Bill Morris in Legal/Financial on February 7, 2019
Property tax notices for the upcoming 2019-2020 fiscal year have been sent out by the city’s Department of Finance. That’s the bad news. The Advisory Commission on Property Tax Reform is due to come out soon with proposals for the first major overhaul of the city’s opaque and unloved property tax system in more than two decades. That may be even worse news.
Why? Because, as Bloomberg Tax reports, property taxes feed $26.4 billion into the city’s treasury every year, nearly half of all revenues, and the commission has been instructed to make any reform proposals “revenue neutral.” That means a tax cut for one of the city’s four tax classes will have to be balanced with increases to one or more of the other classes. For every winner, there will be a loser. Leveling the playing field will not be a painless exercise.
“If you’re going to keep the revenue the same, roughly half the people are going to be winners and half are going to be losers,” says Mark Willis, a policy fellow at New York University’s Furman Center for Real Estate and Urban Policy. “Potential losers tend to be more motivated to object to the change, making for a difficult political fight.”
The revenue restriction is meant to ensure that the city doesn’t suddenly find itself on the short end of a plummeting tax stream. But the requirement also creates an “every owner for himself” situation that’s likely to ratchet up political and legal debates. Condominium and cooperative housing owners (lumped with large residential properties in Class 2), for instance, often complain that a larger share of their property value is taxed than is for single-family and small homeowners (Class 1). Others point out that condo and co-op rates are based on rental income values, which are typically lower than the sale values used to calculate taxes for other residential properties.
One thing is certain: the fight over the tax commission’s recommendations is going to be a dog-eat-dog affair. Tax reform, it turns out, is one of those areas where you should be careful what you wish for.
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