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Property Tax Cap Proposal a Misguided Approach for New York

New York Governor Andrew Cuomo recently announced a misguided compromise with conservatives in the state legislature to place a hard cap on the annual growth of property tax revenues. The cap would limit revenue growth to the lesser of a 2% annual increase or the rate of inflation. The only exception would require a restrictive super-majority vote of 60% in municipalities where the residents wish to opt out of the program. If passed into law, this proposal will lead to a drastic reduction in essential services for hardworking New York families and place an additional burden on middle class communities which have already been battered by the economic downturn.

Hard caps create systemic revenue shortfalls in which municipalities lack the resources necessary to fund services, including education and public safety, leading to teacher, police, and firefighter layoffs and deterioration of essential programs.  Other states – such as California, Colorado, Massachusetts, and Illinois – that have tried this approach have learned the hard way just how harmful it can be for state residents.

One need look no further than Massachusetts – the supposed success story of property tax caps – to see the vast reduction of municipal services that will inevitably result. Throughout that state, schools were closed, libraries were shuttered, educational programs were reduced, senior centers were eliminated, public works projects were cut, police officers and firefighters were laid off, and even street lights were turned off in order to weather the storm of revenue pressures.

Proponents of hard caps argue that they result in forced efficiency in municipal budgets. Studies have shown that this is a myth, as many inevitable expenses are simply outside the control of municipalities. Governor Cuomo’s own projections indicate that property tax revenue would have to increase at a rate of 5% just to keep up with current demand. As such, the inevitable result of a rate cap will be to limit the ability of local communities to generate revenue, leading to severe cuts to the essential services which many residents can ill afford to go without in a time of economic hardship.

The Center on Budget and Policy Priorities further outlines some of the deleterious consequences of severe property tax caps, which include, increasing disparities between wealthy and moderate income districts, disproportionately impacting the fiscal security of low-income communities, and placing the majority of the burden of the cap on the middle class.

Supporters of the cap argue that high property taxes are hurting New York by causing wealthy residents to leave the state. However, statistics indicate that people care more about good schools and safe streets than property tax rates. 

Karen Scharff, Executive Director of Citizen Action of New York, commented:

“[T]he tax cap is one more fake Albany quick fix. After severely cutting state school aid, and forcing more costs onto local property taxpayers, the Governor and Senate now want to squeeze schools from both directions by capping local taxes. And they want a cap that doesn’t even have exemptions for costs that schools and local governments can’t control, like rising energy and health care costs. Albany politicians want to tie the hands of local schools and governments.”

Several state-based advocates have been working diligently to oppose this damaging policy, including New Yorkers for Fiscal Fairness, Citizen Action of New York, AFSCME, AFL-CIO, New York State School Boards Association, New York State United Teachers, Center for Working Families, and many others.

A better method of tackling the issue of property taxes is a “circuit breaker,” an approach that ties property tax increases to residents’ individual incomes. This system would provide tax relief for hardworking New Yorkers while giving municipalities the flexibility to provide adequate services for their residents. A more sensible approach like this would help protect the economic security of working families and the middle class without the drastic consequences that a hard cap is sure to bring.