New York City: Property Tax Haven
Andrew Cuomo announced in Pleasantville, five miles North of my home, as he signed the Property Tax Cap, that the “madness is over”. But Governor Cuomo should know better. The tax cap addresses the ‘top line’ of a problem, not its underlying inequities. The biggest problem with property taxes in New York State is that they are not applied uniformly and fairly.
This morning in the New York Times, Real Estate Section a $1.299M townhouse in Bay Ridge, Brooklyn was featured which pays $5,669 in annual property taxes. My home in Westchester County is valued at $1.265M and pays $36,260 in real estate taxes. The lucky homeowners in Brooklyn pay 0.4% of the value of their home in property taxes; I pay 2.9%.
The difference is that the people in Bay Ridge pay 3.65% in local income taxes, perhaps as much as 3.88% which is the top rate, while we have no local income tax in Westchester County.
If Governor Cuomo had standardized real estate tax rates statewide and imposed a local 3.65% income tax that would have been fair. My real estate tax bill would have drop to $5,060 and I would have paid about $6,700 in local income taxes. Net net, I would have seen my total tax bill drop by $24,500.
Dropping my local tax bill by $24,500, however, would have bankrupted all levels of local government: county, town, water district, refuse district, village and school district. This points out another major difference between the City and the suburbs. The City levies a local tax on business profits of 8.85%, while the suburbs do not. In effect, the City’s business community subsidizes the property owners. Would IBM, Pepsi, Mastercard and Dannon move out of Westchester County if a local tax on profits of 8.85% were levied? They have already moved out of the City to avoid these taxes, so I would guess the answer is "Yes".
This disparity in local tax burdens does point out that New York City taxpayers do not pay their fair share of local property taxes, especially the middle class and upper middle class tax payers in NYC. The truly rich, those who make more than $800,000 per year, do pay more taxes in NYC than in the suburbs for the same unit of real estate.
This issue of inequity is even greater if you take into account the special tax treatment accorded to co-ops and condos. Under New York State assessment rules, co-op and condos pay only 60% of the tax rate of a single family home. This is also visible in the New York Times Real Estate Section today. A condo in Dobbs Ferry valued at $1.8M pays $31,085 per year in real estate taxes or 1.7% of market value, again for a single family house valued at $1.265M I pay $36,260 or 2.9% of market value, 42% more than a condo in the same village . Why is the condo owner getting a lower tax rate than a home owner. Again, the answer is the power of the New York City lobby in Albany. Co-op and condo owners in New York City through the 66-person New York City delegation in the Assembly can block any tax equalization between co-ops and condos versus single family homes.
Governor Cuomo, capping property taxes is a politically popular issue, and you have made some political hay by pushing it through, but what about property tax fairness and equality between jurisdictions and types of property.
Uniform tax regiments across the State would lead to more fairness.
In the meantime, I am selling my house in Westchester and moving into the City – preferably into a co-op.
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