Property taxes are a primary source of revenue for New York City and local governments across the state, levied on the assessed value of residential, commercial, and utility properties. This page covers CBC’s work on property tax system reform, the impact of tax rates on economic competitiveness, the use of tax exemptions and incentives for housing development, the distribution of school aid, and the fiscal implications of pension and benefit costs on local tax burdens.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The City should take this ideal opportunity to evaluate the pied-à-terre’s impact on property values, transactions, supply, ownership patterns, and tax revenues.
The City could also evaluate the broader related impacts of changes in supply and ownership, not just on property taxes but on all revenues and City spending.
The City should reject tax increases that would harm the City’s economic competitiveness and place additional burdens on residents and businesses.
The City should right-size spending in areas where demand has changed, such as adjusting school funding to reflect declining enrollment and managing the growth of the FHEPS housing voucher program.
The City should reduce ineffective spending and improve operational efficiency, including spending on education, procurement, and administrative operations.
The City should build and maintain adequate reserves by not drawing down the rainy day fund or RHBT and including $1 billion of in-year reserves to protect against economic downturns.
Key Data
In a September 2026 report, the CBC noted that New York's local property tax collections per capita were $3,562 in 2024, which was 67% higher than the national average of $2,131.
In August 2026, the CBC discussed the implementation of the pied-à-terre property tax, noting that the City sent roughly 17,000 letters to owners whose properties may be subject to the tax.
In May 2025, the CBC reported that Class 2 rental buildings generated $5.3 billion in property tax revenue in fiscal year 2024, while the combined cost of Article 11 and 420-c tax exemptions grew to $899.4 million in fiscal year 2025.
In August 2024, the CBC highlighted that the School Tax Relief (STAR) program shifts $3.3 billion of education funding from locally-raised property tax revenue to the State annually.
In November 2022 testimony, the CBC highlighted that the median effective tax rate is $0.83 per $100 in market value for one- to three-family homes, compared to $1.53 for large rentals and $1.72 for office buildings.
New York's local property tax collections per capita reached $3,562 in 2024, ranking third highest in the nation and standing 67% above the national average of $2,131. Among regional competitors, only New Jersey surpassed New York with property taxes of $3,667 per capita, while New York's collections exceeded other states like Connecticut, Massachusetts, and California.
Key Data
$3,562
— New York's property taxes per capita in 2024, which was the second highest among comparator states.
67%
— The percentage by which New York's property tax collections per capita exceeded the national average in 2024.
3rd
— New York's national rank in state and local property tax collections per capita.
$2,131
— The national average for property taxes per capita in 2024.
98%
— The maximum percentage by which New York's property tax collections per capita exceeded comparator states, specifically Pennsylvania, in 2024.
$3,667
— New Jersey's property taxes per capita in 2024, which was the only comparator state higher than New York.
The implementation of New York's new pied-à-terre property tax has faced significant challenges due to limited public vetting, a compressed eight-month rollout timeline, and insufficient communication from the Department of Finance. To improve future tax administration and property tax reform, the City should evaluate the tax's impact on property values, transactions, supply, ownership patterns, and overall revenues.
Recommendations related to Property Taxes
The City should take this ideal opportunity to evaluate the pied-à-terre’s impact on property values, transactions, supply, ownership patterns, and tax revenues.
The City could also evaluate the broader related impacts of changes in supply and ownership, not just on property taxes but on all revenues and City spending.
Key Data
17,000
— Approximate number of letters sent to owners whose properties may be subject to the pied-à-terre tax.
eight months
— Timeframe from enactment to revenue collection for the Department of Finance to implement the new tax.
seven weeks
— Timeframe in which the Department of Finance developed regulations and administrative processes.
eight days
— Time elapsed after the law took effect before proposed rules were released.
five days
— Time elapsed after the public hearing before rules were adopted.
The state budget increases spending significantly while failing to bolster reserves, creating long-term fiscal pressures that may force local governments to raise taxes. Additionally, the budget includes an unnecessary pied-a-terre tax and shifts future costs to taxpayers, while resisting calls to increase personal income and corporate taxes.
Recommendations related to Property Taxes
The State should avoid increasing Tier 6 pension benefits, which pressures local governments and school districts to cut services or raise taxes to fund benefits.
The Governor should continue to resist calls to increase personal income and corporate taxes next year.
The State must hold the City accountable for shoring up its own finances to avoid the need for the City to request massive aid or tax increases next year.
Key Data
$547 million
— Cost of increasing Tier 6 pension benefits, which pressures local governments and school districts to raise taxes.
$700 million
— Annual amount wasted on school aid to districts with shrinking enrollment, undermining funding fairness and contributing to tax pressure.
$17 billion
— Structural gap in the state budget that creates long-term fiscal pressure.
Sherif Soliman has more than 30 years of experience in government and currently serves as Budget Director of the New York City Mayor’s Office of Management and Budget. In this role, he oversees the city’s fiscal policy, including the development of the expense and capital budgets, the city’s bond and…
New York City's fiscal year 2027 executive budget relies on short-term strategies and pension maneuvers to close budget gaps rather than implementing a full-scale effort to reduce spending. While the budget avoids a property tax increase, it faces significant long-term challenges as city-funded spending is projected to grow by $24.4 billion through 2030.
The proposed Tier 6 pension enhancements threaten to drive property tax increases and destabilize local government budgets, as the costs would likely exceed the State’s property tax levy cap. Because pension contribution rate growth exceeding 2 percentage points triggers an exemption to this cap, these enhancements could lead to significant, unmitigated tax hikes for New Yorkers.
Recommendations related to Property Taxes
New York State should not enhance Tier 6 pension benefits, as the expansions would likely drive property tax increases.
State leaders should avoid enacting pension enhancements that would trigger exemptions to the State’s property tax levy cap.
Key Data
$438 million
— Annual cost to State and local governments for Tier 6 enhancements enacted in 2022 and 2024.
$700 million
— 2022 estimate for just one of the additional proposed changes to reduce progressive employee contributions.
2 percentage points
— Threshold for pension contribution rate growth that triggers an exemption to the State’s property tax levy cap.
$127 billion is the size of NYC's Preliminary Budget for Fiscal Year 2027. After reporting a yawning $12 billion budget gap estimate, Mayor Mamdani revised that number down to $5.4 billion, thanks in part to Governor Hochul's willingness to chip in. But don't let the shrinking gap fool you: the…
The proposed fiscal year 2027 budget relies on a 14.0 percent increase in property tax revenue and other one-shot measures to close a $9.4 billion gap, rather than implementing structural reforms. Relying on these tax hikes and reserve drawdowns threatens economic competitiveness and affordability for residents and businesses, while failing to address the underlying issue of unsustainable spending growth.
Recommendations related to Property Taxes
The City should reject tax increases that would harm the City’s economic competitiveness and place additional burdens on residents and businesses.
The City should right-size spending in areas where demand has changed, such as adjusting school funding to reflect declining enrollment and managing the growth of the FHEPS housing voucher program.
The City should reduce ineffective spending and improve operational efficiency, including spending on education, procurement, and administrative operations.
The City should build and maintain adequate reserves by not drawing down the rainy day fund or RHBT and including $1 billion of in-year reserves to protect against economic downturns.
Key Data
$3.7 billion
— The amount of revenue the City plans to generate from the proposed property tax increase, accounting for 39 percent of the gap-closing plan.
14.0 percent
— The projected increase in property tax revenue in fiscal year 2027 due to higher assessed values, new and improved buildings, and a higher property tax rate.
8 percent
— The share of the City’s property tax paid by utility properties, which pass these costs on to rate payers.
Raising property taxes would make the city less affordable for homeowners and could harm the commercial real estate market, which is only just beginning to recover from the pandemic. Instead of increasing taxes, the administration should focus on eliminating unnecessary spending to ensure the city's $127 billion budget is used efficiently.
Recommendations related to Property Taxes
The Administration should not raise taxes, which will make the City less attractive for New Yorkers who fund our schools, police, and sanitation—and the businesses that create jobs and support our economy.
The City should not increase property taxes because it makes the City more unaffordable for homeowners.
The City should avoid a property tax hike because it would exacerbate the fiscal insolvency and deterioration of pre-1974 rent stabilized buildings.
The City should avoid a nearly $2 billion dollar tax increase on commercial properties, as it could be harmful to the economy just as the commercial real estate market is finally beginning to recover from COVID.
Key Data
$2 billion
— The potential tax increase on commercial properties that could be harmful to the economy.
$6.6 billion
— The amount by which the budget estimates tax revenues will be higher than expected over two years.
60 percent
— The portion of City tax revenues generated by economically sensitive taxes.
New York's local property tax collections per capita reached $3,454 in 2023, a figure that is 71% higher than the national average of $2,025. This high level of taxation places New York among the states with the highest property tax burdens, with 48 states collecting less property tax per capita.
Key Data
$3,454
— New York's local property tax collections per capita in 2023.
$2,025
— The U.S. average for local property tax collections per capita in 2023.
71%
— The amount by which New York's local property tax collections per capita exceeded the national average.
48
— The number of states that collect less in property tax per capita than New York.
Proposed legislation S683-A/A3729 would permit local governments to implement a 50 percent property tax credit for the primary residences of surviving spouses of law enforcement officers. This measure is among 17 benefit-related bills currently facing opposition due to concerns regarding the creation of new costs outside of the established budget process.
Recommendations related to Property Taxes
The Governor should veto S683-A/A3729, which would allow local governments to establish a 50 percent property tax credit for surviving spouses of law enforcement officers on primary residences.
Key Data
50 percent
— The maximum property tax credit for surviving spouses of law enforcement officers on primary residences that local governments would be allowed to establish under S683-A/A3729.
New York City mayoral candidates were surveyed on their fiscal priorities, including their stances on property tax reform and the city's overall tax structure. The responses highlight a range of approaches to addressing property tax inequities, with candidates proposing various strategies to balance revenue needs with affordability for working families.
New York City's rent-stabilized housing stock is deteriorating, with pre-1974 units showing significantly higher maintenance deficiencies than other housing types. While preservation strategies often rely on property tax exemptions, the combined cost of Article 11 and 420-c exemptions has reached $899.4 million in fiscal year 2025, highlighting the fiscal strain of these programs.
Key Data
$899.4 million
— Combined cost of Article 11 and 420-c property tax exemptions in fiscal year 2025.
$5.3 billion
— Property tax revenue generated by Class 2 rental buildings in fiscal year 2024.
$420.0 million
— Cost of 2,264 Article 11 property tax exemptions in 2025.
$225.7 million
— Cost of 1,584 Article 11 property tax exemptions in fiscal year 2019.
$479.4 million
— Cost of 2,555 420-c property tax exemptions in 2025.
$273.3 million
— Cost of 2,033 420-c property tax exemptions in 2019.
New York's local property tax collections per capita reached $3,319 in 2022, placing the state 70% higher than the national average. This figure contributes to New York's status as having the highest tax burden in the nation, with 46 states collecting less property tax per capita.
Key Data
$3,319
— New York's local property tax collections per capita in 2022.
70%
— The amount by which New York's local property tax collections per capita exceeded the national average.
46
— The number of states that collect less property tax per capita than New York.
$1,947
— The national average for property tax revenue per capita in 2022.
New York City's real property tax generated $32,987 million in revenue during fiscal year 2024, derived from a total full market value of $1,480,981 million across all property classes. Despite this revenue, the city faced $766 million in real property tax delinquency for the same fiscal period.
Key Data
$32,987 Million
— The total revenue collected from the Real Property Tax in fiscal year 2024.
$1,480,981 Million
— The total full market value of taxable real property in New York City for fiscal year 2024.
$766 Million
— The estimated amount of real property tax delinquency in New York City for fiscal year 2024.
The STAR program, which functions as school aid, shifts $3.3 billion in education funding from local property tax revenue to the state annually, yet its current design disproportionately benefits wealthier districts. Reallocating these funds and other expense-based aids proportionally to Foundation Aid would better target resources based on student needs and local wealth.
Recommendations related to Property Taxes
Eliminate the hold harmless provision and arbitrary floors and ceilings in the formula to improve the targeting of property tax-funded school aid.
Formulas should more accurately estimate a district’s capacity and willingness to raise revenue, specifically regarding local property tax contributions, and use the actual local contribution as the expected minimum.
Calculations of local fiscal capacity should account for localities’ other spending obligations, such as Medicaid, to better reflect the actual burden on local property taxpayers.
Indices of need and regional cost should be updated regularly and be sufficiently granular to capture variation in local property tax capacity.
