, in relation to home value.
Robert Ward, Deputy Director of SUNY's Rockefeller Institute of Government, says the cap, first pushed by prior governors, stands it's best chance for approval in 2011.
"The legislature tends to give new governors some deference," said Ward, who said the devil is in the details.
Ward, who served on a key commission appointed by former Governor Eliot Spitzer to examine high property taxes, says the cap would just be the first step though, in a longer process that has to end with lowered government spending.
"A very important question arises," said Ward. "Are we going to balance the budget by slashing services or are we going to limit spending by trying to reduce the unit cost of services that are so important to people?".
Ward says some ideas include requiring employees of schools and local government to pay a greater share of their health insurance benefits, some workers currently pay nothing at all. Ward says government consolidation, which is also pushed by Cuomo, won't save money in the short term and often faces opposition from taxpayers, though he says pooling of services, like snowplowing, would help bring down costs.
Ward says if fixed costs, like health care and pensions are not addressed, then governments and schools will have no choice but to cut services even further. He says some counties have already cut back sheriffs patrols, staffing at local parks has diminished and schools have cut extra curricular activities, like sports teams.
"An awful lot more of those sorts of things are going to happen," says Ward, unless "built in" costs are reduced.
The New York State Association of Counties agrees that simply imposing a property tax cap would not solve the state's underlying fiscal problems. NYSAC's Mark Lavigne says the state would have to ease some of its rules and regulations on county governments first. He says counties have a number of costs mandated by the state, including health insurance and pensions for employees.
"90% of the county property tax levy statewide goes to pay for nine state mandated programs," says Lavigne, who says they range from Medicaid to pre- school special education.
Lavigne says all too often, when the state has a budget deficit, as is currently the case, it passes on even more costs to local governments, who then have to find some way to pay for them.
He says one way to bring down county costs, and property taxes, would be for the state to assume the counties' share of the Medicaid program, worth around $7 billion dollars.
Ward, with Rockefeller Institute, says another potential pitfall in a property tax cap, is that it would mean taxes would not actually be frozen or decrease, but would only increase at a lower rate. Built into that assumption is that New Yorkers' incomes would also rise slightly each year, to keep up with the increase. But he says, in many upstate counties, average incomes are actually flat or on the decline.