Local tax cap under one percent

by Kenneth Girardin |  | NY Torch

Property TaxAfter another year of low inflation, most local governments will again base their tax caps on a growth factor of less than one percent.

For local governments with fiscal years beginning January 1, it will be 0.68 percent, down from 0.73 percent now. By comparison, school districts had an allowable growth factor of 0.12 percent during the 2016-17 school year.

The tax cap keeps the price of government from going up faster than the price of everything else. The root of the tax cap is a maximum allowable rate of growth on the total amount collected in property taxes, known as the tax levy. That rate is based on the change in the consumer price index during the one-year period ending six months prior to the start of the fiscal year, and is limited to two percent.

On top of this inflation-based growth factor, a local government’s tax cap rises to reflect the additional taxes collected from a growing local tax base.

Amidst consternation about the “low” cap, it’s important to note that local governments can always override the cap with a 60 percent supermajority. On a village board of three, that means mustering two votes. For a town board with five members, an override takes three votes. In fact, for most towns and villages, and even some cities, it takes just as many votes to override the cap as it does to pass a budget in the first place.

Meanwhile, counties have had the growth of one of their biggest cost drivers, Medicaid, completely frozen, and the state government is poised to pick up the tab for indigent legal defense, which cost the counties outside New York City $164 million in 2015.

The tax cap, championed by Governor Andrew Cuomo, has been protecting taxpayers exactly the way it’s supposed to. Taxpayers have saved at least $1 billion on school taxes alone since the cap’s creation in 2011, and the cap has survived repeated attempts to weaken it through amendments and litigation.

Unfortunately, the governor has yet to give local governments and school districts the structural mandate relief needed to do more with less.

The governor has refused to address the Triborough Amendment, a provision of the Taylor Law which protects work rules and automatic pay increases for public employees after their contracts expire—and puts public employers at a disadvantage at the negotiating table.

Most recently, the governor could have provided mandate relief simply by doing nothing at all: the state’s binding arbitration law, a sizable unfunded mandate on local governments with paid police or fire departments, was set to expire in June.

But the law was renewed, without any reforms, for another three years as part of the budget approved in April.

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- Kenneth Girardin is the Policy Analyst at the Empire Center for Public Policy.