School districts’ building and transportation costs should be explored further to identify reforms that would incentivize efficiency of spending and to improve the funding distribution to better reflect local property tax needs and resources.
Key Data
$3.3 billion
— Amount of education funding the STAR program shifts from locally-raised property tax revenue to the State each year.
$501 million
— Amount of STAR funding received by districts in the bottom three deciles of wealth last year.
$942 million
— Amount of STAR funding received by districts in the top three deciles of wealth last year.
$1,674
— Average increase in funding per student for districts in the lowest wealth decile if STAR funding were reallocated proportional to Foundation Aid.
$1,157
— Average decrease in funding per pupil for districts in the top wealth decile if STAR funding were reallocated proportional to Foundation Aid.
$135 million
— Additional funding directed to lower-wealth districts if library, textbook, software, and high tax aids were distributed proportionally to Foundation Aid.
The School Tax Relief (STAR) program, which offsets local property tax burdens, disproportionately benefits wealthier districts, with the top 30 percent of districts receiving $942 million compared to $501 million for the bottom 30 percent. Reallocating these funds based on student need rather than property wealth would significantly redistribute aid to lower-wealth districts, potentially doubling support for the lowest-wealth decile.
Recommendations related to Property Taxes
The State should eliminate the School Tax Relief (STAR) program to better allocate State resources to where they are needed most.
The State should reallocate $3.3 billion in School Tax Relief (STAR) program funds proportional to the current Foundation Aid formula, rather than based on local property wealth and tax rates, to shift hundreds of millions of dollars to lower-wealth districts.
Key Data
$942 million
— Amount of School Tax Relief (STAR) aid received by the 203 wealthiest districts in the 2024-25 school year.
$501 million
— Amount of School Tax Relief (STAR) aid received by the 201 lowest-wealth districts in the 2024-25 school year.
$3.3 billion
— Total annual funding for the School Tax Relief (STAR) program.
$1 billion
— Projected School Tax Relief (STAR) aid for the 201 lowest-wealth districts if funds were reallocated proportional to the Foundation Aid formula.
$336 million
— Projected School Tax Relief (STAR) aid for the 203 wealthiest districts if funds were reallocated proportional to the Foundation Aid formula.
The School Tax Relief (STAR) program, which uses state aid to backfill reduced school property taxes, is regressive and disproportionately benefits wealthier districts, costing an estimated $3.3 billion next year. Reforming school aid formulas, including eliminating the STAR program and High Tax aid, is necessary to better align state resources with actual district needs and fiscal capacity.
Recommendations related to Property Taxes
The State should eliminate the School Tax Relief (STAR) program due to its regressive nature and significant cost.
The State should revise the expected local contribution calculation to better reflect districts' actual fiscal capacity and willingness to generate local resources.
The State should eliminate High Tax aid, which is fixed and not tied to an educational expense.
The State should eliminate or phase-out the hold harmless provision to align Foundation Aid with district enrollment.
The State should update district poverty estimates and regional cost measures for a more accurate assessment of need.
The State should reassess arbitrary floors and ceilings to ensure they are limited to extreme situations and do not undermine the intent of allocating school aid based on need and local capacity.
The State should adjust library, textbook, and software aids to account for district wealth either by modifying the formula or folding the funding into Foundation Aid.
Key Data
$3.3 billion
— Estimated cost of the School Tax Relief (STAR) program for the upcoming year.
$223 million
— Total amount of High Tax aid, which is fixed and not tied to an educational expense.
$224 million
— Total cost of library, textbook, and software aids in the 2024-25 school year.
$38.6 billion
— Total funding for Foundation Aid, expense-based aids, and the School Tax Relief (STAR) program for the upcoming school year.
$2.8 billion
— Amount of state aid provided to districts that fully fund a sound basic education before receiving a single dollar from the State.
$10.4 billion
— Total funding for expense-based aids in the current year.
New York State and its localities maintain a high tax burden, with property tax collections per capita reaching $3,343, which is 76% higher than the national average. This level of taxation places the state among the highest in the nation, with 48 other states collecting less in property tax revenue per person.
Key Data
$3,343
— New York's total state & local property tax revenue per capita in 2021.
76%
— The amount by which New York's local property tax collections per capita exceeded the national average.
106%
— The maximum percentage by which New York State and its localities collected more in property taxes per capita than comparator states.
48
— The number of states that collect less in property tax revenue per capita than New York.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
NYC Budget Director Jacques Jiha briefed CBC Trustees on the New York City Fiscal Year 2024 Executive Budget. Director Jiha was appointed to serve as Budget Director in October 2020. He oversees New York City’s fiscal policy, including the development of the Expense and Capital Budgets, the City’s bond finance…
Converting obsolete office space into residential units can help protect the city's property tax base and enhance long-term competitiveness if policymakers implement well-targeted, cost-effective incentives. By utilizing regulatory relief and targeted tax exemptions for mixed-income rental projects, the city can transform 13 million square feet of commercial space into housing while avoiding the high costs of new construction.
Recommendations related to Property Taxes
For projects that require subsidy or property tax breaks, policymakers should take steps to ensure that those incentives are well-targeted and cost-effective.
Any conversion program should be based on a detailed financial feasibility analysis to determine the level and duration of tax breaks needed to incentivize the marginal project.
Policymakers should implement a property tax incentive only for mixed-income rental conversions to ensure developers set aside affordable housing units.
Key Data
13 million
— square feet of commercial space converted into residential units in lower Manhattan.
12,865
— residential units created from the conversion of commercial space.
120 million
— square feet of office space built at densities greater than 12 FAR that could be converted to residential use with regulatory relief.
12
— FAR (Floor Area Ratio) limit that currently restricts the conversion of many office buildings to residential use.
New York City's economic development tax incentives, which include property tax reductions, cost the city $44 million annually in foregone revenue. These programs should not be extended without rigorous, prospective evaluations to determine if they effectively induce desired economic behavior or if they should be sunset.
Recommendations related to Property Taxes
An incentive should not be extended absent a rigorous evaluation of its effectiveness and efficiency and an analysis demonstrating it is needed to meet current and future goals.
Any extension or expansion of an existing tax expenditure should be supported by a prospective model of its impacts and justified by an evaluation that determines whether the tax expenditure achieved its purpose.
For programs like CEP and CRP, existing evaluations should inform the Legislature’s decision of whether to extend, amend, or sunset these programs.
Key Data
$44 million
— Total annual foregone revenue from New York City economic development tax incentives.
$14 million
— Annual foregone revenue specifically from property taxes due to these economic development programs.
$15 million
— Annual foregone revenue from utility taxes.
$7 million
— Annual foregone revenue from commercial rent taxes.
$8 million
— Annual foregone revenue from sales taxes.
The 421-g property tax incentive program successfully spurred residential development in lower Manhattan by converting 12,865 units from obsolete office space, though it cost $1.2 billion. Future conversion programs should prioritize regulatory relief, as-of-right approvals, and cost-effective design to ensure they are targeted and empirically grounded.
Recommendations related to Property Taxes
Regulatory relief of various forms is essential, including lifting the FAR cap to unlock the potential of future projects.
An as-of-right approvals process is needed to ensure that the market is able to dictate when and where office-to-residential conversions make sense.
Care is needed to design a cost-effective incentive that avoids providing subsidies that are more than necessary to incentivize conversions.
Any new conversion program should be appropriately targeted and empirically grounded by a feasibility study and policy design.
Key Data
$1.2 billion
— Nominal cost of the 421-g property tax incentive through the end of fiscal year 2022.
$92,000
— Nominal cost per unit of the 421-g program.
12,865
— Number of new residential units created through the 421-g program.
13 million
— Square feet of commercial space converted to residential use through the 421-g program.
28 percent
— Decrease in the aggregate assessed value of lower Manhattan office buildings between 1991 and 1994.
$1.7 billion
— Total tax expenditure of the 421-g program adjusted for inflation in today's dollars.
New York City's property tax system requires comprehensive reform to improve transparency and equity, particularly by addressing the disparate tax burdens between residential, rental, and commercial properties. The proposed creation of a new residential class and the elimination of class shares are critical steps, but policymakers must ensure these changes are implemented holistically to avoid creating new inequities.
Recommendations related to Property Taxes
The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures do not lead to equitable treatment within rental and commercial property classes.
Policymakers must resist pulling apart the recommendations and instead consider the recommendations holistically to avoid implementing reforms piecemeal.
The City should analyze the extent to which there may be intra-class inequities resulting from the Department of Finance's valuation methods for large rentals, utilities, and commercial property.
The City should prioritize comprehensive reform to create a more equitable and transparent property tax system rather than relying on incremental changes.
Key Data
$1.5 trillion
— Estimated total market value of the new residential class, representing a 40 percent increase from the current valuation.
0.81 percent
— Nominal tax rate for the new residential class before a homestead exemption and circuit breaker.
20.309 percent
— Current tax rate for Class 1 property.
12.267 percent
— Current tax rate for Class 2 property.
$0.83 per $100
— Median effective tax rate for one- to three-family homes.
$1.53
— Effective tax rate for large rental buildings.
The Penn Station Area Civic and Land Use Improvement Project utilizes payments in lieu of property taxes to finance infrastructure, raising concerns about the diversion of city tax revenue. To protect the city's financial interests, future development abatements must be strictly scrutinized to ensure they are necessary for project feasibility and prioritize economic growth.
Recommendations related to Property Taxes
Abatements should be based primarily on promoting economic growth to ensure that the primary impetus for approving new development projects is to support the economic growth of the New York region.
Empire State Development should scrutinize any possible abatements based on whether projects would not be feasible without a specific PILOT discount amount.
Key Data
10-year
— The duration of the property tax lookback period used to calculate 'make-whole' payments to the City.
3 percent
— The annual escalation rate applied to 'make-whole' payments based on the property tax lookback.
New York City must reform its property tax system and implement appropriate tax incentives to ensure the development of all housing types is financially feasible. These fiscal changes are necessary alongside broader zoning and operational improvements to effectively address the city's housing affordability and supply crisis.
Recommendations related to Property Taxes
The City should pursue property tax reform to make the development of all housing types across the city financially feasible.
The City should implement the right tax and other incentives to encourage mixed-income development.
The City should reform the property tax system, building and construction codes, insurance laws, and the Multiple Dwelling Law to make housing less expensive to build and operate.
The Penn Station Area project proposes using payments in lieu of property taxes (PILOTs) to finance transit improvements, raising concerns about the diversion of city revenue and the need for local control. The project's high costs and reliance on complex value capture financing require careful scrutiny to ensure the plan is cost-effective and does not set a precedent for overriding local decision-making authority.
Recommendations related to Property Taxes
Ultimately, the Mayor and City Council should guide whether and how much of the City’s future property tax revenue should be dedicated to specific needs, such as a mass transit project, instead of other needs like public safety, education, or housing.
It is important to evaluate how the State will manage and mitigate the financing risks inherent to value capture projects, including who will be responsible for interest payments until revenue from new development comes online or who will be responsible for paying for cost overruns.
Before any financing plan is approved, the scope of work should be reasonably detailed, scrutinized, and streamlined as much as possible to ensure the financing plan is cost-effective.
The State and the City should ensure that any agreement regarding PILOT revenue does not set a precedent for overriding vital local decision-making authority.
Key Data
$6 to $7 billion
— Estimated cost for the renovation of Penn Station.
$12 billion-plus
— Estimated cost for the expansion of Penn Station.
New York City must implement a comprehensive, growth-oriented housing plan that increases as-of-right development capacity to meet the immense need for 560,000 new housing units by 2030. Achieving this level of production requires significant zoning changes alongside property tax reform and targeted incentives to ensure development remains financially feasible.
Recommendations related to Property Taxes
To make development of all housing types across the city financially feasible, the city must implement property tax reform and the right tax and other incentives to encourage mixed-income development.
The 421-a program, which provides property tax incentives for housing development, requires a well-crafted successor to ensure the continued production of rental units and avoid significant financial losses. Additionally, officials are urged to address broader housing issues by reducing construction costs, increasing zoning capacity, and reforming the city's property tax system.
Recommendations related to Property Taxes
State and City officials also should take action to reduce construction and operating costs, increase zoning capacity, and reform the property tax.
Approving a successor to the 421-a program is critical to ensuring that the city’s already scarce and expensive rental housing does not grow even scarcer and more expensive, as this property tax incentive is necessary to ensure the production of rental housing.
Key Data
$100 million
— Less than $100 million annually over the next seven years would be provided if the 421-a property tax exemption program ends.
$1.8 billion
— $1.8 billion will not be freed up for decades to come if the 421-a property tax exemption program is not replaced.
