To really lower property taxes, you have to raise state taxes
New York leaders have been buried in budget negotiations lately, trying to pass the state’s 2014-15 spending plan by the April 1 deadline.
One thing they are discussing is property taxes, and why not? There’s no question that New York’s property taxes are too high – the highest in the nation, actually. That certainly drags down the state’s economy, although it’s hard to prove how much.
Gov. Andrew Cuomo has been blaming local governments for this, saying there are too many of them and that they spend too much. That’s the thought process behind the tax cap – which hasn’t turned out that badly, actually – and his complicated schemes this year to give property tax rebates to people in local governments that meet the tax cap and move to consolidate.
Yes, it’s local governments, not the state, that directly levy property taxes, and they are part of the problem. But fixing that part can’t be done unilaterally. It involves countless local officials making countless local decisions.
A huge portion of your tax bill, however, is due to expenses the state has dumped on our school districts, counties, cities, villages and towns. Each of those dumpings was done with a single set of legislative votes in Albany, and each could be remedied that way, too.
What it would take is for state lawmakers to put certain big expenses back on their books rather than on those of the locals. That would put the fiscal stress back on the state, but that would be more fair because the state raises its revenue through income and sales taxes, which are more just than property taxes since they’re based on ability to pay.
The Gap Elimination Adjustment is an excellent example that should be eliminated itself – immediately – and could be if state lawmakers had the guts and the proper sense of justice.
The GEA was begun during a time of fiscal emergency for the state – plus political meltdown within the Capitol. (Remember the Senate schism?) Facing a huge deficit, Albany decided it would balance its books on the backs of every school district in the state, skimming from the aid each was due. The gap was eliminated in the state budget, but only because it was shifted to schools. It worked so well the politicians figured they’d keep it around. Now the governor is bragging about a surplus and dangling election-year gifts for big business, all-day pre-kindergarten, school technology, property tax rebates, tax-free zones around campuses – the list goes on.
Meanwhile, our schools are gouging out their own hearts to stay below the new property tax cap.
Over the last five years, the Saranac Lake Central School District has eliminated 40 full-time-equivalent positions, and if its board passes the budget before it, it will cut 25 more over the summer. That’s 65 FTEs eliminated – one for every 20 of the district’s 1,300 students. Oh, and they closed two schools in that time, too.
This coming year, after an $867,000 GEA cut, the governor’s budget would increase the district’s state aid $127,748 over the current year. Meanwhile, health and dental insurance alone are expected to go up $352,000, and pension payments another $53,625. And then there are contract-guaranteed raises and all kinds of other rising costs.
In Tupper Lake schools, pension cost hikes alone essentially equal the state aid increase. Tupper’s GEA alone would be more than $923,000 under Cuomo’s budget.
These poor school boards, which have already cut deeply into the meat and bone of education, are faced with two options: Cut deeper into the kids, or cut deeper into the taxpayers. It’s a nasty choice.
Sure, Cuomo’s student laptop computers and all-day pre-K could be nice, but they are add-ons rather than the core function, which is K-12 instruction – which is getting hammered.
The GEA has no more reason to exist – except that it helps the state budget at local expense, which means it stays. That’s how it always is in Albany. They want to get re-elected, so they don’t want New York taxes to go up – even if it reduces taxes elsewhere and makes them more fair overall.
It’s the same thing with Medicaid. The federal government covers half of it, and New York is the only state that dumps half of its half onto counties, which have to pay for it with property taxes.
Gov. Cuomo brags that he’s had the state pick up annual Medicaid increases, but that’s piddly, and it postpones most of the state’s burden until after he’s in office. The state should take it all, now, levying it onto income and sales taxes.
Besides, it’s state leaders, not locals, who have control over Medicaid costs, so it should be they who budget for it.
When you hear people talk about “mandate relief,” this is it. People have been nagging for it for years, but the Capitol keeps shrugging it off. A few brave, selfless politicians could change things.
Meanwhile, what our leaders have proposed is self-serving, election-year, Band-Aid plans.
Gov. Cuomo’s initial tax freeze proposal was too complicated, too expensive, too short-term, too antagonistic toward local governments and too unfair toward those that had already done consolidation work. Now the governor has backtracked, and his plan is essentially a rebate check – one that will require a costly state bureaucracy to create, because the details and exemptions are too shifting, convoluted and ridiculous to get into here.
Equally undesirable is a plan to create a property tax circuit breaker at a cost of $1.1 billion the first year. This one is espoused by Democrats in the state Assembly and long championed by our area’s state senator, Betty Little. Cuomo would include a circuit breaker, too, but the Assembly Democrats would have it on its own.
The circuit breaker ties people’s property taxes to their household income, much like the Enhanced STAR program available for senior citizens. It would make people’s property tax bills go down, at statewide taxpayer expense, but includes none of the structural reforms needed to make local taxing jurisdictions more efficient and less costly. Taxpayers deserve tax relief, but simply spending the state’s money without structural reforms that make tax relief sustainable, year after year, papers over the reasons for New York’s high taxes.
Helping people pay their high taxes doesn’t solve the state’s tax problem. They merely make an election year easier for politicians.
They’re trying to pass a budget on time, and that’s a good aim, but we’d prefer a late budget with some mandate-relief justice in it.