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Property Tax Rebates: No Lasting Relief in Fiscal Pain Killer


Property Tax Rebates: No Lasting Relief in Fiscal Pain Killer

July 22, 2007
Urban PolicyNYC

Instead of permanently cutting tax rates, New York state is borrowing a gimmick retailers use to avoid cutting prices: the mail-in rebate. The Department of Taxation and Finance is inviting homeowners to apply for a property tax discount.

Gov. Spitzer says the rebate program will "reduce the property tax burden shouldered by New York's seniors and hard-working families." Unfortunately, like the partial tax exemptions provided under former Gov. George Pataki's original School Tax Relief program, Spitzer's "Middle Class STAR" rebate does not represent real tax reduction. 'The STAR "relief" is little more than fiscal novocain masking the underlying pathology—the out-of-control cost of local government, especially schools.

Measuring property taxes as a percentage of home values, nine of the most heavily taxed counties in the nation are in upstate New York Monroe County is second on the list.

STAR has been around for 10 years; an added rebate was first approved by the Legislature last year. Spitzer's new wrinkle is means-testing. The full rebate will go only to the "middle class," arbitrarily defined to include upstate homeowners earning up to $90,000.

While Spitzer touts this as a major victory for tax equity, the arbitrary income thresholds make it even less fair than the existing STAR program. STAR rebates and exemptions already target savings solely to owner-occupied, single-family homes - excluding commercial and industrial property, and multifamily housing. So renters and employers continue to get stuck with 100 percent of a bigger tax bill. Seniors earning up to $70,650 get significantly "enhanced" STAR savings—even though they might have more disposable income than younger, higher-income couples struggling to pay tuitions and mortgages.

The only truly fair tax reduction is a permanent, across-the-board cut in tax rates. For an example of how this can be accomplished over time, we need look no further than Massachusetts. In 1980, voters there passed Proposition 2 1/3 capping tax levy growth at 2 1/2 percent a year. Within a decade, the combined state and local tax burden in Massachusetts had tumbled from the top of national rankings to well below average. No one now calls it 'Tax-a-Chusetts." After trying its own costly STAR-like "tax relief" gimmicks, New Jersey just imposed a 4 percent cap on the growth of school property tax levies.

And now a group of state Assembly Republicans has introduced the New York State Property Taxpayers Protection Act to limit school property tax levy increases to the rate of inflation or 4 percent, whichever is lower, subject to voter override. The bill, whose sponsors include Assemblymen Dan Burling, R-Warsaw, Wyoming County, and Bill Reilich, R-Greece, would also give school districts substantial relief from costly state mandates.

The time for gimmicks has passed. The New York State Property Taxpayers Protection Act would lead to the permanent tax relief all property owners need.