New York City needs to implement a successor to the 421-a tax exemption program to boost housing production, as simply ending the program will not immediately free up $1.8 billion in revenue. A comprehensive strategy to improve affordability must include reducing construction costs, increasing as-of-right zoning capacity, and reforming the property tax system.
Recommendations related to Property Taxes
New York City needs to implement a successor to the 421-a tax exemption program to boost housing production.
Policymakers should pursue a broader package of policies that includes reducing construction and operating costs.
The city should focus on increasing as-of-right zoning capacity to support housing development.
The city must prioritize reforming the property tax system as part of a comprehensive housing strategy.
Key Data
$123 million
— Estimated "mini tax" property taxes that 421-a properties will pay for fiscal year 2023.
60,149
— Number of tax lots expected to receive 421-a exemptions in the upcoming fiscal year based on the tentative fiscal year 2023 property tax assessment roll.
$1.74 billion
— Total exemption value for 421-a properties in fiscal year 2023.
$1.65 billion
— Amount of foregone tax revenue in fiscal year 2029.
$451 million
— Average annual "available" tax revenue from fiscal year 2030 to fiscal year 2036.
$700 million
— Value of exemptions still in force in fiscal year 2043.
$220 billion is the reported size of the New York State fiscal year 2023 budget that the Governor and Legislature adopted on April 10. The budget includes a property tax rebate and a tax holiday, and increases State spending about $14 billion, with more money for education aid, day care,…
New York City's 421-a property tax exemption is essential for making rental housing development financially feasible, as property taxes represent a significant portion of operating costs. Replacing this program with a more restrictive version without broader property tax reform would likely suppress housing production and make the city's already expensive rental market even less affordable.
Recommendations related to Property Taxes
ANNY’s affordability set-asides should vary by neighborhood to reflect different market conditions in different areas of the city.
Any 421-a replacement program should come with greater transparency and public reporting of data to support a robust assessment of the program’s impact and effectiveness.
The 421-a successor should harmonize with other affordable housing programs to avoid misalignments that cause delays, increase complexity, or make building housing riskier and more expensive.
Key Data
30 percent
— New York's property taxes as a percentage of rental income, compared to 13 percent elsewhere in the country.
75 percent
— The amount rents would have to increase to generate a reasonable rate of return without the 421-a tax exemption.
50 percent
— The amount by which the cost to operate a multifamily building in New York City exceeds the national average.
60 to 65 percent
— The portion of gross rental income that fully taxed rental buildings in New York report spending on expenses.
The fiscal year 2023 budget includes a $2.2 billion homeowner tax rebate program that should be allocated to address specific needs with evidence-based, accountable programs. Furthermore, maintaining an as-of-right property tax exemption is necessary to ensure the continued feasibility of rental housing development in New York City.
Recommendations related to Property Taxes
The $4.2 billion total, including the $2.2 billion proposed property tax rebate, should be allocated to address identified needs with evidence-based programs that are held accountable for results.
The Legislature should focus on allocating the available $4.2 billion, including the $2.2 billion homeowner tax rebate program, rather than increasing overall spending.
The State should maintain an as-of-right property tax exemption to make the development of rental housing feasible in New York City.
Key Data
$2.2 billion
— The amount of the proposed property tax rebate included in the fiscal year 2023 budget.
$4.2 billion
— The total amount allocated for relief and recovery in the fiscal year 2023 budget, which includes the property tax rebate.
New York City has increased its property tax revenue forecasts by $839 million for fiscal year 2023, $669 million for fiscal year 2024, and $436 million for fiscal year 2025, citing strength in residential markets and a rebound in commercial real estate. These adjustments reflect the city's updated revenue outlook amidst a sluggish economic recovery and potential structural changes in commuting and travel.
Key Data
$839 million
— The increase in the property tax forecast for fiscal year 2023.
$669 million
— The increase in the property tax forecast for fiscal year 2024.
$436 million
— The increase in the property tax forecast for fiscal year 2025.
The city's property tax revenue is projected to generate $30.0 billion for fiscal year 2023, while the value of taxable real estate is expected to rise 8.2 percent to $1.4 trillion. Although commercial property has not fully recovered, market values for offices and retail stores increased 12 percent, with hotels seeing a 5 percent rise.
Key Data
$30.0 billion
— Projected property tax revenue for fiscal year 2023.
8.2 percent
— Projected increase in the value of the City’s taxable real estate next year.
$1.4 trillion
— Projected value of the City’s taxable real estate next year.
12 percent
— Increase in the market value of offices and retail stores after the recession.
5 percent
— Increase in the market value of hotels after the recession.
Rent regulation in New York City has historically caused operating expenses to grow significantly faster than rents, with expenses rising 37.5 percent compared to a 15.1 percent rent increase between 2010 and 2019. This disparity constrains property maintenance and lowers property values, ultimately reducing the city's property tax base and revenue.
Recommendations related to Property Taxes
For a good cause policy to provide its intended benefits without consequential harms its components should balance legitimate tenant protections with the need to maintain a well-functioning rental market to avoid depressing property values and the property tax base.
Good cause provisions should be designed to promote stability through guaranteed renewal and to discourage rent gouging, rather than to limit rent increases, which can result in either lower revenue, higher tax rates, or shifts in tax burdens across different property types.
Good cause laws should exempt new development for a period of time, typically 15 years, to support and incentivize housing development and protect the future property tax base.
Policymakers should utilize other programs, such as the federal Section 8 Housing Choice Voucher program, to alleviate rent burdens for the lowest income households, as right to renew policies can lead to lower property tax revenue.
Key Data
37.5 percent
— Cumulative increase in expenses of rent-stabilized units between 2010 and 2019.
15.1 percent
— Cumulative increase in rents of rent-stabilized units between 2010 and 2019.
80 percent
— More maintenance deficiencies reported by tenants of rent-stabilized units compared to tenants living in market rate units.
3.6 percent
— Average annual rate of increase in operating costs for rent-stabilized buildings between 2010 and 2019.
The proposed Penn Station Area Civic and Land Use Improvement Project utilizes a value capture financing model that diverts potential property tax revenue from the City to fund station renovations and expansions. This approach raises significant concerns regarding the lack of transparency in financing, the potential for cost overruns, and the need for the City to maintain a substantive role in decisions affecting its general fund.
Recommendations related to Property Taxes
The plan should avoid costly, non-essential cosmetic improvements and should not preclude the possibility of future capacity or service enhancements, including both allowing for through running or for additional track capacity.
New York City should have a substantive role in the planning process and should be a partner that agrees to the use of tax revenue that would otherwise flow to the City’s general fund.
The public approval process should include broader discussions about financing risks and the most effective strategies for mitigating and managing those risks.
There should be additional public discussion about the merits of the financing strategy compared to other alternatives and whether this is the most appropriate financing approach for the renovation of Penn Station.
There should be a robust discussion about potential tax incentives or abatements for redevelopment projects in the GPP district.
Key Data
$17 billion
— Estimated cost of the entire Penn Station project, including renovation, expansion, land acquisition, demolition, and public space improvements.
$6 to $7 billion
— Estimated cost of a scaled-back renovation project without the proposed Penn South expansion.
$1.3 billion
— Funding included in the State’s Fiscal Year 2022 Enacted Budget for Penn Station-related projects.
50 percent
— Portion of the Gateway project funding anticipated to be covered by the federal government.
25 percent
— Portion of the Gateway project funding anticipated to be covered by New Jersey.
25 percent
— Portion of the Gateway project funding anticipated to be covered by New York.
47 is the number of people who will have held the office of NYC Comptroller once Brad Lander is sworn in on January 1, 2022. At a breakfast with CBC Trustees, President Andrew Rein sat down for a wide-ranging conversation with the Comptroller-elect, covering subjects including risks to New York’s…
New York City's property tax system is widely considered broken, with tax burdens distributed in an unfair and inequitable manner. To address this, the incoming administration should finalize a comprehensive reform proposal, build a supporting coalition, and work with the state legislature to enact necessary legislative changes.
Recommendations related to Property Taxes
The incoming Administration should reform the property tax system to increase equity.
The incoming Administration should finalize a property tax reform proposal, build a supporting coalition, develop legislative language in cooperation with the State legislature, advocate for passage, and implement the reforms.
New York State schools are receiving record levels of state and federal aid, with local revenues derived from property taxes totaling approximately $42.7 billion. The state must implement stronger management and accountability processes to ensure these funds effectively address learning loss and improve educational outcomes.
Key Data
$42.7 billion
— Local revenues derived from property taxes for school districts.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
New York City's property tax system requires comprehensive reform to address systemic inequities, specifically by simplifying the tax rate setting process and clarifying assessment methodologies. The current approach fails to adequately narrow disparities between residential, rental, and commercial properties, necessitating more transparent and equitable policy structures.
Recommendations related to Property Taxes
The Commission should develop a simple and transparent tax rate setting process that eliminates the function of class shares and distributes the levy based on clearly articulated policy rationales for the differential levels of taxation.
The Commission should expand the scope to address disparities within the rental and commercial classes by improving models and increasing transparency on assessment guidelines.
The Commission should provide details on how the homestead exemption and circuit breaker should be structured to ensure they effectively address property tax affordability.
The Commission should clarify how assessed values for the new residential class will be set to resolve conflicts regarding market value assessments.
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
The COVID-19 pandemic has significantly impacted New York City's economy, leading to an unprecedented 4.3 percent decline in property tax revenue and a $71 billion loss in market value. Consequently, the City has reduced its property tax revenue forecasts by billions of dollars for fiscal years 2023 through 2025, necessitating prudent fiscal management of federal aid to ensure long-term stability.
Recommendations related to Property Taxes
The City should avoid further considering increasing taxes, as the infusion of federal aid provides resources more than sufficient to bridge to a stable fiscal future, making tax increases neither proposed nor needed to balance the budget.
Key Data
4.3 percent
— The historically significant expected decline in property tax revenue.
16 percent
— The decrease in market value of commercial property on the tentative property tax assessment roll for fiscal year 2022.
8 percent
— The decrease in market value of residential property over 4 units on the tentative property tax assessment roll for fiscal year 2022.
$71 billion
— The unprecedented loss in market value (5.2 percent) reflected in the tentative property tax assessment roll for fiscal year 2022.
$2.5 billion
— The shortfall in property tax revenue due to market value decline forecasted for the upcoming year.
$2.7 billion
— The amount by which the City reduced its property tax revenue forecast for fiscal year 2023.
New York City faces a projected 4% decline in property tax revenues, a drop not seen in nearly three decades, as the city navigates fiscal challenges alongside federal aid. This revenue shortfall is part of a broader fiscal landscape where the city must balance immediate pandemic needs with long-term structural budget gaps.
Key Data
4%
— Projected decline in property tax revenues, a level not seen in nearly three decades.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
New York City's property tax system is opaque and inequitable, taxing multifamily rental properties at significantly higher effective rates than single-family homes and condominiums. Reforming this system to reduce the tax burden on rental buildings would improve fairness and allow for more efficient, better-targeted tax incentive programs.
Recommendations related to Property Taxes
State lawmakers should pass reforms to make the City’s property tax system more equitable and efficient.
Comprehensive tax reform should include provisions to reduce the high tax rate on multifamily rental buildings relative to single family homes and other owner-occupied units.
This would reduce the tax burden on renters and allow lawmakers to reform tax incentive programs like 421-a to make them more efficient and better targeted.
CBC supports reforms to the City’s property tax system that would reduce inequities and boost the supply of housing.
CBC has proposed moving condominiums and cooperatives to Class 1 with one- to three-family homes and reducing the tax rate on Class 2 rental apartment buildings so that they are taxed at lower rates than utilities and commercial buildings.
Key Data
2.55
— New York City's classification ratio, representing the difference between effective tax rates on apartments and single-family homes, which is the second highest among large U.S. cities.
$1.6 Billion
— The cost of 71,095 property tax exemptions in fiscal year 2019 in foregone City tax revenue.
71,095
— The number of property tax exemptions in fiscal year 2019 that cost $1.6 billion in foregone City tax revenue.
15 percent
— The portion of the net tax levy billed to rentals, condominiums, and cooperatives in fiscal year 2019 that was equal to the cost of property tax exemptions.
A temporary property tax increase for fiscal years 2022 and 2023 is recommended to help close budget gaps, generating $690 million in fiscal year 2022 and $706 million in fiscal year 2023. This measure is intended as a short-term strategy to balance the budget while avoiding more damaging long-term fiscal consequences.
