New York is likely to impose a property tax cap next year but its effectiveness could depend on local decision-makers, according to a commentary published Monday by a government think tank.
The Nelson A. Rockefeller Institute of Government’s deputy director, Robert Ward, wrote that a property tax cap proposed by Governor-elect Andrew Cuomo would make those taxes more affordable over time, but only if certain conditions are met.
Cuomo’s proposal would limit property tax growth to the lesser of 2% or the inflation rate. Residents could override the cap with a 60% vote.
The ability of the cap to make property taxes more affordable is contingent on voters refraining from regular overrides as well as governments seeking ways to boost revenue from new sources, the commentary said.
“The tax cap debate will force people to make some choices,” Ward said in an interview. “Everybody wants to be against property taxes and in favor of higher spending. It’s hard to balance the two in a realistic way.”
Among counties with populations of 65,000 or greater, nine of the 10 counties nationwide with the highest property taxes as a percent of home values are in upstate New York, according to figures cited in the commentary from the Washington, D.C.-based Tax Foundation. Monroe County had the highest rate at 2.89% of home value compared to a U.S. average of 1.04%. Suburban counties in the New York City metropolitan region have some of the highest property taxes in the nation in dollar terms.
About 62% of property taxes outside New York City are used to fund school budgets, and that is where a disproportionate amount of growth has occurred in recent years, the commentary said. A cap would require either spending cuts, or for the state to increase education aid. The latter is unlikely to happen as Cuomo has publicly stated he intends to cut education to help balance next year’s $9 billion budget gap.
“If there’s going to be a tax cap, people are going to have to deal pretty seriously with the need to align spending to revenues,” Ward said.
Mark LaVigne, deputy director for the New York Association of Counties, said that property tax increases on the county level are driven by mandates from Albany that have shifted costs for state-mandated programs to the local level.
“We can cut property taxes if the state takes fiscal responsibility … [for] state-mandated programs that consume 90% of the county property tax levy statewide,” LaVigne said. Those programs include Medicaid, pensions, public assistance and welfare, child welfare protection, preschool special education, indigent legal defense, probation, and youth detention.
More than $4 billion of the $4.4 billion of property taxes levied by the counties outside New York City were for state-mandated programs, he said.
“If you think about it that way, the county property taxes are levied at the state capital,” LaVigne said. “The counties have no room in their budgets for any additional discretionary funding.”
Gov. David Paterson has proposed property tax caps, but they did not find a warm reception in the Assembly. The Senate passed a cap this year, but the Assembly did not vote on it.
A spokeswoman for Assembly Speaker Sheldon Silver, D-Manhattan, said Silver has said he would talk to Cuomo about a tax cap.