ALBANY—Property tax relief for business is an essential component of any reform recommendations, Business Council Senior Director of Government Affairs Ken Pokalsky has told a commission studying ways to lessen the state's real property tax burden.
“Outside of New York City, business pays nearly $9 billion in total property taxes – 40% of the total,” Pokalsky told the New York State Commission on Real Property Tax Relief at an April 23 hearing. “For many businesses, property taxes are the largest single tax levy they pay.”
The Council has argued that the “STAR” program has been ineffective in controlling real property tax increases. “An alternative strategy [would] treat the root cause, not just the symptom, of sky high local property taxes,” Pokalsky testified. “Simply put, we should cut local costs and cap property tax levies.”
The testimony highlighted a report, What's STAR Got To Do With It, produced in February by the Council's not-for-profit research affiliate, the Public Policy Institute.
New York's local property taxes hit $37 billion in 2005 and continue to escalate, Pokalsky said, citing data from the state Comptroller's office.
“The Comptroller's office says property taxes increased an average of 3 percent a year from 1995 to 2000, then an average of 7.1 percent a year from 2000 to 2005—more than double the rate of inflation,” he said.
And STAR, originally intended to reduce property taxes when implemented in 1998, could be a contributing factor to that fast growth, Pokalsky argued.
Pokalsky also stressed that New York's businesses, which pay 30 percent of school property taxes, get no benefit from STAR. The effective tax burden on business property is about $1 billion higher than it would be if taxed the same as residential property, Pokalsky testified.
The Council's testimony offered a plan for property-tax reform that includes both a cap in the growth of STAR and some mandate relief for localities. “One alternative might be to cap both STAR, and local property taxes,” Pokalsky said. “STAR could be capped at its 2006-07 level, for example, and local property taxes capped at 2.5 percent—about the rate of inflation. The property-tax cap would offset the impact of the STAR cap.”
But, Pokalsky argued, the key to a permanent solution is to adopt mandate relief, and downsizing reforms, that will enable local governments to get by on less.
“Freezing STAR at its 2006-07 level of $4 billion, for example, could have saved the state $1 billion in FY '08-09 and eliminated all consideration of tax increases in the new budget,” Pokalsky testified.
“There is a desperate need for fiscal discipline in Albany,” Pokalsky said. “We need to recognize that our spending and tax policies are having an adverse impact on the state's economic climate, and we need to find the new political will to adopt policies that make us more competitive.”
The complete testimony is available in PDF format.
The Business Council is New York's largest statewide employer association, representing more than 3,000 private sector employers in all industry sectors across New York State.