Recommendations related to Property Taxes
A temporary increase in the property tax rate in fiscal years 2022 and 2023 is reasonable and justified as part of a package to close budget gaps.
City leaders should ensure that the temporary property tax increase does not become permanent to avoid harmful anti-competitive effects.
Key Data
$690 million
— Revenue generated by a 2 percent increase in the average property tax rate in fiscal year 2022.
$706 million
— Revenue generated by a 2 percent increase in the average property tax rate in fiscal year 2023.
$143
— Additional amount the average homeowner would pay in fiscal year 2022 due to the proposed property tax increase.
12.283 percent
— Current average property tax rate before the proposed 2 percent increase.
12.529 percent
— Proposed average property tax rate after the 2 percent increase.
CBC hosted a special panel discussion of prominent fiscal experts who helped New York overcome some of the most dire crises of the past. They provided insights and lessons from past experiences to help us understand and navigate the looming crisis. Stephen Berger Chairman, Odyssey Investment Partners; Former Executive Director,…
$28.8 billion is the cumulative four-year budget gap facing New York State between fiscal years 2020 and 2023. CBC President Andrew Rein joined the podcast to explain how the State should get its fiscal house in order. And for a special treat, CBC's Andrew Perry and Ana Champeny discuss regional…
New York City's property tax system generates nearly $30 billion annually, accounting for 32 percent of all city revenues while remaining resistant to economic cycles. To improve equity and transparency, the system requires comprehensive reform, including moving to market-based valuations and implementing income-based tax rebates for homeowners.
Recommendations related to Property Taxes
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Valuation for tax purposes should reflect actual real estate market value, using sales-based models for one-, two-, and three-family homes, cooperatives, and residential condominiums.
Full market value should be the starting point for assessing the tax base.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates of owner-occupied residential property taxes should be provided based on household income when tax bills exceed a set share of income.
Transition to the new system should occur over a five-year period.
Key Data
$30 billion
— Amount of revenue the property tax will generate in fiscal year 2020.
32 percent
— Share of all city revenues generated by the property tax in fiscal year 2020.
$1 out of every $3
— Amount of every dollar the City spends that is funded by the property tax.
6.2 percent
— Average annual growth rate of property tax revenue since fiscal year 1999.
New York City's high property tax rate on multifamily rental buildings hinders new construction, necessitating complex tax incentives to make projects financially viable. Reforming this tax system is essential to facilitate the development of rental housing without relying on substantial subsidies.
Recommendations related to Property Taxes
Lawmakers should prioritize reforming New York City’s property tax system to facilitate the construction of rental housing without requiring substantial subsidies.
New York City's tax revenue is nearly evenly split, with property taxes accounting for $29.6 billion, or 47% of the total, while non-property taxes make up the remaining 53%. Additionally, the city allocates $6,853 million in total tax expenditures, with $3,830 million dedicated specifically to housing programs.
Key Data
$29.6 Billion
— Property tax revenue for fiscal year 2020.
$33.8 Billion
— Non-property tax revenue for fiscal year 2020.
$6,853 Million
— Total tax expenditures in fiscal year 2019.
$3,830 Million
— Tax expenditures dedicated to housing programs in fiscal year 2019.
47%
— Share of total tax revenue derived from property taxes in fiscal year 2020.
53%
— Share of total tax revenue derived from non-property taxes in fiscal year 2020.
Proposed economic development legislation in New York includes multiple measures to expand property tax exemptions for small businesses and nonprofits, such as the School Tax Relief (STAR) program. These initiatives, which include a $275 million fiscal impact for the STAR expansion, are among 69 economic development bills evaluated for their potential impact.
Recommendations related to Property Taxes
Governor Cuomo should veto the three economic development bills identified in the scorecard, which include measures that would expand property tax exemptions for small businesses and nonprofits.
Key Data
$275 Million
— Fiscal impact of the School Tax Relief (STAR) program expansion for small businesses.
Several legislative bills introduced in 2019 proposed new property tax exemptions, including a measure to extend the STAR property tax exemption to small businesses with 100 employees or fewer. This specific proposal carries an estimated fiscal impact of $275 Million.
Key Data
$275 Million
— The estimated fiscal impact of bill S2460, which makes real property owned by small businesses eligible for the STAR property tax exemption.
The 2019 Economic Development Sweetener Scorecard tracks various legislative proposals, including measures that would grant property tax exemptions to nonprofits and small businesses. One such proposal, S2460, would extend the STAR property tax exemption to real property owned by small businesses with 100 or fewer employees, carrying an estimated fiscal impact of $275 million.
Key Data
$275 Million
— Estimated fiscal impact of S2460, which makes real property owned by small businesses eligible for the STAR property tax exemption.
New York State's fiscal year 2020 budget agreement maintains a property tax relief credit that costs taxpayers over $1.3 billion despite its classification as a wasteful expenditure. This credit remains in place even as the state fails to adequately bolster reserves against potential economic downturns.
Recommendations related to Property Taxes
The State should eliminate the wasteful property tax relief credit that costs taxpayers over $1.3 billion annually.
Key Data
$1.3 billion
— Cost to taxpayers of the property tax relief credit in fiscal year 2020.
A proposed pied-à-terre tax on non-resident owners of homes worth over $5 million aims to generate $650 million annually, but critics argue it is a piecemeal approach that fails to address underlying inequities in the property tax system. Instead of implementing this surcharge, policymakers should pursue comprehensive property tax reform and avoid dedicating specific tax revenues to individual agencies like the Metropolitan Transportation Authority.
Recommendations related to Property Taxes
The extensive disparities in the current system should be addressed through comprehensive property tax reform, rather than piecemeal approaches like a pied-à-terre tax.
The State should not adopt a pied-à-terre tax without thoughtful deliberation about whether it is needed and revision of the proposal to mitigate negative impacts.
Revenues from the proposed tax should not be dedicated to specific agencies, but rather allocated through the standard budget process.
Lawmakers should seriously consider lower tax rates for the pied-à-terre tax that will do less harm to the attractiveness of New York City.
Key Data
$5 million
— The minimum value of a New York City home required to be subject to the proposed annual property tax surcharge.
0.5 percent
— The starting annual property tax surcharge rate for homes valued above $5 million.
4.0 percent
— The maximum annual property tax surcharge rate for the value of homes greater than $25 million.
$650 million
— The projected annual revenue yield from the proposed pied-à-terre tax.
Eliminating rent stabilization for households earning over $200,000 annually could restore thousands of units to market-rate status, thereby increasing property tax revenue and allowing for better-targeted housing assistance. Current rent regulation policies often benefit higher-income tenants while failing to address the maintenance deficiencies and severe rent burdens faced by the lowest-income households.
Recommendations related to Property Taxes
Eliminate rent stabilization for upper-income households earning more than $200,000 per year to restore units to market-rate status, which would boost property values and increase property tax revenue.
Reform measures should be designed to make rent regulation better targeted to lower-income, rent-burdened households rather than exacerbating current problems.
Any reforms to capital improvement allowances should provide some incentive for owners of stabilized buildings to maintain the condition of their units.
Key Data
28,377
— Number of households earning more than $200,000 living in rent-stabilized units.
$271 million
— Total annual savings for rent-stabilized households earning more than $200,000.
$13,764
— Average annual savings per household for rent-stabilized households earning more than $200,000.
966,441
— Number of rent-stabilized units in New York City in 2017.
107
— Number of units deregulated through high-rent/high-income decontrol in 2017.
New York City's property tax system is widely considered opaque and inequitable, necessitating a comprehensive redesign that moves toward market-value-based assessments and eliminates distortive class share systems. To ensure fairness, the city should implement income-based tax rebates for homeowners and transition to a simplified, transparent tax structure over a five-year period.
Recommendations related to Property Taxes
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Class 1 should face the lowest tax burden, as measured by the effective tax rate, with increasing rates for residential rental buildings, utilities, and commercial properties.
Valuation for tax purposes should reflect actual real estate market value, using more transparent methods that take advantage of available data.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels, while eliminating current caps and phase-ins.
To ease burdensome tax bills, rebates should be provided of owner-occupied residential property taxes based on household income when tax bills exceed a set share of income.
Transition to the new system should occur over a five-year period.
Key Data
4 to 5 times
— The current effective tax rates of commercial and rental properties compared to those of owner-occupied homes.
2.25 times
— The maximum effective tax rate on commercial properties relative to owner-occupied homes in 46 of 53 cities studied.
10 percent
— The Constitutional debt limit for New York City based on the five-year average of market value.
2.5 percent
— The maximum property tax revenue that can be raised and used for operating expenses, excluding long-term debt.
5 percent
— The example threshold for a circuit breaker rebate on residential property taxes for households with income below $100,000.
6 percent
— The cap on assessed value growth per year for Class 1 properties.
The data point for today is 1981, the year in which the State Legislature enacted S7000A, the landmark bill that formalized the current property tax system for New York City. A response to the Hellerstein case, which found the system was in violation of State law, S7000A essentially codified the…
Problems, Inequities, and Potential Reforms NYC Advisory Commission on Property Tax Reform is charged with recommending reforms to make the NYC property tax fairer, simpler, and more transparent. CBC, the Regional Plan Association, and NYU Wagner convened a panel to discuss the current property tax system and the reforms that…
New York City's property tax system for one- to three-family homes creates significant inequities because statutory caps on assessed value growth shift the tax burden away from rapidly appreciating neighborhoods to those with more stable property values. To address these disparities, the city's property tax commission should prioritize restructuring or eliminating these assessment growth caps to ensure a fairer distribution of tax liabilities.
Recommendations related to Property Taxes
One of the items at the top of the Commission’s agenda should be addressing the inequities in the Class 1 property tax by restructuring or eliminating caps on assessment growth.
Key Data
$1.25 trillion
— The full market value of taxable properties across all tax classes in fiscal year 2019.
47 percent
— The share of total market value accounted for by Class 1 properties.
660,000
— The approximate number of one-, two-, and three-family homes in New York City.
$683,000
— The median market value of a Class 1 home citywide.
0.89 percent
— The median effective tax rate (ETR) for Class 1 properties citywide.
21.861 percent
— The tax rate for Class 1 properties in fiscal year 2019.
New York state legislators have introduced numerous bills that utilize property tax exemptions and other economic development incentives to support small businesses, nonprofits, and specific industries. These proposed measures aim to stimulate growth through targeted tax relief, though they often bypass broader fiscal oversight and contribute to a complex web of specialized tax benefits.
Recommendations related to Property Taxes
The Governor should veto legislation that grants property tax exemptions for development on vacant land, as these incentives are often inefficient.
The state should reject bills that expand STAR property tax exemptions to small businesses, as this dilutes the program's intended purpose.
Policymakers should oppose measures that provide property tax exemptions to nonprofits for economic development, as these erode the local tax base.
Key Data
25% to 50%
— Range of property tax exemptions provided for development on vacant land.
100
— Maximum number of employees a small business can have to be eligible for the STAR property tax exemption.
5 to 10
— Number of years for which property tax exemptions on vacant land improvements are provided.
Several legislative proposals aim to expand property tax relief in New York, including extending the School Tax Relief (STAR) exemption to small businesses with 100 or fewer employees. Other measures propose property tax exemptions for development on vacant land, with benefits ranging from 25% to 50% over a period of 5 to 10 years.
Key Data
100
— Number of employees or fewer a small business must have to be eligible for the STAR property tax exemption.
25% to 50%
— Range of property tax exemptions provided for development on vacant land.
5 to 10 years
— Duration of property tax exemptions for development on vacant land.
New York City imposes a commercial property tax that is significantly higher than in other large cities and nearby jurisdictions, creating a competitive disadvantage for businesses. Because the city's residential property tax is exceptionally low, the commercial property tax rate is five to six times higher than the homeowner rate, a disparity that is far more extreme than in other major U.S. cities.
Recommendations related to Property Taxes
Policymakers should consider the city's high commercial property tax rates in any initiatives to raise more revenue from the property tax.
Policymakers considering raising the commercial property tax need to be aware that these taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities regarding its tax structure.
Key Data
$327,000
— Annual difference in property tax for a $25 million commercial property in New York City compared to the average of the other 14 largest U.S. cities.
$596,000
— Annual difference in property tax for a $25 million commercial property in New York City compared to Hoboken.
162 percent
— Amount by which New York City's commercial property tax is higher than in Hoboken.
$1,450
— Property tax on a $25 million commercial property in Mineola, New York, in 2012 (in thousands).
$964
— Property tax on a $25 million commercial property in New York City in 2012 (in thousands).
