Tax Deal Provides Added Relief to Middle-Income Homeowners

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ALBANY, March 30 — Middle-class homeowners in Westchester County will get nearly $3,000. In Albany, they will receive $994, and in Erie County, $842.

That is a sampling of the tax relief that homeowners will receive under a plan hammered out this week by Gov. Eliot Spitzer and legislative leaders that would add $1.3 billion to the state’s School Tax Relief program, known as STAR. Under the plan, the state would spend nearly $5 billion on STAR in the coming year.

The agreement, which emerged during state budget negotiations, would direct more relief — through rebates and property tax adjustments — to middle- and lower-income taxpayers than in the past. The largest benefit would go to homeowners with annual incomes up to $120,000 in the downstate region and up to $90,000 upstate.

“People come to New York and look at the price of a house and say, ‘Gee, the price is good, but the property tax hit is troublesome,’ ” Mr. Spitzer said on Friday. “So when we begin to ratchet down on that property tax bite, people will find it more economically viable to stay here.”

In New York City, where property tax rates are low because city income taxes are the principal means of financing schools, homeowners have received relatively small benefits from STAR. For that reason, the Legislature agreed as part of the deal to increase the personal income tax credit to $290 from $230 for married couples filing joint returns, and to $145 from $115 for individuals.

It is far from clear that the increased benefits will address longstanding criticisms about STAR. Many homeowners have expressed dismay that their property taxes have continued to rise, often sharply, despite the program. Critics on the left assert that STAR gives too much money to higher-income neighborhoods; critics on the right say it has done nothing to control property taxes, despite doling out huge sums of money.

And some independent analysts say that STAR, created in the late 1990s, has had the perverse effect of encouraging localities to raise property taxes. Since 1998, property tax levies in New York State have risen 41 percent, nearly twice the rate of inflation.

“It’s an inefficient use of funds that basically encourages what it’s supposedly trying to fix,” said Edmund J. McMahon, director of the Empire Center for Public Policy, a conservative group. “When you subsidize something, you get more of it.”

STAR exempts at least $30,000 of a home’s value from tax, an amount that can be higher, and sometimes far higher, in counties where the home values are above the statewide average. Homeowners who are 65 or older receive higher benefits.

Initially, STAR aid was sent directly to school districts and was used to adjust property tax bills. But starting last year, the Legislature also sent rebate checks directly to homeowners. The rebates would roughly double under the new agreement, to $1.3 billion. Homeowners will continue to receive adjustments to their property tax bills. People who have already enrolled in the STAR program with their local assessors will have to apply for the new rebate checks through the state’s Department of Taxation and Finance.

According to numbers released by Governor Spitzer’s office, homeowners who live in Westchester County, where property taxes are particularly high, and who earn up to $120,000 would get $1,094 rebate checks and another $1,823 deducted from their property tax bills. The agreement calls for taxpayers making more than $250,000 to receive no rebates.

Some homeowners were not impressed with the rebate checks last year.

“We need real relief,” said Laurann Pandelakis, a former teacher living in Manhasset who received a $300 check last year. In the past seven years, her annual property taxes have risen to $13,500 from $6,000, causing her to become an outspoken critic of school spending.

“It’s insulting to people who are seeing increases of 6 or 7 percent,” Ms. Pandelakis said, referring to the spending increase projected in her district this year.

Studies show that school districts spend the largest portion of their budgets on personnel costs, supporting teacher salaries that are among the highest in the nation. Unions have been strong supporters of STAR.

School board presidents say that while they do not raise taxes because of STAR, the program makes it easier for homeowners to swallow increases.

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