ALBANY — New York’s property taxes are not only among the highest in the nation, but they’re also complicated.
This year, they are becoming even more complex, due to new wrinkles in the state’s school tax rebate (STAR) program for homeowners that were stitched into the state budget.
STAR has been in effect since 1999 and now drives some $3.4 billion a year in exemptions and rebates to property owners.
There are two types of STAR — “basic,” designed for homeowners whose annual income is $500,000 or less; and “enhanced,” aimed at homeowners who are at least 65 years of age and whose income is $86,300 per year or less.
Enhanced STAR provides rebates of about $1,400 per year, on average, to eligible seniors, significantly higher than the average rebate under Basic STAR.
Initially — and for many homeowners still — the STAR saving showed up as a reduction in a homeowner’s school tax bill, with the state reimbursing the school districts for the amount of savings that went to a taxpayer.
The first $30,000 of a home’s full value was exempted by $30,000 under Basic STAR. For Enhanced STAR, the program exempts $68,700.
The program became more complicated in 2016 when the state decided that a better approach would be mail rebate checks instead of having the savings show on tax bills.
New Yorkers who purchased their houses in 2015 were put into the check program, while those who owned their homes before then and qualified for STAR could still get the savings on their tax bill.
There’s a catch
In this year’s budget STAR changed yet again, with the Cuomo administration pushing for amendments that are designed to get more homeowners to opt for the credit program, providing them with the checks.
The administration says the credit system is run “more efficiently” and “gives the state a better look at who is receiving the benefit to help prevent abuse of the system.”
Homeowners earning $250,000 or less who get the Basic STAR savings on their tax bill, as well as seniors who qualify for the Enhanced STAR, can continue on that path — but there is a catch.
By not electing to go with the credit checks, they won’t get an annual savings of up to 2% that the state will add to the checks of those getting the credit sent to them.
Another important change this year is that those who get the BASIC Star savings on their tax bill and earn more than $250,000 but less than $500,000 will need to switch out of the local exemption on their school taxes and opt for the state rebate in order to preserve the advantage.
Frozen in time
While the initial rationale for STAR was to cushion taxpayers from New York’s high property taxes, some say the abrupt changes are bound to leave homeowners confused over the amendments.
David Friedfel, director of state studies for Citizens Budget Commission, a watchdog organization, predicted many taxpayers will be greatly displeased by the new approach.
“For people who currently get the STAR benefit as an exemption on their property, if they don’t make a change, their STAR benefit will be frozen in time, and their savings will be frozen in time at the same amount,” he explained.
“But if they switch to the new program, where they get a check back, then it will grow by 2% a year.”
Quite a hurdle
One major hitch for those who opt for the credit checks is that they will have to pay their full school tax bill upfront to get the credit.
Coming up with that money could be a challenge for people struggling to meet their obligations, especially seniors living on fixed incomes, said Timothy Surpitski, the Clinton County assessor who is assigned to the City of Plattsburgh and other municipalities.
He said that since the Enhanced Star benefit for his local taxpayers is $1,474, that means a homeowner would have to set aside $122 a month in order to have enough to pay the pre-credit tax bill.
“For some of them, that is quite a hurdle,” he said, noting the school tax bills in the city are sent out in July, earlier than most parts of the state.
Thus, homeowners would have to wait longer for the rebate to show up in mailboxes.
Surpitski said the 2% extra would amount to about $25 for those getting Enhanced STAR.
He predicted some seniors may forego the credit in order to get the savings upfront.
“STAR began as a way to help taxpayers, but it’s become a big mess,” the assessor said.
E.J. McMahon, who served as a deputy tax commissioner in the administration of former Gov. George Pataki and now is the research director for the Empire Center for Public Policy, an Albany think tank, said STAR has always been about fiscal gimmickry and is going further in that direction.
“It would have been a better idea to simply freeze the STAR benefit rather than sneakily convert it into a credit,” he said.
“The policy explanation that they ‘want to track it better’ is just smoke.”
Better off without?
Critics of the program, among them McMahon and Friedfel, see STAR as a budget gimmick because it allows state officials to say they are holding growth in state spending at 2% or less.
That is because the STAR credits are counted as a state expense.
Friedfel said the program effectively subsidizes wealthy school districts, contending New York would be better off without it.
A spokesman for the State Department of Taxation and Finance, James Gazzale, said his agency is preparing a mailing to explain the STAR changes to taxpayers.
“Registrations for the switch to the credit program will be accepted for three years from the income tax filing deadline for the year that the credit covers,” he said.
Credit savings this year will be subject to a 2% cap, while the exemption savings cannot increase, according to the agency.
“In the typical place where the school district levies taxes on September 1, property owners would need to switch from the STAR exemption to the credit by August 1 to receive the credit this year,” the agency explained.
Veteran Sen. Jim Seward, R-Milford, said he is pressing state tax officials to do a better job educating taxpayers about the new options under STAR.
While the program, in its infancy, was “one of the best things the Legislature has ever done,” the new changes threaten to “erode some of the benefits,” Seward said.
“There is a need for a real public information campaign to inform people so they can make the best judgment as to whether they just want to continue with the current exemption or switch over to the tax credit, with the check coming,” the senator said.
Property owners who want to check their exemption status may contact their local assessor and consult with the state tax agency.
The latter runs a help line that can be reached on business days at 518-457-2036.
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