5-6 times
— Ratio of the commercial property tax rate to the homeowner property tax rate in New York City in a typical year.
The NYS FY2019 budget relies on short-term measures to close gaps rather than structural spending reforms, while extending wasteful property tax relief credits to $1.3 billion annually. This budget fails to address long-term fiscal stability, instead relying on one-time revenue sources and extending existing tax relief programs.
Key Data
$1.3 Billion
— Annual cost of wasteful property tax relief credits that will be extended under the NYS FY2019 budget.
A state budget proposal to fund the Metropolitan Transportation Authority by capturing up to 75 percent of increased New York City property tax revenue threatens to usurp local control over municipal finances. Instead of broad state-mandated districts, decisions regarding the allocation of property tax revenue for transit projects should be made by city officials on a case-by-case basis to ensure accountability.
Recommendations related to Property Taxes
Any value capture arrangement should be tailored to specific projects and circumstances rather than broadly applied.
The mayor and city council, not the state, should determine how the city’s property tax revenue is going to be spent.
Dedicating future tax revenue to a mass transit project should be a policy choice made by the city on a case-by-case basis in a way that is transparent and accountable to taxpayers.
Key Data
up to 50 percent
— Share of increased New York City property taxes that would be captured by transportation improvement districts under the state executive budget proposal.
up to 75 percent
— Share of increased property taxes that could be captured for future transportation improvement districts under one version of the proposal.
more than 18 million square feet
— Amount of new office, residential, and retail space planned or built at Hudson Yards that would not have occurred without the No. 7 subway line extension.
The Governor's proposal to allow the MTA to create tax increment financing districts in New York City without local approval threatens municipal autonomy and fails to adhere to standard value capture best practices. By bypassing City oversight and allowing revenue to be used for general operating expenses rather than specific capital projects, the legislation risks undermining the ability to fund essential local services.
Recommendations related to Property Taxes
The State and the MTA should use the powers granted to them under the existing TIF law to partner with New York City when considering the use of value capture for future projects.
TIF districts should sunset after a period of time, after which the incremental revenue flowing to the district reverts to a city’s general fund.
Incremental revenue should be segregated to repay the costs of the projects that created the value rather than flowing directly to the MTA for general use.
The criteria for identifying capital projects should be raised to limit the use of value capture to truly transformative projects rather than projects like the Enhanced Station Initiative.
The size of TIF districts should be reduced to no more than a one-half mile buffer surrounding individual stations to avoid diverting revenue growth unrelated to specific capital improvements.
Key Data
75 percent
— The City would be required to remit to the Authority an amount of up to 75 percent of the property tax increment.
$100 million
— Transit improvement subdistricts can be created around capital projects with an estimated cost of at least $100 million.
one mile
— The proposal would allow the MTA to capture revenue from areas up to one mile from an MTA capital project.
one-half mile
— Industry standards, such as those from the Center for Transit-Oriented Development, consider transit zones to be no more than a one-half mile buffer surrounding individual stations.
Tax increment financing (TIF) allows municipalities to fund infrastructure by diverting future property tax revenue, but it carries significant risks if projects fail to generate net new economic growth or if revenue shortfalls occur. To protect taxpayers, governments should conduct rigorous due diligence, including "but for" testing and evaluating whether alternative financing methods like general obligation bonds are more appropriate.
Recommendations related to Property Taxes
Governments should determine if the project passes the 'but for' test to ensure development would not occur without the TIF-funded capital project.
Policymakers must assess whether the investment will generate new economic activity or simply shift it from elsewhere.
Officials should evaluate if the project’s expected return on investment is strong enough to justify diverting revenue from other uses.
Governments must determine if the district will generate sufficient revenue to repay debt service and other costs, and plan for how shortfalls will be covered.
Policymakers should consider whether general obligation bonds are a better option than TIF bonds, which are riskier and more costly.
Key Data
$359 million
— Amount the City paid from its general fund to subsidize Hudson Yards’ interest payments after the Great Recession delayed office development.
$14 million
— Amount of TIF debt the Troy Downtown Development Authority in Michigan defaulted on after assessed values fell below pre-TIF baseline levels.
$75.4 million
— Total outstanding Pilot Increment Financing (PIF) debt in New York as of June 2017.
$3 billion
— Total cost of the Hudson Yards project, which was financed through public investments and actions projected to create enough tax revenue.
$266 million
— Capital cost overruns incurred by the Hudson Yards project.
$100 million
— Additional funding needed for Hudson Yards as costs continued to exceed the plan.
$26 billion is the amount of property taxes the City will collect this fiscal year-- it is the largest single source of revenue that funds NYC government. Special guest Martha Stark is a former Commissioner of the Department of Finance. She joined the podcast to discuss the complexities of the…
Business Improvement Districts (BIDs) in New York City rely on special assessment fees, which function as property taxes, to fund supplemental services for commercial districts. Because these fees are mandatory, there is a need for greater transparency and rigorous performance evaluation during the contract renewal process to ensure these districts operate effectively and in the interest of property owners.
Recommendations related to Property Taxes
The current contract should be revised to specify that BID contract renewal is conditioned upon a thorough performance review and analysis of progress in implementing the BID's strategic plan and should include specific evaluation criteria and performance metrics to be utilized by SBS.
The contract should also require BIDs to survey their members at least once every five years to determine satisfaction with the BID's strategic plan and performance.
The additional performance measurement data, combined with the data SBS already collects, should be included in the annual BID Report for every BID for which a contract is renewed in that year.
SBS should also disclose any written notices of violations it has issued to BIDs, as well as the actions taken by BIDs to correct these concerns.
The City Council should hold oversight hearings at least once each year to review the SBS’s oversight of BIDs with contracts up for renewal.
Key Data
$100 million
— Total BID assessment revenues collected in fiscal year 2016.
$134 million
— Total revenue collected by BIDs from all sources in fiscal year 2016.
$106 million
— Total revenue from special assessment fees in fiscal year 2016.
$838
— The median BID assessment charge for properties.
0.13%
— The average BID charge as a percent of a building's market value.
We know that New York State leads the country in school spending per pupil. But how do those numbers break down when it comes to federal, state, and local spending? Most of the money comes from local governments through property taxes, which is how wealthier school districts are able to…
New York leads the nation in per-pupil education spending, with local property taxes serving as the primary revenue source for school districts. Wealthier districts benefit from higher property values, allowing them to generate significantly more revenue with lower tax efforts compared to poorer districts that must levy higher rates to fund their schools.
Recommendations related to Property Taxes
The State should properly account for district wealth and reallocate state resources from high-wealth to low-wealth districts to address the disparities in local property tax revenue generation.
Key Data
$13,168
— Average revenue per pupil derived from local governments and property taxes.
95.4%
— Highest local share of total district revenues, recorded in Amagansett (Suffolk County).
6.7%
— Lowest local share of total district revenues, recorded in Indian River (Jefferson County).
$30,486
— Local resources collected per pupil in the 10th wealth decile.
Vice President Maria Doulis discusses issues such as New York State and local tax deductions, New York City’s $85 billion fiscal plan for 2018, and the inequity of New York City’s real estate property tax system. Original video can be found here .
New York City's property tax system is riddled with inequities, including assessment caps and the undervaluation of co-ops and condos, which result in widely varying effective tax rates across similar properties. To address these issues while raising $2 billion in revenue, the city should consider reforms such as revaluing properties based on market sales, eliminating assessment caps, and consolidating property classes to ensure a more equitable distribution of the tax burden.
Recommendations related to Property Taxes
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
The city should value condos and co-ops based on market values using sales prices (as is currently the case for Class 1).
The city should eliminate disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The city should assess co-ops and condos with 1-3 family homes at an assessment ratio of 6 percent.
The city should pursue the elimination of the cap on small rental properties and the phase-ins for large rental and commercial properties.
Key Data
$4.5 billion
— Estimated revenue foregone in fiscal year 2015 due to the cap and phase-in rules.
$2 billion
— Target amount of additional property tax revenue to be raised.
0.78 percent
— Effective tax rate for Class 2 condos and co-ops based on Department of Finance market value determinations.
0.77 percent
— Effective tax rate for Class 1 homeowners.
4.60 percent
— Effective tax rate for large Class 2 rental buildings.
21 times
— The factor by which a commercial property owner's effective tax rate and tax bill exceeds that of a two-family home owner in the provided example.
New York's requirement for counties to fund a portion of Medicaid creates an inequitable burden on taxpayers, especially as local Medicaid costs are allowed to grow by 3 percent annually while property tax increases are capped at 2 percent. Eliminating this local funding requirement and shifting to full state financing would align fiscal responsibility with administrative control and provide necessary tax relief.
Recommendations related to Property Taxes
The logical step toward aligning the decision-making responsibility for Medicaid with the obligation to pay for it is the elimination of the local funding requirement.
Full state financing is the best way to achieve continued cost control in a program fully controlled by the State.
The State should assume responsibility for the local share liability over a period of four or five years.
New, statewide revenues will be required to replace the current local share in a way that relieves the disproportionate burden placed on taxpayers in low income counties.
Key Data
$7.1 billion
— Amount New York's counties will pay for Medicaid in state fiscal year 2012.
$6.5 billion
— Amount New York's counties paid for Medicaid in fiscal year 2008.
3.3 percent
— Increase in property taxes from 2005 to 2006.
4.7 percent
— Estimated property tax levy increase from 2005 to 2006 without state assumption of local Medicaid costs.
2 percent
— Annual property tax cap limit for county governments.
3 percent
— Annual growth rate allowed for local Medicaid costs.
New York's Foundation Aid formula for school funding is flawed because it relies on outdated data and arbitrary adjustments, failing to effectively target resources to districts with the greatest need. Reforming this formula to use a more equitable basis for local funding and increasing poverty-related weightings would allow for a more rational distribution of state aid without requiring massive spending increases.
Recommendations related to Property Taxes
A single method should be used that applies a uniform local tax factor and adjusts only for one other factor – the local Medicaid financing burden.
Hold harmless provisions, phase-in percentages, caps, and other adjustments in the current formula should be eliminated.
Increasing the weighting for poverty from 0.65 to 0.75 in the calculation of the PNI incorporated in the formula would more appropriately distribute Foundation Aid.
Key Data
$569 million
— Required increase in annual State funding to support a sound basic education in all of New York’s school districts under the proposed reform.
$2.7 billion
— Amount of funding that would be redirected to needy districts under the proposed reformed formula.
$3.8 billion
— Additional annual State funding requested by advocates for the Foundation Aid program.
$16.5 billion
— Total Foundation Aid in school year 2016-2017.
$24.3 billion
— Total state school aid in school year 2016-2017.
$14.9 billion
— Foundation Aid amount in school year 2007-2008.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York City's property tax system generates $24 billion in annual revenue, yet relies on a structure where effective tax rates vary significantly by property type, with homeowners paying much lower rates than commercial and rental properties. These disparities, exacerbated by tax law provisions and exemption programs, create wide inequities among similar properties and impede the city's economic competitiveness.
Key Data
$24 billion
— Projected revenue for fiscal year 2017, representing 44 percent of all City tax revenues.
$1.47 trillion
— The total value of property in New York City in 2017, having more than tripled from $382 billion in 2000.
$25.8 billion
— The total property tax levy in fiscal year 2017, which tripled from $8.4 billion in 2000.
4.12 percent
— The average effective tax rate for large rental properties, which is more than five times that of small homes.
3.87 percent
— The average effective tax rate for commercial property, which accounts for 42 percent of the property tax levy despite comprising less than 20 percent of total market value.
$3 billion
— The cost of housing and economic development exemptions in 2016, significantly higher than the $350 million spent on personal exemptions.
The School Tax Relief (STAR) program, which costs state taxpayers approximately $3.4 billion annually, should be converted from a property tax exemption into a personal income tax credit to improve transparency and prevent benefit abuse. Additionally, binding arbitration statutes for contract disputes should be reformed to require that arbitrators account for the full cost of decisions without increasing taxes, and these criteria should apply to all local governments.
Recommendations related to Property Taxes
The State should convert the STAR exemption into a personal income tax credit to allow property taxpayers to see changes in their school district’s tax levy more clearly.
The State should convert the STAR exemption into a personal income tax credit to provide another administrative mechanism to prevent taxpayers from receiving the STAR benefit on multiple homes.
Arbitrators should account for the full cost of a decision, including retroactive pay and the impact on fringe benefits, without increasing taxes, making service cuts, or employing fiscal gimmicks.
The criteria for binding arbitration should be applicable to all local governments, not just those in the bottom quartile of tax rates and fund balances.
