January 31, 2011RE: AN ACT to amend the general municipal law, the education law and the municipal home rule law, in relation to establishing limitations upon school district and local government tax levies; and to repeal certain provisions of the education law relating thereto S.2706 (Skelos) Governor’s Program Bill #1 MEMORANDUM IN SUPPORTUnshackle Upstate, a bi-partisan coalition of over 80 business and trade organizationsrepresenting a growing group of 70,000 companies that employ more than 1.5 million peoplesupports the enactment of this legislation. The bill caps the growth of the real property taxlevies that may be imposed by local governments and school districts at 2% or 120% of theinflation rate, whichever is lower.Unshackle Upstate supports this effort to directly address the crushing property tax problemfaced by many New Yorkers.New York State has the highest local taxes in America – 78% above the national average. Highproperty taxes are one of the primary reasons that suburban and Upstate residents say the statehas become unaffordable.The property tax problem is particularly acute in the Upstate region, where the economy hasbeen stagnant, and in the suburban counties around New York City, where home values arehigher than elsewhere.The need to address the problem of high property taxes is clear: • the median property tax in New York State in 2009 was $3,755, nearly double the national average;i
• property taxes rose 73% from 1998 through 2008, more than twice the rate of inflation (which was 32% during that period);ii • the suburban communities around New York City pay some of the highest property taxes in the nation when measured in real dollars: Top 10 Counties in Median Real Estate Taxes Paid, 2009 Median Real Estate Taxes County State Paid Westchester New York $9,044 Nassau New York $8,940 Bergen New Jersey $8,708 Hunterdon New Jersey $8,671 Rockland New York $8,542 Essex New Jersey $8,245 Passaic New Jersey $7,939 Morris New Jersey $7,904 Union New Jersey $7,793 Somerset New Jersey $7,720Upstate New York communities pay some of the highest property taxes rates in the nation whenmeasured against home values: Top 10 Counties in Median Real Estate Taxes Divided by Median Home Value, 2009 Median Real Estate Taxes as a % County State of Median Home Value Monroe New York 2.89% Niagara New York 2.87% Wayne New York 2.78% Chemung New York 2.61% Chautauqua New York 2.61% Erie New York 2.60% Onondaga New York 2.50% Camden New Jersey 2.50% Steuben New York 2.49% Madison New York 2.43%This legislation will cap the growth of all property taxes, not just school property taxes. The factis that all local property taxes in New York have increased at a rate higher than the rate ofinflation:
Property tax rate growth in NYS Fire districts School districts Villages Average rate of increase, Towns 2002-2007 Cities Counties Inflation 0.0% 2.0% 4.0% 6.0% 8.0% .A Property Tax Circuit Breaker is Not the AnswerProposals to address the property tax burden faced by New Yorkers are not new. New York TaxLaw § 606 provides a circuit breaker for individuals with an income ceiling of $18,000, andmaximum home and rent values of $85,000 and $450. Set in 1985 and unmodified since, NewYork’s program is eroding and provides relief to fewer and fewer residents each year. In 2006,for example, the median household income in New York was $51,384, the median home valuewas $303,400, and median rent was $875. § 606 of the Tax Law demonstrates that a majorfailure of a circuit breaker program is they shortly becomes ineffective.A Property Tax Cap Will Not Undermine Public SchoolsMassachusetts enacted “Proposition 2½” in 1980 in response to itsr high level of propertytaxation, which was then among the highest in the nation. Proposition 2½ has stopped the out-of-control property tax growth in Massachusetts. In the first 20 years following the passage ofProposition 2½, the per capita residential property tax levy dropped 1.6 percent, after adjustingfor inflation. Since the enactment of Proposition 2½, Massachusetts dropped from 3rd nationallyto 33rd on the measure of state and local tax burden.Massachusetts’ success in managing its property taxes has not undermined the state’s publicschools. Massachusetts’s experience suggests that New York, by adopting similar reforms, couldsignificantly restrain tax growth without hurting educational outcomes.The Hidden Costs of High Property TaxesThe effects of New York’s real property tax burden on homeowners are well documented andunderstood. What is far less understood is that New Yorkers are burdened by higher costsoverall because of real property taxes. A study by the Fiscal Policy Institute demonstrates thatthe people of New York pay more for energy because of the State’s high tax burden.
The state’s electricity sector paid nearly $3.1 billion in property taxes for calendar year 2008. The corresponding figure in Texas for the same year was $1.018 billion, and for California it was $786 million. The property tax disparity is actually getting worse. Ad valorem assessments and taxes for California are expected to decline slightly in 2009 and remain flat or fall slightly in Texas, while the burden on New York’s industry increased by $180 million last year. iiiNew York Needs a Property Tax CapUnshackle Upstate prefers that there be no increases in property taxes, but we recognize that asensible, well-designed tax levy cap is the next best thing. A property tax “circuit breaker”would not do anything to slow the growth of property taxes. Further, a circuit breaker wouldonly address some real property taxes, while consumers of electricity, and other goods andservices will continue to pay hidden property taxes in the form of higher costs.For these reasons, Unshackle Upstate supports the enactment of this legislation.4830-6576-1800, v. 2
i The Tax Foundation Fiscal Facts #248, September 28, 2010 [http://taxfoundation.org/news/show/26742.html]ii Office of the State Comptroller, State of New York Financial Condition Report for Fiscal Year Ended March 31, 2009, @ 23.[http://www.osc.state.ny.us/finance/finreports/fcr09.pdf]iii The Public Policy Institute of New York State Short Circuiting New York’s Recovery, 2010 [http://www.ppinys.org/reports/2010/ShortCircuitingNewYorksRecovery.pdf]