The New School has released data showing how the city’s regressive property taxes cancel out its progressive income tax. The data, as reported by Crain’s, starkly illustrates the discrepancy in the percentage of household income that rich and poor New Yorkers pay for income and property taxes.
For instance, a household with an income of $25,000 pays -0.6 percent in income taxes and 8.8 percent in property taxes, while a household with a $5 million income pays 3.8 percent in income taxes but just 1.1 percent in property taxes.
A group called Tax Equity Now, which filed a lawsuit against the system in April, produced compelling evidence of how the system discriminates against poor neighborhoods and minorities. The reason is that decades ago the state General Assembly, which governs city tax laws, gave owners of one-, two-, and three-family homes big tax breaks to keep them in the city and to offset the financial impact of income taxes. As co-ops and condos became a significant share of the marketplace, politicians extended less generous tax breaks to them (along with tax abatements). Politicians decided to further shield homeowners from rising property taxes by limiting to 6 percent the increase in the tax assessment of any property in any year and 20 percent over five years. Homeowners in areas where property values are rising the fastest benefit the most from this growth cap.
Taxes on rental buildings were left unchanged, however, and now those landlords pay several times the rates that homeowners and condo and co-op owners pay, costs they mostly pass along to their tenants. Racial minorities account for three-fourths of the city’s renters.
But with Gov. Andrew Cuomo and Mayor Bill de Blasio locked in a seemingly unbreakable, Hatfields-and-McCoys cycle of fruitless political sparring, few are optimistic that the state will ride to the city’s rescue on this issue. As James Parrott writes in the New School report: “Our property tax system is established in state law, and because Albany’s cooperation is needed, expectations are low about anything sensible happening.”
But this is not an age of politics as usual, which gives Parrott some hope that “now-unseen stars might yet align in favor of a badly needed overhaul” of New York City’s horrendous system of property taxation.
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