Key Data
$3.4 billion
— Annual cost of the School Tax Relief (STAR) program to state taxpayers.
New York City's property tax system is riddled with inequities, including disparate effective tax rates across property classes and within classes due to assessment caps and phase-ins. The report outlines three reform options to raise $2 billion in revenue while addressing these systemic issues, such as revaluing co-ops and condos and eliminating assessment growth caps.
Recommendations related to Property Taxes
This option eliminates all disparities among homeowners by assessing and taxing both categories of property in the same way.
This option eliminates these disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The third option would raise $2 billion in revenue and addresses the inequities among properties by eliminating the caps and phase-in provisions for all properties.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
Smoothing property tax liability over time need not be implemented in a way that confers a tax reduction at the same time; foregone revenue for each year in which a property’s assessment is capped might be viewed as a loan, secured by a lien that attaches to the property and accrues interest until paid off.
Key Data
$21.1 Billion
— Baseline property tax levy in fiscal year 2015.
$2 Billion
— Amount of additional revenue each option is designed to raise.
$4.5 Billion
— Estimated revenue foregone due to the cap and phase-in rules in fiscal year 2015.
1.21%
— Assessment ratio for the home in Park Slope/Carroll Gardens.
45%
— Assessment ratio for the commercial property in East New York/Starrett City.
17.5%
— Reduction in tax liability for co-ops and condos due to abatements.
This school year New York State will spend $23.5 billion on aid to school districts, accounting for 25 percent of the state-funded operating budget. The State’s role in K-12 public education is critical to offsetting disparities in local wealth and student need, yet numerous problems remain in the state school…
The Governor's proposed fiscal year 2016-2017 budget includes $1.2 billion for the Family Tax Relief Credit and the Property Tax Freeze Rebate, both of which are set to expire in 2016. The budget's approach to these expiring tax rebates remains a key point of interest for fiscal planning.
Key Data
$1.2 billion
— Amount designated for the Family Tax Relief Credit and the Property Tax Freeze Rebate, both of which expire in 2016.
A new property tax relief rebate program in New York is set to cost $1.3 billion annually when fully implemented, despite concerns that the state's fiscal plan relies on optimistic surplus projections. The program is criticized for excluding New York City homeowners and renters while disproportionately benefiting wealthier households through its link to the School Tax Relief (STAR) program.
Recommendations related to Property Taxes
Lawmakers must now be prepared to enact cost-saving measures to produce the 'surpluses' they just spent.
Key Data
$1.3 billion
— The new property tax relief rebate program will cost $1.3 billion annually when fully implemented.
$1.2 billion
— New York State was set to spend $1.2 billion on two other rebate programs this fiscal year.
$410 million
— The Family Tax Relief Rebate provides $350 to households with children under age 17 and annual income between $40,000 and $300,000 at an annual cost of $410 million.
$783 million
— The Property Tax Freeze Rebate provides an amount equal to the annual increase in property taxes to homeowners earning less than $500,000 in tax cap-compliant local governments and school districts and costs $783 million annually.
$2.0 billion
— New York State faced out-year budget gaps that grow from $2.0 billion next year to $4.2 billion in fiscal year 2018-2019.
A new property tax rebate program included in the state's end-of-session agreement is estimated to cost $1.3 billion annually, raising concerns about the fiscal sustainability of funding such commitments with projected surpluses. While the resolution of issues like the property tax cap is noted, the last-minute addition of these spending measures lacks sufficient public scrutiny.
Key Data
$1.3 billion
— The new property tax rebate program is estimated to cost $1.3 billion annually.
The School Tax Relief (STAR) program, which costs $3.4 billion annually, is poorly targeted and incentivizes school district spending, necessitating reforms like freezing benefits and disqualifying high-income earners. Additionally, a proposed 'circuit breaker' income tax credit for those paying over 6 percent of their income in property taxes is a large, unfunded commitment that should be replaced by repurposing existing resources for more targeted relief.
Recommendations related to Property Taxes
The Executive Budget should improve the STAR program by providing a tax credit for new homeowners, so taxpayers bear the full burden of their school taxes directly, and school districts gradually lose the state subsidy.
The Executive Budget should disqualify taxpayers in New York City making more than $500,000 and freeze the exemption benefit to better target STAR benefits to those most in need.
Policymakers should repurpose existing resources to provide more targeted relief, such as additional reforms to STAR that could shrink and convert it to a circuit breaker program.
Key Data
$3.4 billion
— Annual cost of the School Tax Relief (STAR) program.
6 percent
— Threshold for property taxes as a share of income for the proposed 'circuit breaker' program.
$1.7 billion
— Cost of the 'circuit breaker' program when fully phased in.
$500,000
— Income threshold for disqualifying New York City taxpayers from the STAR program.
The PATH transit system faces growing annual deficits, projected to reach $487 million by 2018, necessitating a shift from its current reliance on bridge and tunnel toll cross-subsidies to a more equitable funding model. Implementing a new financing structure, such as a 50-25-25 or equal shares approach, would require new revenue sources like a dedicated property tax or sales tax in the region to ensure long-term fiscal sustainability.
Recommendations related to Property Taxes
The region should implement a property tax in the five New Jersey counties with the most PATH use—Bergen, Essex, Hudson, Middlesex, and Union—to provide a dedicated tax subsidy for the transit system.
Policymakers should consider extending the property tax base to include the Manhattan central business district south of 60th Street, as property in this area benefits from the availability of the labor force in New Jersey served by PATH.
The agency should adopt a consistent funding structure that shares the cost of operating the transit system among all who benefit, specifically utilizing a "50-25-25" or "equal shares" formula.
PATH could pursue distance-based fares or zone pricing to increase the farebox recovery ratio from long-distance passengers and reduce the penalty that short trips incur.
The system should implement peak pricing to charge a premium for users during peak periods most commonly associated with work-related commutes.
Key Data
$487 million
— The projected annual deficit for the PATH transit system in 2018.
$175 million
— The amount of tax subsidy required in 2018 under the "50-25-25" funding formula.
$233 million
— The amount of tax subsidy required in 2018 under the "equal shares" funding formula.
$360,400
— The recent median value for owner-occupied housing units in Hudson County.
$964,000
— The property tax levy on a $25 million commercial property in New York City in 2012.
Proposed property tax relief measures, including a freeze credit and circuit breaker, are poorly targeted and fail to address the underlying high costs of local government that drive tax burdens. Instead of these temporary and cumbersome credits, the state should focus on structural reforms like reducing the local share of Medicaid to achieve sustainable tax relief.
Recommendations related to Property Taxes
The state should defer action on the property tax relief proposals until their design is improved and the necessary surplus is achieved.
New York should further reduce the local share of Medicaid as an effective method of reducing local government expenses and property tax burdens.
Policymakers should address the high cost of local government, including salaries, wages, and fringe benefits, which drives high property tax burdens in the state.
Key Data
$1.4 Billion
— The amount of local property tax collections that the proposed relief measures would replace with state tax revenue when fully implemented.
$1 Billion
— The estimated annual cost of the proposed Real Property Tax Freeze Credit.
$400 Million
— The estimated annual cost of the proposed Renter's Credit.
$1,000
— The maximum allowable credit for the proposed Enhanced Real Property Tax Circuit Breaker Credit.
$500,000
— The income eligibility limit for homeowners to qualify for the Real Property Tax Freeze Credit.
2%
— The percentage of tax liability provided as a credit under the proposed Real Property Tax Freeze Credit.
New York City's property tax system is currently broken and inequitable, sacrificing approximately $4 billion in annual revenue due to arcane provisions like "caps" and "phase-ins" that shield some owners from tax increases. Reforming these structures could generate significant new funds without raising tax rates across the board, addressing long-standing issues within the current system.
Recommendations related to Property Taxes
The city should pursue significant modification of arcane provisions that give some owners breaks in the form of "caps" and "phase-ins" of tax increases due to appreciation in their property's value.
The next administration should take the lead in fixing a broken, inequitable and often inscrutable property tax system.
Reforms to the property tax structure should be implemented to redress inequities without raising tax rates across the board.
Key Data
$930 million
— Cost to the City of business property tax expenditures in the last fiscal year.
$4 billion
— Annual revenue sacrificed by the current property tax system due to its lack of transparency and fairness.
$1.8 billion
— Amount raised by Mayor Bloomberg's property tax hike beginning in fiscal year 2004.
$3.1 billion
— Annual value of the fiscal year 2004 property tax hike due to appreciation in property values.
New York City's commercial property tax is significantly higher than in other large U.S. cities, with rates often 50 percent or more above the average for large cities. Policymakers should exercise caution when considering tax increases, as the city's commercial property tax is already substantially more expensive than its competitors, potentially impacting the city's economic competitiveness.
Recommendations related to Property Taxes
Policymakers considering raising the personal income tax or the commercial property tax need to be aware that both taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities.
The policy implication is that high commercial property tax rates and differential rates between commercial and other property types should be considered in any initiatives to raise more revenue from the property tax.
Policymakers should avoid increasing the commercial property tax, as such a change would be tantamount to taking the price of a luxury good that already is substantially more expensive than its competitors and increasing it further.
Key Data
3.9%
— The effective rate of the commercial rent tax for properties with gross rent of more than $300,000 annually.
51%
— The amount by which New York City's commercial property tax was higher than the average for the other 14 of the 15 largest cities.
$327,000
— The annual difference in commercial property tax for a $25 million property in New York City compared to the average of the other 14 largest cities.
162%
— The amount by which New York City's commercial property tax was higher than in Hoboken.
$596,000
— The annual difference in commercial property tax for a $25 million property in New York City compared to Hoboken.
3.21%
— The 2012 commercial property tax rate in New York City.
New York City's property tax system is riddled with inequities, including disparate effective tax rates across property classes and within classes due to assessment caps and phase-ins. The report proposes three options for reform to raise $2 billion in additional revenue, ranging from proportional rate increases to structural changes that would eliminate assessment caps and revalue co-ops and condos.
Recommendations related to Property Taxes
This option eliminates all disparities among homeowners by assessing and taxing both categories of property in the same way.
This option eliminates these disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The third option would raise $2 billion in revenue and addresses the inequities among properties by eliminating the caps and phase-in provisions for all properties.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
One possibility is to value these properties based on the sales of units within the same, or similar, buildings.
Key Data
$2 Billion
— The target amount of additional property tax revenue the report proposes raising.
$4.5 Billion
— The estimated revenue foregone in fiscal year 2015 due to the cap and phase-in rules.
1.21 percent
— The assessment ratio for a two-family brick home in Park Slope/Carroll Gardens.
45 percent
— The assessment ratio for a commercial property in East New York/Starrett City.
0.78 percent
— The effective tax rate for Class 2 condos and co-ops based on Department of Finance determinations of market value.
4.60 percent
— The effective tax rate for large Class 2 rental buildings.
New York's current property tax relief programs, such as the School Tax Relief (STAR) program and the Family Tax Relief rebate, are poorly targeted and often provide greater benefits to wealthier households rather than those most burdened by high taxes. Reforming these existing measures and expanding income-based circuit breaker credits would more effectively provide relief to low- and moderate-income residents.
Recommendations related to Property Taxes
The Tax Relief Commission should re-examine and reform the local tax relief programs on which the State already spends $4 billion annually.
The Tax Relief Commission could achieve its objective by better targeting STAR aid and the Family Tax Relief rebate.
The Tax Relief Commission could achieve its objective by expanding the Real Property Tax Credit so that all three of these programs provide deeper relief for low and moderate income households with the greatest burden.
Permanent relief from high property taxes can only be provided through a comprehensive revision of current measures, and a reexamination of local government costs and the underlying division of state and local responsibilities.
Key Data
$4 billion
— The amount the State spends annually on local tax relief programs.
$3.4 billion
— The cost of the STAR (School Tax Relief) program in fiscal year 2014.
$1,533
— The amount of STAR aid provided per pupil among the wealthiest/least-needy 10 percent of districts.
$991
— The average amount of STAR aid provided per pupil among the least-wealthy/neediest 10 percent of districts.
$350
— The flat amount provided to households with children under age 17 by the Family Tax Relief rebate.
$410 million
— The amount allocated for Family Tax Relief rebates.
Expanding universal prekindergarten to all three- and four-year-olds in New York State would require significant funding, with estimates ranging from $1.4 billion to $4.2 billion annually depending on the quality and scope of the program. This expansion would likely necessitate substantial increases in local school property tax levies, which are already constrained by a state-imposed 2 percent cap.
