April Issue
March 31, 2014

Property tax freeze billed as a gift to voters favors only a few

Author: By Ned Hoskin
Source: NYSUT United

With every state legislator and the governor up for election this fall, the politicians are intent in offering tax cuts to curry favor with campaign donors and "buy" votes from taxpayers.

The state budget was expected to include $2.2 billion — the equivalent of the expected budget surplus — in total tax breaks, mostly to millionaires.

The "gift" to the middle class — a $400 million property tax "freeze" — is a charade. Truth is, it favors wealthy New Yorkers, not the people who could really use the help.

And the consequences? A tax freeze will further squeeze already cash-strapped school districts and municipalities, especially given that the freeze is tied to the undemocratic tax cap. Poorer districts have a hard enough time raising local revenue, even without a tax cap, because the value of their property is relatively low. The cap makes their task even harder.

The freeze will allow residential property taxpayers in districts that stay under the tax cap to receive a rebate from the state equal to any increase in their property taxes over the previous year. To qualify for a rebate, a homeowner's income must be less than $500,000 and the district, or municipality, must stay under its tax levy cap. Districts that already have a lower property valuation can't raise revenue with that restriction.

"This will put local leaders in a no-win situation," said NYSUT Executive Vice President Andy Pallotta. "In order to seek a tax cap override, a district would have to ask taxpayers to pass up a rebate check in the fall at the same time you're asking them to pay more in taxes. It's an impossible burden."

The truth

The tax freeze pits homeowners against their schools, ensuring that few, if any, districts will attempt to override their tax levy limit and none will be able to muster the 60 percent supermajority needed to do so.

Perhaps the most troubling hidden factor is that the freeze will have a much greater impact on schools in poor communities and further widen gaps in opportunities for students between low- and high-need school districts. And we know, based on the past two years, that these districts are much less likely than wealthier districts to even attempt to pierce the tax cap.

In subsequent years, this convoluted, complex plan will also require districts and municipalities to find economies of scale in consolidating services and agencies. Last-minute tweaks in the budget might give credit for actions local leaders and school districts have been taking to slow the growth of taxes and spending over the past several years.

The consequences

On average, the wealthiest school districts raise seven times more revenue than poorer districts, according to the Educational Conference Board.

Thirty percent of the districts in the state — the 282 most needy districts — would raise less than $200,000 if they raised the tax levy 2 percent.

If they did that — cutting programs, services and staff even more than they already have — the average taxpayer in a district with 5,000 homes would receive a rebate check for $40.

The top 10 percent of districts ranked by property wealth can raise nearly $800,000 without exceeding 2 percent. That revenue would allow them to preserve much more in terms of programs and staff, and would make it much easier for them to qualify for the tax rebates. Assuming the same number of tax-paying households, 5,000, the average rebate could be around $160. For those paltry rebate checks, jobs will be jettisoned, class sizes will balloon, and sports, music, AP, foreign languages and libraries will be lost.

The smarter solution

NYSUT has persistently advocated for a true circuit breaker as a more effective form of property tax relief. Done right, it would deliver relief to homeowners who need it the most, triggering a rebate when tax bills reached a certain percentage of income. It would not disadvantage local funding of schools, so long as eligibility for the circuit breaker is not linked to the tax cap.

"This so-called ‘freeze' is just another example of the governor's fiscal policies that favor his wealthy friends and, as a direct result, harm kids in the vast majority of school districts," Pallotta said.