In New York State’s infinitely complex tax regime, STAR is perhaps its most confusing element.STAR stands for School Tax Relief rebate program.It was enacted in 1997 during the Republican Pataki administration.Some experts think that STAR set the stage for runaway education spending by mitigating the effects of school district tax increases.
The benefits of STAR are easy to grasp, i.e., my school tax bill is $2,083 less this year and would have been $4,166 less had I been 65 years of age and earned less than $74,700 in 2008.The STAR program is good for every home, coop and condo owner in Dobbs Ferry; rich and poor because there is no income limit on BASIC STAR.There is talk to exclude rich folks who own houses worth more than $1,500,000 but with house prices declining at the high end of the market such a move would have little fiscal impact and just be pure populist politics.
For the average homeowner in Dobbs Ferry paying about $11,500 of school taxes, BASIC STAR means that the good old State of New York is paying 18% of your school tax bill every year (36% if you are a qualifying middle or low income senior under ENHANCED STAR).Most of you don’t even know that this is going on because you pay your school taxes through your mortgage and you are only aware of your monthly payment to the bank.Those lucky, few people who own their homes outright don’t see the effect either, because the STAR payment goes directly to the school district and is netted from the tax bill that they receive from The Greenburgh Tax Receiver, the Honorable David Dwinell.
The macro-effect of STAR is that the median resident of Dobbs Ferry gets ½ of his or her State income tax refunded indirectly from the State through this rebate.While most senior citizens due to this rebate effectively pay no State income tax at all.No wonder the State is bankrupt.
Here is the math to support those provocative statements.Estimated median household income in Dobbs Ferry was $87,833 in 2008 according to www.city-data.com/city/Dobbs-Ferry-New-York.html .Using TurboTax and creating a sample tax return, a married couple using the standard deduction would owe $4,195 in New York State tax.The BASIC STAR rebate is worth $2,083, so the effective tax payment to the State is only $2,112 or 2.4% of median income.
For a senior couple earning less than $74,700, the deal is even better and the drain on New York State’s coffers even more pronounced.I assumed that the retired couple was getting $25,000 from Social Security, $25,000 from an IRA and $24,700 from a saving account.Such a retired couple would owe $1,635 in New York State income tax.Adjusting for the ENHANCED STAR rebate, the senior couple actually gets a tax subsidy of $2,471.
After doing the math for a senior couple earning the median income of $87,833, I figure out why the Honorable Andrea Stewart-Cousins wants to reinstate the MIDDLE CLASS STAR rebate.Without the MIDDLE CLASS STAR rebate which she helped repealed in 2008, such a couple would endure the inequity of paying some New York State income tax.Hey, it is an election year and what has she done for you lately.
As the population ages and more and more people are over 65, the State finances are going to get worse and worse.The double whammy of unaffordable public employee pensions and tax exemptions for senior citizen is going to bankrupt New York State.Politically who get resist giving boons to the elderly; no politician that I know.
Eventually, STAR will have to be repealed to balance the New York State budget.Afterall STAR makes little macro-economic sense; it just moves money from one level of government to another.When that happens, the stress on school budgets caused by the Great Recession will look like child’s play.The Dobb Ferry Free Union School District will be facing a funding cut of 22%; for Dobbs Ferry that means 88 staff members.But not to worry, my last child will have graduated from Dobbs Ferry High School by then and it will be the problem of the next generation.