Recommendations related to Property Taxes
New York’s leaders should review the history of such efforts and take stock of some key realities before raising public expectations regarding the expansion of universal prekindergarten.
State leaders should avoid underfunding services for those students who could benefit most for the sake of achieving universality in prekindergarten.
Policymakers should consider that making the program both richly-resourced and fully universal would impose a significant new fiscal burden on already highly taxed New Yorkers.
Key Data
2.3%
— The average school tax levy increase required to fund an Abbott-style universal prekindergarten program for all four-year-olds.
5.0%
— The average school tax levy increase required to fund an Abbott-style universal prekindergarten program for all three- and four-year-olds.
7.1%
— The average school tax levy increase required to fund a universal prekindergarten program for all three- and four-year-olds at the K-12 general education per pupil spending level.
$80.60
— The local tax burden per $1,000 of personal income in New York, which is 72 percent higher than the national average.
2%
— The limit on annual school property tax levy increases imposed by the state’s statutory tax cap.
The proposed extension of the personal income tax surcharge, which would maintain a 12.7 percent tax rate for high earners, fails to address the underlying issues of New York's regressive tax structure. Instead of using revenue for business tax credits, state leaders should focus on comprehensive reform of state and local taxes, including property taxes, to address the $2 billion budget gap projected for fiscal year 2015-16.
Recommendations related to Property Taxes
State leaders should prioritize comprehensive reform of the combined high and regressive set of state and local taxes, including property taxes, rather than relying on untargeted rebates.
New York's heavy reliance on local property taxes to fund public education creates significant disparities in school district wealth and tax burdens, with some low-wealth districts taxing themselves at high rates while wealthy districts tax at lower rates. To improve performance under the state's property tax cap, funding formulas must be overhauled to better account for local ability to pay, student need, and regional cost differences.
Recommendations related to Property Taxes
State school aid formulas should be overhauled to ensure that districts with similar student needs and local abilities to pay receive equitable state aid.
The components of the aid formulas that account for pupil need, local ability to pay, and regional costs should be applied to the total amount of state aid to be distributed.
For districts whose financial situations would change significantly due to redesigned aid formulas, a 3-5 year phase-in schedule should be developed.
To improve performance under the property tax cap, special education must be made a more flexible enterprise in New York State.
Key Data
$32,000
— The amount spent per pupil in the wealthiest decile of school districts in New York State.
$19,700
— The average amount spent per pupil in the poorest decile of school districts in New York State.
$14.7 per $1000
— The tax effort rate in Rochester, an economically challenged community.
$8.6 per $1000
— The tax effort rate in Scarsdale, a wealthy community with high property value per student.
$2 million
— The property value per student in Scarsdale.
$171,000
— The property value per student in Rochester.
New York's policy requiring counties to fund a significant portion of Medicaid costs creates an inequitable burden on local taxpayers, particularly in low-income areas, and complicates efforts to adhere to the state's 2% property tax growth cap. While the proposal to phase in a state takeover of Medicaid cost growth provides necessary relief, further long-term action is required to fully address the financial strain on local governments and their residents.
Recommendations related to Property Taxes
The Governor and legislative leaders should begin planning for more far-reaching, longer-term initiatives that will fully solve the problem of the inequitable and unusual burden of Medicaid costs on local taxpayers.
The State should continue to implement the three-year phase-in of the Medicaid cost growth takeover to ensure that local governments can live within the statutory property tax cap.
Key Data
$7.1 billion
— Amount New York counties were required to pay for Medicaid in the 2011-12 state fiscal year.
13%
— The portion of the $54 billion in projected total Medicaid expenditures that New York counties were required to cover in 2011-12.
2%
— The statutory property tax growth cap adopted in June 2011.
$370 million
— The amount local governments will save in state fiscal year 2015-16 due to the state's takeover of Medicaid cost growth.
$1 billion
— The total local funding for Medicaid in California.
2.5%
— The portion of total Medicaid expenditures covered by local funding in California.
New York's requirement for local governments to fund a portion of Medicaid creates an inequitable financial burden that forces counties to rely heavily on property taxes to cover these costs. Eliminating this local funding requirement would align financial responsibility with state control and provide necessary relief to taxpayers facing strict property tax growth caps.
Recommendations related to Property Taxes
The State should eliminate the local funding requirement for Medicaid to align decision-making responsibility with the obligation to pay for the program.
The State should assume responsibility for the local share liability over a period of four or five years.
New, statewide revenues should be implemented to replace the current local share in a way that relieves the disproportionate burden placed on taxpayers in low-income counties.
Key Data
$7.1 billion
— Projected amount New York's counties will pay for Medicaid in state fiscal year 2012.
$6.5 billion
— Amount New York's counties paid for Medicaid in fiscal year 2008.
$1,361
— Average annual Medicaid cost for a homeowner with a property valued at $250,000 in Chemung County.
$135
— Average annual Medicaid cost for a homeowner with a property valued at $250,000 in Putnam County.
$387
— Average local Medicaid cost for a taxpayer with an annual income of $75,000 living in Schenectady County.
$184
— Average local Medicaid cost for a taxpayer with an annual income of $75,000 living in Saratoga County.
Rent regulation in New York City reduces property tax revenue by approximately $283 million annually while failing to effectively target benefits to low-income households. Future policy should focus on phasing out rent protections for high-income earners and expanding more effective, targeted programs to promote affordable housing.
Recommendations related to Property Taxes
Benefits now available to low- and moderate-income households should not be reduced, but the poorly targeted benefits can be removed at an accelerated pace by phasing out regulation for higher-income households.
The long-term contraction in the scope of rent regulation should be accompanied by expansion of other more effective programs to promote affordable housing.
Key Data
$283 million
— Annual decrease in the City of New York’s property tax revenue due to rent regulation.
$5,500
— Average annual rent reduction per housing unit provided by rent regulation based on 2008 data.
$1.9 billion
— Total annual amount paid in extra rent by 669,000 households in unregulated units.
$2,800
— Average annual extra rent paid per household in unregulated units.
Rent regulation in New York City suppresses property values, which in turn reduces the city's property tax revenue by approximately $283 million annually. This lost revenue could otherwise be utilized to fund essential public services like education, law enforcement, and senior programs.
Recommendations related to Property Taxes
The current rent regulation law needs a massive overhaul to address its negative impacts on property tax collections and housing affordability.
Key Data
$283 million
— The amount by which the city's property tax revenue would grow annually without rent regulation.
$2,800
— The average amount more per year that tenants in the unregulated rental market pay for their apartments compared to what they would pay without rent regulation.
$1.9 billion
— The total amount per year that more than 669,000 unregulated renters pay as a consequence of rent regulation.
31%
— The average discount provided by rent regulation based on 2008 data.
500,000
— The number of households in unregulated units that have incomes below $75,000.
1 million
— The number of New York City apartments governed by rent regulations.
Rent regulation in New York City significantly reduces property tax revenue by an estimated $283 million annually while failing to effectively target benefits to low-income households. Future policy should focus on phasing out rent protections for high-income earners and replacing current regulations with more effective, targeted programs to promote affordable housing.
Recommendations related to Property Taxes
Reduce inequities and expand the unregulated housing stock by phasing out benefits for all higher-income households.
Develop and expand effective programs to promote affordable housing.
Key Data
$283 million
— Annual decrease in the City of New York's property tax revenue attributable to rent regulation.
$1.9 billion
— Annual amount paid in excess rent by 669,000 households in unregulated units compared to a fully deregulated market.
$5,500
— Average annual rent reduction per housing unit provided by rent regulation based on 2008 data.
$2.6 billion
— Total annual rent discount associated with rent regulation under the assumption that unregulated rents would be 15 percent lower in a fully deregulated market.
New York's tax system is progressive in that it eases the burden on the lowest-income residents through credits, yet middle-income families face the highest state and local tax burden as a share of their income. While the state effectively taxes its wealthiest residents, property taxes disproportionately impact the poorest New Yorkers compared to the national average.
Recommendations related to Property Taxes
To complete the model of progressivity, New York needs to focus on lowering the tax burden on households with moderate incomes.
Key Data
5.3 percent
— Average share of income that New Yorkers in the poorest fifth pay to property taxes.
3.6 percent
— National average share of income that the poorest fifth pay to property taxes.
11.6 percent
— Share of income that the middle quintile of New York families pay to state and local taxes.
7.2 percent
— Share of income that the top 1 percent of earners in New York pay for state and local taxes.
New York's school districts face significant financial pressure from mandates that prevent them from adjusting retiree health insurance benefits without union approval. Vetoing legislation that extends these restrictions would allow districts to control rising costs and help alleviate the burden of high local taxes.
Recommendations related to Property Taxes
The Governor should veto A4628, a bill that would renew the provision that prohibits school districts from reducing the health insurance benefits offered to retirees unless the changes are approved by the local teachers union, in order to help lower local taxes.
State leaders should not stand in the way of school district managers that find ways to provide satisfactory benefits at reduced costs to help lower local taxes.
New York should, whenever the opportunity arises, roll back costly mandates that contribute to high local taxes.
New York's tax system relies heavily on personal income taxes from top earners, creating a volatile revenue base that struggles to support government services during economic downturns. To achieve a more stable and equitable system, the state should pursue structural reforms, including a comprehensive review of the property tax system and a shift toward higher-quality, lower-cost government.
Recommendations related to Property Taxes
Proposals that would merit serious consideration include a rearrangement of the state and local tax systems, including reform of the property tax system, to balance equity and stability in their design.
New York's high local taxes are driven by state mandates that force local governments to assume costly obligations, such as the recent bill preventing local officials from managing retiree health insurance costs. This practice bypasses local negotiations and directly contributes to the state's extraordinarily high local tax burden.
Recommendations related to Property Taxes
Governor David Paterson should veto the legislation (A9393A/S6457A) that prevents local officials from achieving savings in the cost of providing health insurance for government retirees.
The state should stop the practice of requiring local governments to assume costly obligations without providing the funding needed to meet them, as this forces local governments to raise taxes.
Local government leaders should be granted the flexibility in negotiating with unions to better manage the escalating expenses of retiree health care.
Key Data
79%
— New York's high local taxes are 79% above the national average statewide.
$49.7 Billion
— The state's liability for government retiree health insurance is estimated at $49.7 Billion.
$57.8 Billion
— New York City's liability for government retiree health insurance is estimated at $57.8 Billion.
New York's existing circuit breaker program for property tax relief is outdated, with income and value criteria unchanged since 1985, causing it to provide relief to fewer residents despite rising costs. An improved circuit breaker model could more effectively replace the problematic School Tax Relief (STAR) program by targeting relief to homeowners and renters based on their income levels.
Recommendations related to Property Taxes
New York should reform its circuit breaker program by updating income and wealth criteria that have remained unchanged since 1985.
The state should replace the problematic STAR homestead exemption program with an improved circuit breaker model.
New York should implement a circuit breaker program for renters that refunds property taxes in excess of 6 percent of New York Adjusted Gross Income.
The state should refund property taxes above 5 percent of income for homeowners earning less than $20,000.
The state should refund property taxes above 7 percent of income for homeowners earning more than $20,000.
Key Data
$18,000
— The current income ceiling for New York's circuit breaker program, which has remained unchanged since 1985.
$51,384
— The median household income in New York in 2006, which is far above the current circuit breaker income ceiling.
$303,400
— The median home value in New York in 2006, which is well above the program's value ceiling of $85,000.
$875
— The median rent in New York in 2006, which is well above the program's rent ceiling of $450.
$2.6 billion
— The estimated cost of a circuit breaker program that refunds property taxes above 5 percent of income for homeowners earning less than $20,000 and above 7 percent for all others.
$2.7 billion
— The estimated cost of a circuit breaker program for renters that refunds property taxes in excess of 6 percent of New York Adjusted Gross Income.
In order to promote fiscal reform, the Citizens Budget Commission (CBC) convened three separate agenda-setting conferences for key stakeholders in the state budget process in 2007. Each session focused on one aspect of fiscal reform with a goal of identifying specific changes for the coming budget cycle. The expectation is…
New York State's high local tax burden is driven largely by heavy reliance on property taxes to fund schools, creating significant inequities between wealthy and low-wealth districts. While programs like the School Tax Relief (STAR) and property tax rebates aim to provide relief, they often fail to lower the overall tax burden and can inadvertently incentivize increased local spending.
Recommendations related to Property Taxes
An easy – and transparent – way to improve upon the STAR rebate program is to base a household’s rebate on property taxes as a share of income.
The State might also benefit from consolidation in its property tax assessment units.
State law could require arbitrators to award wage increases that will not necessitate tax increases or require that any wage increase be funded in part by productivity gains.
