Image credit: City of New York, Office of the Comptroller.
Comptroller calls for an expansion of property tax relief programs in the City. On September 6, 2018, New York City Comptroller Scott M. Stringer issued a report detailing property tax increases in the City from 2005 to 2016 and their effect on households at different income levels. The report highlights the dramatic impact that these increases have had, particularly on households with incomes below $50,000 and the inability of existing property tax relief programs to ease the burden of taxpayers at this income level. The report shows how the City tax relief programs fare in comparison to other states that offer tax benefit programs, specifically Maryland and Washington D.C, where benefits are higher and more expansive. The report is a call to policy makers and the recently established NYC Advisory Commission on Property Tax Reform to re-evaluate the impact of property tax increases and the ineffectiveness of existing tax benefit programs in order to turn New York City’s tax system from a regressive one to a progressive one. To read CityLand’s prior coverage on NYC Advisory Commission on Property Tax Reform, click here
Comptroller Report Summary
The report shows that since 2005, property taxes have increased dramatically. The effects of property tax increases on property owners were until now mitigated by the fact that mortgage interest rates were low, property values were increasing, and taxpayers who itemized their deductions could deduct the full amount of their property taxes from their federal income taxes. More recently, however, the effects of these mitigating factors have subsided as mortgage costs and interest have been rising, property taxes have been growing while property values have slowed in growth, and the new federal income tax law has placed a limit on the deductibility of property taxes to $10,000.
From 2005 to 2016, households earning less than $50,000 a year have seen a property tax increase of 98 percent, households earning between $50,000 and $100,000 have seen an increase of 67 percent, and those earning between $100,000 and $250,000 have seen an increase of 54 percent.
More specifically, average property taxes paid by a household with income below $50,000 increased from an average of $1,940 in 2005 to $3,849 in 2016, a 98 percent increase. However, the median income for this band decreased by .08 percent over this time frame. Therefore, households earning less than $50,000 spend almost 13 percent of their income on property taxes.
By comparison, households earning between $50,000 and $100,000 spent approximately 5.4 percent of their income, or $4,009, on property taxes in 2016, a 67 percent increase from the $2,397 in taxes paid 2005. However, the median income for this band increased by 4.6 percent over this time frame. Similarly, in the band with incomes between $100,000 to $250,000, property taxes increased by 54 percent from 2005 to 2016, going from median of $3,524 to $5,421, while the median income increased by 4.9 percent. Households earning between $250,000 and $500,000 have the lowest overall tax burden, constituting 2.9 percent of their income, and have also experienced the slowest growth in property taxes.
These numbers show that homeowners, particularly those making less than $100,000 and who make up roughly half of all of NYC property tax filers, experience the most significant burdens. This burden results in a regressive tax system wherein the largest tax burdens are born by those at the lowest income levels, as opposed to a progressive tax system where the tax burden increases according to an increase in income. The report argues that the continued placement of property taxes on those in the lower income bands creates a barrier to the middle class and needs to be addressed. Furthermore, the existing tax relief programs do little to afford relief.
Based on the report, existing property tax relief programs provide either low benefits or have restrictive eligibility requirement and several are geared only towards senior citizens. For example, in order to receive the NYC School Tax Credit, household income must be below $250,000 in return for an average credit of $63 for a single person or $125 for a married couple. Similarly, in order to receive the NYC Enhanced Property Tax Benefit (“Circuit Breaker”), the household income must be below $200,000, in return for a $52 benefit.
In comparison, the Enhanced Star Program and the Senior Citizen Homeowners Exemption (SCHE) which are programs for taxpayers who are 65 or older with incomes that are less than $86,000 and $50,000, respectively, offer a benefit, on average, of $600 for Enhanced Star and a varying benefit amount from SCHE that is income-specific.
The report also highlights that NYC Circuit Breaker tax relief programs – the NYC Enhanced Property Tax Benefit and the Basic Star programs – offer a much lower benefit compared to the circuit breaker programs in Maryland and Washington, D.C. As an illustration, a household earning $32,729 with a property tax of $3,849, would only a receive Circuit Breaker benefit of $114 in NYC, while in Maryland the benefit is $1,989 and $1,000 in Washington, D.C.
Comptroller Recommendations
Based on the foregoing, the Comptroller makes several recommendations, which are summarized here. First, the Comptroller recommends that Circuit Breaker benefits are not only increased in amount but also limited to those in the lower income brackets as is done in DC and Maryland. According to the report, part of the issue in the City is that while Circuit Breakers may be offered to more households, with income ranging up to $200,000, they do very little to alleviate the tax burden for those who need it the most, such as households with incomes below $100,000. Second, the Star benefit exemption should be expanded from $30,000 to $66,800 for all households making less than $50,000. Third, the Comptroller proposes deferring property taxes for senior citizens as a way to allow them to stay in their home and make the taxes due when the property is sold by the owner or his estate. Finally, the Department of Finance should publish annual reports on median tax burdens for all taxes in order to enable residents and policy makers to see trends and determine the regressivity of taxes.
“Property taxes are rising too fast and incomes are rising too slowly – and it’s becoming harder than ever for already struggling New Yorkers to get ahead,” said Comptroller Stringer. “Rising property taxes are becoming a barrier to the middle class and we can’t afford to continue down this path. We need to give New Yorkers a break, and turn a regressive tax system into a fair and progressive one. We must explore common sense solutions and expand tax relief to level the playing field for working families.”
To read the full report, please click here.
By: Viktoriya Gray (Viktoriya is the CityLaw Fellow and New York Law School Graduate, Class of 2018).