Gov. Andrew Cuomo hates the new federal tax law. He’s suing Washington for its “targeted assault” on New York and his administration’s best minds are working to insulate the state from the law’s effects. While the battle rages on, Cuomo is also fighting the tax war on a more local front against a less powerful opponent: municipal governments, and their multilayered bureaucracy. If local governments issue lower property tax bills, the thinking goes that any changes from Washington could hurt less.
As Martha Stark, the policy director for Tax Equity Now New York, told City & State, “The $10,000 cap on state and local deductions won’t feel as bad if your property tax didn’t go up.”
The new federal tax law sets a $10,000 limit for the state and local tax deduction, meaning New Yorkers paying more than that in state and local taxes will be on the hook for more money than ever. Cuomo fears the bigger tax bills will send more residents south to Florida, and he may have a hard time stopping them. Tax experts doubt the efficiency and legality of Cuomo’s tax workarounds and state Senate Majority Leader John Flanagan isn’t eager to work with the governor.
Tackling local taxes may be easier.
Cuomo plans to do that through the County-Wide Shared Services Initiative. Starting last year, the governor pushed counties to hold meetings about sharing services like snowplowing, trash pickup and fire services across municipalities in order to save money. If the counties actually instituted the reforms, the state government would match the savings, further reducing the property taxes municipalities needed to charge to stay afloat.
The Cuomo administration said 34 of the state’s 62 counties took part last year, finding a total of more than $200 million in savings. Cuomo’s budget would give the counties equal to what they saved, and if that carrot isn’t enough, Cuomo also has a stick – he’s proposed withholding state aid unless counties continue to hold consolidation meetings. “We must do more,” the governor said in his State of the State address, “because property taxes are now toxic to our economy and our stability.”
One important voice is on board with the plan. “I’m such a believer in this consolidation,” said Democratic Assemblywoman Sandy Galef, who chairs the Real Property Taxation Committee.
“It’s not a huge amount of money probably for every municipality, but setting the tone for pulling ourselves together and saying, ‘Where can we save’ was certainly directed by the governor,” she said. “I give him great credit for kind of convincing localities to do that.”
But not everyone is a believer. Dutchess County Executive Marcus Molinaro, a frequent Cuomo critic, has called the plan “intrusive” and noted that 70 percent of his county’s spending is on unfunded mandates from state government. But the criticisms didn’t stop Molinaro from participating in the initiative, and Dutchess County expected to save $27 million by sharing services, including $600,000 alone from buying road salt as part of a cooperative, according to the Poughkeepsie Journal.
The initiative does not do anything for the 8.5 million residents of New York City, which already shares services across its five counties, but consolidation is just one of the ways Cuomo is trying to keep property taxes lower. The state will once again cover the cost for any growth in counties’ Medicaid costs, and all municipalities except New York City are again barred from raising property taxes by more than 2 percent in a given year without a local override vote. Cuomo is also continuing the property tax relief credit, an income-based refund of property taxes that, according to the state, sent an average check of $380 to 2.6 million New Yorkers. In turn, Cuomo is hoping to limit the increase in the school tax break, or STAR rebates.
While any change to STAR may be opposed, the rest of Cuomo’s proposals are expected to stay in the budget, which is due March 31. The Republican state Senate majority has made reducing property taxes one of its main goals for this legislative session, and Democrats are eager to soften the blow of President Donald Trump’s tax plan.
The parties can expect to hear more dire language about the state and local tax deduction as the budget deadline nears.
“Our property taxes have long been an obstacle to growth,” Cuomo said in his State of the State address, “but today the federal SALT provision, it is an economic cancer.”
REAL ESTATE ISSUES
Property tax cap
Property taxes are effectively capped at 2 percent growth per year everywhere in the state except New York City. State Senate Republicans love the fiscal discipline, and want to make the cap permanent statewide, and state Sen. Andrew Lanza has a bill that would put the five boroughs under the cap as well. New York City Democrats have never liked the idea, but the idea could gain more traction this year, amid growing fiscal fear. Meanwhile, New York City officials have continued to call for changes to the city’s unfair property tax system, although little progress has been made.
Critics of the Scaffold Law argue that New York is the only state in the country where construction contractors and property owners are fully liable when a worker gets hurt on a construction job, while supporters insist it’s essential to protect workers. The law also contributes to high building costs. Business groups and developers have been trying to repeal it for years, and even though Rep. John Faso has joined Assemblyman John McDonald on the case, change is unlikely after it was left out of Gov. Andrew Cuomo’s executive budget.
The “LLC loophole”
Campaign contributions from limited liability corporations aren’t treated like those from other businesses, meaning they can be used to subvert contribution limits and pour money into political campaigns – a popular tactic for real estate developers, who often control many LLCs. Cuomo’s been a big beneficiary, so many Democratic legislators have doubted his resolve in passing legislation to close the so-called “LLC loophole.” He listed it as a priority for the third straight year, but has failed so far. A pending court case, however, could make legislative action unnecessary.
Cuomo spoke about the record number of homeless New Yorkers in his State of the State address, but his budget didn’t propose any additional spending for affordable housing beyond his five-year, $20 billion plan, now entering its third year. Still, he plans to allocate nearly $500 million this year to build affordable housing units, working toward the state’s goal of 100,000 units.