Plan To Cap Property Taxes Seen as Dead

By JACOB GERSHMAN, Staff Reporter of the Sun
April 29, 2008

The debate over a property tax cap in New York may be finished before it started.

Weeks before a special state commission headed by the Nassau County executive, Thomas Suozzi, is expected to recommend a plan for imposing a cap on local school property tax increases, state lawmakers are signaling that the proposal will be dead on arrival.

In a published interview, the Democratic speaker of the Assembly, Sheldon Silver, suggested that a property tax cap was not up for negotiation.

Democrats in his conference, meanwhile, are rallying around an alternative — and more costly — approach for lowering the tax burden of homeowners.

The idea, which organized labor groups are advancing, would increase the personal income tax on those earning more than $250,000 a year and then redistribute the money to lower-income individuals who face high property tax bills.

While facing a wall of opposition in the Assembly, Mr. Suozzi and other proponents of a property tax cap are faring little better in the other side of the Legislature and in the governor's office.

Senate Republicans have avoided discussing the issue — going only as far as supporting the idea of giving school districts the option of capping property tax increases, rather than mandating a ceiling.

Governor Paterson has sharply criticized a multibillion-dollar program that Albany has relied on for dealing with rising property taxes but has stopped short of endorsing a cap.

Mr. Silver, in an interview published by the newsletter of the New York State School Boards Association, took his strongest stance yet against a cap, saying he didn't believe it could be imposed without leading to damaging school budget cuts.

"The caps are not going to work," he reportedly said.

Assembly Democrats appear to be embracing another plan, one put forward by the Working Families Party, a labor-backed third party whose intensive ground operation and ability to deliver votes has made it a potent force in Albany.

The party is supporting what it describes as tax relief in the form of a "circuit breaker," which would give grants to homeowners when their taxes consume a certain percentage of their income. It would be graduated, setting a lower percentage for lower earners.

The cost of the program would be paid for through a marginal income tax increase on residents earning more than $250,000.

The tax increases would increase along with the income being earned, with new rates ranging from .5 to 4 percentage points more than the current 6.85% rate.

"This thing is real because it's the right thing to do. This is power politics attached to a set of progressive principles," a Democratic assemblyman of Westchester, Richard Brodsky, said.

A spokesman for Senate Republicans, which opposed an earlier Assembly proposal to raise taxes on millionaires, said the conference would not support any rate hike and said the Working Families Party plan would just lead to increased spending.

"It's a wolf in sheep's clothing," the spokesman, John McArdle, said.

While more than a dozen states have some sort of cap on the annual growth of property tax collections, putting a limit on property taxes — also known in New York by the friendlier-sounding name of school taxes — has never gained much traction in Albany.

It received a boost in January when the then-governor, Eliot Spitzer, promoted it in his State of the State speech and then tapped Mr. Suozzi to run a commission that would draft a policy proposal.

Mr. Suozzi, a popular leader in his county, has convened eight public hearings around the state on the issue and is expected to issue recommendations next month.

The resignation of Mr. Spitzer, however, was a major setback to his commission, which many lawmakers now dismiss as a vestige of a past administration.

At the same time, powerful public-sector unions, particularly New York State United Teachers, have come out with increasing force against the cap, giving pause to lawmakers who might be sympathetic to the policy.

"You have the overriding issue of the teachers union coming in there, which is obviously a major concern to our conference," a Republican senator, George Winner, said.

Mr. Suozzi, in an interview, said the problem of rising school taxes cannot be contained without Albany legislating a restriction on school tax growth. "We're not moving away from a cap," he said.

Outside of New York City, which raises revenue primarily by taxing income rather than property, property taxes have long been a burning issue.

To quell voter anger, Albany spends more than $5 billion each year on a program first started by Governor Pataki that is supposed to lower school taxes by providing districts with subsidies and homeowners with rebate checks.

Homeowners have seen their bills climb despite the aid because school districts have increased their tax levies by an average of 7% each year.

Advocates of a cap argue that homeowners won't see their taxes decline without imposing restrictions on school spending. A cap, they say, would also force state and local governments to deal with escalating union contract and pension mandate costs that have contributed to the higher taxes.

Opponents, including Assembly Democrats and the state teachers union, say school budgets and tax increases should be decided by school district elections, which are heavily influenced by organized labor participation.