Thursday, December 1, 2011

A tax cap with no teeth

By Bob Confer

Earlier this year, the tax cap was instituted by the state legislature at the behest of Governor Cuomo as a means to curtail the ongoing decline of New York State by limiting the growth of property taxes which are already 79 percent higher than the national average.

Although the basic concept itself was not perfect – after just 5 years of 2 percent hikes your taxes will be more than 8 percent higher – it was advertised as being better than the alternative: This century it has not been uncommon for municipalities and school districts to drive up their levies by more than 5 percent per year. Case in point, during a three-year period ending in 2007 my total property taxes (local, county, school) grew by a combined 17 percent.

But, as taxpayers like me who are pained by these growing levies have found out recently, there’s a huge difference between the original intent of the law and the reality of what it became. The tax cap is really nothing of the sort, a law saddled with loopholes that permit tax growth far in excess of the 2 percent mark.

First and foremost among these flaws is the ability of governing bodies (such as town and village boards) to create a local law applicable to the budget year that would allow them to exceed the cap. To do so, they need only hold a public hearing followed by approval of 60 percent of the board. School districts, too, can pass higher budgets given that, unlike the towns, their residents elect to do so with a vote of at least 60 percent.

It’s too bad that rule of public approval applied to schools wasn’t required of the other taxing jurisdictions, because many boards across the state have been using the loophole. Last week the office of State Comptroller Thomas DiNapoli provided me some numbers about how many taxing entities (specifically cities, villages, towns, counties, fire districts and libraries) have informed him of their plans regarding the cap. So far, 40 percent have submitted their plans and of those 1,125 bodies, 217 of them – or 19 percent – have expressed their intent to override the cap.

The cap’s weaknesses further confound local taxpayers with an exclusion for pensions; their growth is allowed to exceed 2 percent. Unlike private retirement investments such as IRAs or 401(k)s, public pensions have guaranteed outcomes in New York. So, when the economy falters, taxpayers have to make retirees “whole” by picking up the slack for the low or negative rates of returns on the investments that back state pension funds. DiNapoli said municipalities will have to increase their pension contribution rates from 16 percent of payroll to a tad under 19 percent (that’s a growth of 16 percent!). For police officers, the payment will go from 22 percent to 26 percent of payroll. So, in most cases, it’s guaranteed that the theoretical 2 percent cap will be exceeded by pensions alone.

The greatest problem with the tax cap, though, doesn’t occur in our neighborhoods. Albany is the root of all evil in this state. The state legislature and executive branch can’t force unconscionable mandates upon taxing jurisdictions and expect them to stay within budget, especially when the state has done little to nothing to reform the requirements of said mandates. If Cuomo and Friends were serious about stemming the loss of New York’s economic lifeblood they would introduce any of hundreds of suggested reforms to these programs, the worst being Medicaid, for which the counties are on the hook for nearly $10 billion annually.

Albany, too, should cap its spending (Google my 2008 column: “Taking the tax cap to the top”) because what’s good for the goose is good for the gander. Every government entity - our towns, schools, agencies and capitols - should cap (preferably decrease) their spending…just like we have to in our businesses and families if we expect to stay in business or not lose our homes to foreclosure.

Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at


This column originally ran in the 05 December 2011 Greater Niagara Newspapers

No comments: