No matter on which side of the political divide you reside, we have to admit Gov. Andrew Cuomo is clever.
Early on, the governor tapped into the collective concerns of Upstate New Yorkers. The property-tax burden per New Yorker is 49 percent higher than the national average. In the last five years, property taxes rose by 42 percent on average while inflation rose by 13 percent. As a share of income, they are 60 percent higher. That’s 22 percent higher than the next highest state.
When combined with state taxes, New Yorkers pay the highest share of our personal income in taxes. This makes us the highest taxed state in the country. Yet, our income taxes are only marginally higher than the average state. The wide difference compared to elsewhere is in property taxes alone.
If we remove New York City from the calculation, we find our upstate property taxes are 73 percent above the national average. Downstate New Yorkers have many other taxes offsetting their property taxes, and many of these other taxes are paid by non-New Yorkers. These may be visitors to New York City or residents of New Jersey who work in the city. And, the property taxes levied on downstate residents often have a lower mill rate per $1,000 of property value because their homes are worth much more and because the housing density is much higher.
When we live a lifetime in an area with high property taxes, it is hard to notice whether our taxes are disproportional. It is like the frog in a pot. If the temperature of the water slowly creeps up, the frog does not notice. But, if suddenly plopped into a pot of hot water, the frog jumps out. This is the reaction we sometimes hear from people who explore moving here but are persuaded otherwise by our high property taxes.
North Country residents are acutely aware of property taxes. It is also something that our local government officials have been working to address. Some governments have even managed to maintain a frugal budget and stay under the tax cap this year.
Now, the governor is applying some grassroots pressure. His idea is to offer residents a property-tax rebate if their local governments can hold the line on spending, and then even figure out how to share services to reduce spending even further.
The governor’s instinct is good and his method is clever, some would say, or diabolical, so say others. By offering a tax rebate to residents, but not to local governments, voters double the pressure for balanced local government budgets.
This strategy is too blunt, though. A local government smart enough to play the game and amass a nice cushion of fund balances or easy-to-cut fluff has many avenues to save and to hold the line. However, the government that has worked hard to wring inefficiencies out of its system and has worked to consolidate services among its neighbors may not find it at all easy to reduce spending or avoid mandated government employee raises. They are penalized by the policy while the irresponsible are rewarded.
We all agree that high property taxes may be a factor that will discourage future residents and encourage some current residents to leave. If some leave, and few come, the tax burden rises on the rest of us. From that perspective, most all agree we ought to be most mindful of local property taxes.
However, there is far less than universal agreement on how to solve the dilemma. It seems that a nuanced approach is necessary. The governor’s proposal is powerful, but poorly targeted.
Instead, we should tie rebates not only to those that strive for efficiencies, but also to those that have already gleaned efficiencies. Vermont has done just that with school spending. Districts that want Cadillac spending per student suffer a luxury tax. The luxury tax from jurisdictions that choose to spend more per student can then be used to subsidize students in less affluent areas.
Unfortunately, districts, municipalities and counties won’t unite around such an approach because some regions will be winners in a more nuanced approach, while others will be losers.
If we don’t do something, though, most New Yorkers will lose.
Colin Read chairs the finance and economics faculty at SUNY Plattsburgh and has published a dozen books on local and global finance and economics.