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April 26, 2006

Report finds New York's local property tax burden is far above the national average

New York’s local property taxes grew three times the rate of inflation between 2000 and 2005, a new report from state Comptroller Alan Hevesi’s office has found.

“New York taxpayers’ property tax burden is nearly 50 percent higher than the national average and shockingly, for areas outside of New York City, 73 percent higher than the national average,” Hevesi said. “Property taxes are by the far the largest and fastest growing component of most New Yorkers’ tax bills. Because local governments have little choice but to raise property taxes or cut services when other revenues fall short during tough economic times, this trend will likely continue.”

The report found that New York’s property taxes increased from $26 billion in 2000 to $38 billion in 2005. New York’s per capita property tax burden in 2002 was $1,406, 49 percent above the national average of $945.

The data call into question arguments often raised by state lawmakers in Albany that increases in state taxes and/or state spending programs have the benefit of holding down local taxes.

For example, in 2003, when state lawmakers overrode Governor Pataki's veto to increase the state's tax burden by $2 billion, many said the tax increase was necessary to hold down property-tax increases. But property taxes continued to rise.

The report also says the STAR school-tax relief program may have produced higher, rather than lower, school taxes.

"Although often described as a tax cut, STAR exemptions are actually a transfer of tax burden, from homeowners paying local school property taxes to taxpayers statewide," the report said. "While STAR indisputably provides property tax relief for those receiving it, its long-term impact may well be an overall increase in state and local taxes. The reason for this is that STAR lowers the effective tax rate on homeowners – the largest group of people who vote on and otherwise influence local school budgets."

The report said that by reducing the local share paid for greater school spending, the program actually provided an incentive to increase school spending.

"This incentive is strongest, ironically, in the some of the highest spending areas – where high taxes and high home values combine to provide the highest STAR benefits," the report said.

When measured as a portion of personal income, the state’s property tax is $40 per $1,000, 28 percent above the national average of $31 per $1,000, the report said.

"When New York City is excluded, property tax per capita was $1,634 in 2002 was 73 percent above the national average,” a release from the comptroller’s office said. “In fact, it may even be higher given the growth of property taxes in the last five years.”

The report also found that the property tax is the largest tax imposed by local governments, accounting for 79 percent of all local taxes outside of New York City.

Property taxes increase when the economy slows or other revenues decline, the report found. “From 1995 to 2005, local property taxes grew by 60 percent, while inflation was 28 percent,” the comptroller’s office said. “Most of this growth occurred in the last five years after the economy took a downturn.”

The report is at www.osc.state.ny.us/localgov/pubs/research/propertytaxes.pdf.