A provision to automatically adjust circuit breaker criteria for inflation would further ensure that the circuit breaker program remains effective.
The most dramatic change to the pension system would be to convert to a defined contribution rather than a defined benefit system.
Arbitrators could be allowed to grant an award that is 'chronologically current' in the event of severely expired contracts or an award that matches the length of the contract that is expired.
Key Data
$61 billion
— Total taxes collected by local jurisdictions in New York.
56 percent
— Portion of local tax revenue accounted for by property taxes.
$4.7 billion
— Total school property tax relief spending in fiscal year 2007-08.
42 percent
— Share of STAR aid received by the three wealthiest counties in New York State in 2005.
35 percent
— Amount by which the property tax burden in New York City’s suburbs was higher than in the upstate counties in fiscal year 2005.
$600 million
— School property tax relief spending in fiscal year 1998-99.
New York City's tax structure places a disproportionate burden on commercial property owners compared to homeowners, with office building owners paying roughly seven times more per thousand dollars of value. To improve economic competitiveness and prepare for potential downturns, the city should establish a commission to develop a comprehensive, multi-year strategy for reforming business taxes and incentives.
Recommendations related to Property Taxes
The Mayor and City Council should appoint a blue-ribbon commission to map a multi-year strategy relating to the whole range of taxes and tax incentives.
The commission should develop estimates of the fiscal impact in time for the mayor's January 2008 financial plan and specific recommendations for his executive budget in April 2008.
The city should consider revamping business taxes to take advantage of the thriving economy and surplus revenues to ease the transition for those who will be asked to pay more.
Key Data
$2.3 billion
— Annual cost of excluded taxes, including the commercial rent tax, real property transfer tax, and mortgage recording tax.
$6
— Average property tax paid by homeowners for each thousand dollars of property value.
$41
— Property tax paid by office building owners for each thousand dollars of property value.
$74,000
— Current property tax paid by the Mayor for his townhouse.
$611,000
— Potential property tax for the Mayor's townhouse if it were used for commercial purposes.
7%
— Reduction in property tax rates for all types of property implemented in the recent budget.
The STAR program, originally designed to lower local school taxes, has proven fundamentally flawed by disproportionately benefiting wealthy homeowners while excluding renters and business owners. This program requires restructuring to ensure that property-tax relief is directed toward those who need it most rather than being expanded in its current ineffective form.
Recommendations related to Property Taxes
The state should restructure the STAR program to deliver property-tax relief where it's needed most.
The economic literature suggests that while higher local taxes can discourage growth, the magnitude of this impact is subject to significant debate and varies based on the specific tax and economic context. New York City's property tax structure, particularly the disparities between different classes of property, warrants reform to reduce economic distortions and improve the city's competitiveness.
Recommendations related to Property Taxes
Policymakers should pursue property tax reform, in particular by reducing differentials across property classes.
The city should prioritize broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
Policymakers should aim for a tax structure that addresses equity considerations and stability of revenue streams alongside economic efficiency.
The city should seek credible quantification of property tax costs to reduce the influence of politics on tax policy.
Key Data
$400
— Maximum annual property tax rebate provided to homeowners, including owners of condominium and cooperative units.
19.1%
— Average long-run change in economic activity resulting from a 10 percent change in property taxes in one locality compared to its neighbors.
26,400
— Estimated increase in private sector employment resulting from phasing out the 18.5 percent increase in property tax rates instituted in 2002.
$1.6 Billion
— Estimated net revenue loss associated with phasing out the 18.5 percent increase in property tax rates instituted in 2002.
New York's local tax burden is the highest in the nation, driven largely by state-mandated costs like Medicaid and inequitable school aid programs such as the School Tax Relief (STAR) program. To address these fiscal challenges, the state must reform its school aid distribution, redesign pension benefits, and implement stricter controls on state debt and budget transparency.
Recommendations related to Property Taxes
Reduce State-mandated local government Medicaid costs more than authorized by the 3 percent cap on local growth enacted in 2005.
Redesign State school aid programs including STAR to better serve poorer districts and thereby lower their local school tax burden.
Redesign the State-mandated pension benefits for future state and local government workers through changes such as raising the minimum retirement ages, increasing the required employee contributions, eliminating inclusion of overtime in benefit calculations, and eliminating variable supplements for uniformed workers.
Lower Medicaid expenditures by eliminating long-term care eligibility loopholes that extend benefits to middle-class residents.
Key Data
158 percent
— The local government portion of the tax burden in New York is the highest in the country and is 158 percent of the national average.
165 percent
— The local tax burden in New York City is 165 percent of the national average.
$3.4 billion
— The School Tax Relief (STAR) program has grown in annual appropriations from $582 million in 1999 to $3.4 billion in the current fiscal year.
28 percent
— The wealthiest districts receive an average of 28 percent more per pupil in STAR aid than the poorest districts.
$7,912
— New York’s average Medicaid spending per beneficiary is $7,912, which is 176 percent of the national average.
New York's reliance on local property taxes to fund schools creates significant inequities, as wealthy districts can raise more revenue at lower tax rates than poorer districts. To address these disparities and meet court-mandated funding requirements, the state must consider reforms such as restructuring existing taxes, implementing a luxury tax on wealthy districts, or shifting toward full state funding.
Recommendations related to Property Taxes
The State should fully fund public schools from state sources to eliminate disparities in local tax burdens and spending levels.
New York should adopt school aid formulas that apply a uniform local tax rate across districts and provide aid only to those that cannot meet per pupil adequacy targets.
The State should free up existing resources to fund schools by cutting spending on other services, such as Medicaid and the prison system.
New York should restructure existing taxes, such as collecting sales tax on remote and internet sales or broadening the sales tax base, to increase revenue and improve tax policy.
The State should impose a luxury tax on wealthy districts by adding a tax surcharge onto local effort above a spending threshold to share revenue with less fortunate districts.
Key Data
$21.0 billion
— Amount of local taxes provided for school operations in the 2004-05 school year.
$3.2 billion
— Cost of the STAR program in school year 2004-05.
$8.4 billion
— Estimated cost of a statewide solution to the CFE-generated mandate.
$158,319
— Average actual valuation of property per pupil in the lowest spending 10 percent of districts in 2002-03.
$1,200,109
— Average actual valuation of property per pupil in the highest spending 10 percent of districts in 2002-03.
New York's school finance system relies heavily on local property taxes, which creates significant funding disparities between wealthy and poor districts. To address the need for additional school funding, the state should shift responsibility toward statewide revenue sources rather than relying on local property taxes, while also implementing educational efficiencies and accountability measures.
Recommendations related to Property Taxes
The State should establish a longer-run goal of significantly increasing the share of all public school funds raised from statewide revenues and decreasing (and perhaps eventually eliminating) the mandated share raised by local school districts.
If the Court mandate for a sound basic education requires more than is available from other sources, the State should consider a new State property tax of between $31 and $43 per $10,000 of property value.
The State should revise State aid programs to better target funds to poorer districts and establish a higher baseline for State funding to reduce the reliance on local property taxes.
The State should implement a uniform local tax effort policy to eliminate disparities among districts in tax burdens and spending levels.
Key Data
$73
— New York State residents and businesses pay their local governments, including school districts, $73 for every $1,000 of personal income.
$9.20
— Great Neck is able to raise $17,381 per pupil in local revenue by imposing a tax rate of $9.20 per $1,000 of tax base.
$16.70
— New York City’s combined school and Medicaid tax effort significantly exceeds the statewide average of $16.70 per $1,000.
$11
— A property tax rate of $11 per $10,000 of market value would yield $1 billion annually.
School finance litigation across various states has frequently centered on the reliance on local property taxes, leading to reforms that often involve shifting toward statewide property taxes or increasing state aid to reduce disparities. These experiences demonstrate that while court victories can drive changes in funding structures, they do not guarantee improved educational outcomes without targeted investments in areas like early childhood education and smaller class sizes.
Recommendations related to Property Taxes
Policymakers should recognize that a court victory does not ensure timely or effective policy responses, as legislative action is often required to achieve meaningful change.
Political leaders must be supportive of court policy directions to ensure that legislative action is prompt and effective.
Policymakers should understand that generating additional spending for public schools does not automatically equal success in terms of improved educational outcomes.
Additional spending is more likely to result in gains in student achievement when the money is well targeted, such as through early childhood education and smaller class sizes.
Key Data
$490 million
— Increase in education funding in Kentucky during the 1990-91 school year alone.
$825 million
— Amount committed by the New Hampshire state legislature for education in the fiscal year 2000-01 biennium.
$922 million
— Estimated amount the Vermont Education Fund was to receive in the 2000-01 school year.
$800 million
— Increase in state education aid in New Jersey in the first year of the Quality Education Act.
$1.4 billion
— Two-year increase in state funding for education enacted by Ohio in Spring 2001.
$18.8 billion
— Total spending on public education in Texas in 1996-97, following the Edgewood litigation.
New York local governments collected a total of $25.2 billion in property taxes in 2000, with an average tax rate of 2.76 percent on full market value. To raise $1 billion in revenue, a statewide property tax would require a rate of 0.11 percent of market value.
Key Data
$25.2 billion
— Total property taxes collected by New York local governments in 2000.
2.76 percent
— Average tax rate on full market value for property taxes collected by New York local governments in 2000.
0.11 percent
— Statewide property tax rate of market value required to raise $1 billion in revenue.
$911.9 billion
— Total market value of taxable property in New York State.
0.81 percent
— Effective tax rate per dollar of market value required to raise $7.4 billion in revenue.
New York City's heavy reliance on local property taxes to fund public education creates an inequitable burden, as the state currently provides a lower share of funding compared to the national median. To ensure a sound basic education, the state should increase its share of funding to reduce the pressure on local tax bases and avoid forcing cuts to other essential services.
Recommendations related to Property Taxes
All additional resources necessary to ensure that New York's students receive a sound basic education should be provided through statewide revenues.
Additional education funds should be raised from statewide taxes rather than through additional local mandates to avoid forcing cuts for necessary services other than education.
Key Data
171%
— New York State residents pay their local governments, including school districts, $73 for every $1,000 of personal income, which is 171% of the national average.
48%
— New York State provides 48% of non-federal revenues used for public primary and secondary education, compared to a national median of 57%.
$68
— In fiscal year 2000, New Yorkers paid $68 for every $1,000 in personal income in state-level taxes, which is 98% of the national average.
17%
— The state share of all school revenues grew from less than 17% in 1930 to nearly 40% in 1950.
New York City addressed its fiscal year 2004 budget gap in part through an 18.49 percent increase in the property tax, which generated $1.7 billion in recurring revenue. Additionally, $621 million in surplus funds from the current fiscal year, resulting from this mid-year tax hike, were designated to be transferred to the 2004 budget.
Key Data
$1.7 billion
— The yield from the recently enacted property tax increase in fiscal year 2004.
18.49 percent
— The rate of the property tax increase implemented to help close the budget gap.
$621 million
— Surplus funds from the current fiscal year generated as a result of the mid-year property tax increase to be transferred to fiscal year 2004.
New York City's property tax system places an unusually high burden on commercial property, which comprises 28 percent of property value but pays 44 percent of taxes, while small homes pay only 14 percent of taxes despite representing 46 percent of value. To avoid driving away jobs, the city should restructure its property tax system, as the current rates on commercial property are five times higher than those on small residential properties.
Recommendations related to Property Taxes
Unless New York City changes the structure of its property tax, increases will be borne disproportionately by commercial property and will drive away jobs.
The tax on small homes could be raised and would still be in line with neighboring jurisdictions.
Key Data
46 percent
— Share of property value in New York City comprised by small homes.
14 percent
— Share of property taxes paid by small homes in New York City.
28 percent
— Share of property value in New York City comprised by commercial property.
44 percent
— Share of property taxes paid by commercial property in New York City.
$42
— Tax rate per $1,000 in property value for commercial property in New York City.
$8
— Tax rate per $1,000 in property value for small residential property in New York City.
New York State's STAR program is criticized for failing to effectively target local tax relief where it is most needed, while the City's tax reduction efforts are hampered by policies like the extension of the coop and condo tax abatement. These tax strategies are viewed as inequitable or low-priority, failing to adequately address the high local tax burdens that undermine competitiveness.
Recommendations related to Property Taxes
State leaders should address the State's high local taxes, but they should do so with better programs than STAR, which is poorly designed because it does not target reductions in local tax burdens where they are most needed.
The City should avoid perpetuating inequitable tax policy, such as the extension of the coop and condo tax abatement.
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