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Progressives Argue for Property Tax Reform, Not Caps

Tax reforms rather than tax caps are the solution to burdensome property taxes, according to the featured speaker at the Property Tax Reform Teach-in organized by Westchester for Change and held at the Memorial Methodist Church in White Plains on Monday, May 24.

Several Larchmont and Mamaroneck residents were among the thirty or so participants and coordinators of the event put on by  Westchester for Change, an organization formed in 2008 in support of progressive social and political change. The speaker, Ron Deutsch, is with Omnibus Consortium, which is dedicated to reducing New York State’s reliance on local property and sales taxes.

Rachel Estroff with Westchester for Change outlined three principles the group believes any tax reforms should follow:

1) The reforms must restore progressivity to our tax system, which has grown significantly less progressive over the last 40 years ago.

2) Our investment in public schools must be maintained and strengthened.

3) We cannot withdraw our commitment to provide services to the least among us.

She stressed the hope that the forum would be the beginning of a robust dialogue about the problems and potential solutions to the property tax crisis.

Burdens on the Property Tax

Mr. Deutsch opened his presentation explaining that the property tax issue in New York is complex and often misunderstood.  The inter-locking tax system is confounding.

Over the last thirty years, while income taxes have dropped, needed revenue has increasingly been collected at the local level through property taxes. Accordingly, “with the state of New York ranking 31st among the 50 states in terms of the state’s share of funding for public elementary and secondary education, on average school taxes make up 60% of the levy,” he said.

As a realtor in the audience remarked, “Everyone wants excellent schools and high re-sale value, but everyone wants their property taxes to remain low.”

School taxes, however, are not the only source of property tax growth.  “New York is also unique in requiring its counties to share in Medicaid costs, and some counties are most burdened by these Medicaid costs,” Mr. Deutsch pointed out.

Tax caps, such as those originated in Colorado, are not a solution, he argued.  He showed how the caps led to dramatic drops in spending for public health and K-12 schools.  As a result, he said, Colorado fell to near the bottom in national ranking for providing vaccinations to children. The share of low income children who lacked health insurance doubled, making Colorado the worst in the nation by this measure.

Similar ceiling caps tried in Massachusetts have shifted the burden and hurt the most vulnerable populations, said Mr. Deutsch. Moreover, to accommodate fast-growing expenses under a cap, other expenditures, such as busing, sports, and language programs have been eliminated.  One person’s efficiency is another’s essential program.

Under a tax cap being proposed for New York, all cuts would have to come from schools, said Mr. Deutsch. In Massachusetts, one tax is levied for schools and localities, so there is a larger set of funding choices, including parks, police and fire departments.

Although New York State has had a circuit breaker since 1978, it is inadequate in its relief or income limits, particularly for middle class residents who may pay more than 30% of their income in property taxes, argued Mr. Deutsch.  As one place to start, he advocated the Omnibus Circuit Breaker, NY Senate Bill 4239 (by Liz Krueger) and NY Assembly Bill 8702 (by Steve Engelbright) both with bi-partisan sponsorship. These proposals would ensure individuals’ property tax burdens do not exceed a particular percentage of their income. The revenue would be rebated from what he said was a small increase in income taxes at the highest income levels.

He shared charts demonstrating that the wealthiest 1% of households pay a much smaller share of their income in aggregate taxes — state and local taxes — than do all other New Yorkers, even with the temporary income tax increase.  With a small increase in the progressivity of income taxes, property taxes would be forced to cover a bit less, he said.

Mr. Deutch’s presentation was interrupted by a number of questions, and even after two hours, the audience was reluctant to stop the conversation. People wondered if high income residents would leave New York if their taxes went up. Others wanted to know more about how the circuit breaker would work.

This was the fourth forum organized by Westchester for Change. Previous topics have been health reform and financial regulatory reform. In addition the group attempted to hold a counter demonstration to the Westchester Tea Party on April 15 at the Westchester County Center. The group will be meeting this month to plan future events.

Elizabeth Saenger resides in Mamaroneck Village and is a founding member of Westchester for Change.

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5 comments to Progressives Argue for Property Tax Reform, Not Caps

  • Reader

    The problem with “progressives” is they usually look for a ways to shift more taxes to the “wealthy”. They love the chart that shows taxes as a percentage of income.The top 1% already pay 35% of NYS tax revenue!! How many more people are they trying to push across the border into CT? A lot of the Wall St jobs are already moving up to Stamford and Greenwich so the next logical choice is for the people to move. If they really want to be progressive, they need to look into spending reforms. Employees paying into retirement and Health Care. Cutting pork out of legislative spending, stop making deals with the likes of Senator Sushi Espada. That is what I would call progress.

  • TaxLawyer

    If I understand it correctly, I believe that the attached chart is very misleading. If “federal offset” is supposed to represent a deduction for state and local taxes, many income earners (not just the top 1%) receive little to no federal benefit for state and local taxes paid because they are subject to the alternative minimum tax.

    Please explain.

  • KR

    I suggest everyone read this:

    A HUGE reason Boston and Palo Alto emerged as hubs of innovation were the property tax caps put in place in the late ’70s, early ’80s.

  • Interesting ideas, but currently California is on the verge of going bankrupt, even though they had a 1.0% to 1.2% tax on real estate at the time of sale. Which means a person who bought a condominium in 1980 for 100,000 would pay approximately $1,200 a year in 2010, while new buyers would be paying 1.2% on the current market price. California is sinking fast. 12% to 14% unemployment, lower tax revenues, and on the verge of legalizing marijuana for revenue. With current real estate values falling, and with tax revenue tied to real estate valuation, taxes will continue to decline in the coming years. More likely local and state governments will have to figure out how to cut expenses by either saving jobs without pay raises, or raising pay but cutting jobs. Expenses will have to be controlled, unless high rates of inflation come back so that price appreciations occur. The best solution for the nation is to implement a progressive flat tax in income in the following manner. Incomes under $ 75,000 would pay 12%. Incomes from $ 75,000 to $ 250,000 would pay 19%, and incomes from $ 250,000 and above would pay 24%. No deductions would be allowed. Tax forms would be one page long. The top wealthiest families in the USA should not be allowed to form foundations without paying an estate tax. They can still form foundations but first they should pay an estate tax to Uncle Sam for all present and past foundations. This alone would raise hundreds of billions of dollars. Income taxes on hedge funds, equity owners and investors should be taxed at an income tax levels and not on the long term capital gains tax level. These suggestions would help with fiscal planning.

  • Rachel

    It is true that those paying the AMT do not receive the offset, but these aggregate numbers reflect this. I am not sure I understand your larger point or question. Can you say a bit more about what your question is? Thanks, Rachel