Pay What You Can
New York City’s cap on residential property assessments has helped to protect many homeowners from unaffordable tax hikes—but over time the safeguard has created inconsistencies from one neighborhood to the next.
So if, in the name of fairness, the city were to drop the cap, would thousands of city residents suddenly be hit with huge property tax bills—or even forced from their homes?
Not necessarily, experts say. One alternative would be to enact a property tax “circuit breaker,” which would instead limit annual tax increases based on a homeowner’s ability to pay. Such a measure would still protect low-income residents while at the same time increasing revenue from their neighbors who are able to afford the higher payments.
The idea is not new. Decades ago, Gov. Hugh Carey’s proposed property tax overhaul included a circuit breaker linking taxes to income in New York City. Carey would have limited property taxes to no more than 4 percent of income for a household earning less than $12,000 a year, according to the New York City Independent Budget Office. However, state lawmakers eventually moved forward with their own plans that included a cap instead.
More recently, Gov. Andrew Cuomo has proposed a property tax circuit breaker for households with incomes below $250,000 and taxes that exceed 6 percent of income. Although the governor’s first-term property tax initiatives targeted upstate New York, this one would cover the five boroughs as well as the rest of the state.
George Sweeting, the deputy director at the city’s Independent Budget Office, said that the governor’s proposal would allow the state to target certain income groups and offer broad relief, but that it wouldn’t do much to address growing costs for local governments, which rely heavily on property taxes.
Still, a circuit breaker that is more targeted than the governor’s would be a good idea in New York City, Sweeting added, at least as an alternative to the existing assessment caps.
“Using the assessment cap is pretty inefficient,” Sweeting said. “You wind up giving benefits to people whose incomes might very well be keeping up with their appreciation. Using a circuit breaker that’s really structured towards the goal of linking the benefit to ability to pay is a more efficient way of providing that protection for homeowners whose income is not going up as fast as their assessments.”