'We've capped them - now let's cut them." That's Gov. Cuomo's slogan as he lobbies for legislative approval of the property-tax provisions of his proposed budget for the fiscal year that begins April 1.
Cuomo has, indeed, slapped a cap on local property-tax levies - a real accomplishment. But his budget wouldn't actually "cut" them. Instead, it would shift a little more of the local tax burden to the state tax base - in the long run promoting more growth in local spending and taxes.
The governor's convoluted plan would unfold in stages - the first temporary, the second permanent.
Stage One, implemented over the next two years, would send up to $1 billion to homeowners outside New York City who have incomes below $500,000. The state would issue rebate checks for any added taxes paid to a county, municipality or school district that holds its increase under the 2 percent tax cap.
In the second year, the rebate would be credited only for homeowners whose local governments stay under the cap and develop a plan to share or consolidate services.
The premise behind what Cuomo calls a tax "freeze" is that temporary rebates would give taxpayers an incentive to lean on local governments to reform themselves.
But the incentive doesn't amount to all that much. For example, under Cuomo's plan, the owner of a $400,000 house in Suffolk County might save $90 in combined county, town and special district taxes over two years. We're supposed to believe a temporary $90 rebate check (or much less upstate) will make taxpayers feel a greater sense of urgency to reduce local government costs? Perhaps the governor should sweeten the deal with some Dunkin' Donuts gift cards.
The school-tax rebate checks would be larger, averaging $300 or more over two years in downstate suburbs (and, again, less upstate). But when it comes to pressuring schools, the rebate would be a costly redundancy. Thanks to Cuomo's tax-cap law, school-district voters are now empowered to freeze their own taxes by refusing to pass the annual district budget. From a school-board perspective, that's a stronger and scarier incentive than any rebate check from Albany.
After two years, Cuomo's rebate moves to Stage Two: $1 billion a year in permanent "circuit-breaker" income-tax credits that would offset some of the property taxes paid by some homeowners, if their incomes are low enough and their taxes high enough. (For New York City, the proposal includes $400 million a year in renters' credits.)
So in the name of "cutting" property taxes, Cuomo actually would spend $1.4 billion to subsidize them - boosting the $3.4 billion dose of fiscal Novocain the state supplies to households under Gov. George Pataki's School Tax Reduction (STAR) program, enacted in the late '90s.
But by dulling the pain of high taxes for many homeowners, the circuit-breaker credit will only tend to increase their tolerance for more of the same - bad news for businesses and owners of multifamily properties, who won't get any break.
The irony is that Cuomo has already done far more than his predecessors in this area. The tax cap (a provision Pataki pulled out of his original STAR plan) - finally has put New York property taxes, especially school taxes, on a lower long-term growth curve.
But as he gears up for a re-election campaign this year, Cuomo wants to take credit for short-term results. So he's rolled out what amounts to Grandson of STAR.
As budget negotiations began this week, the Assembly favored the circuit-breaker alone. while the Senate preferred a permanent version of the rebate that targets money to local governments rather than individual homeowners. Whatever compromise emerges, it's safe to assume Cuomo and legislative leaders will proclaim that they have brought forth historic property-tax relief for New York. Again.
Why do New York governors and legislators in both parties continue to offer expensive painkillers instead of real, cost-free cures for high property taxes? Because they're unwilling to attack the main problem, which is unfunded state mandates - especially collective-bargaining laws that force public-employee pay to unsustainable levels. Until that changes, New Yorkers can expect more STARs in their eyes.
This commentary first appeared earlier this week in the New York Post. E.J. McMahon is president of the Empire Center.