ALBANY — Everyone pretty much agreed on one thing during Wednesday’s Senate hearing on possible alternatives for education funding: Property taxes are universally unpopular but they will likely continue as a mainstay of school support in New York.
“It is consistently the least popular tax,” said Thomas Downes, a Tufts University economist who was among the speakers at a hearing led by Senate Education Chairwoman Shelley Mayer, D-Yonkers, and Budget Chairman Brian Benjamin, D-Manhattan.
But they are also the most stable over time, since, unlike sales or income taxes, they don’t go up and down with the inevitable economic cycles.
And since homeowners can ultimately lose their houses if they don’t pay, they will forego other expenses to make sure the property taxes are covered.
“One of the things (homeowners) make sure they are going to pay is their (property) taxes,” said Sen. John Brooks, D-Long Island.
“(Property tax) is a stable and predictable source of funding and it is less subject to economic whims than sales or income tax,” said Emily Parker, senior policy analyst at the Education Commission of the States.
The trouble is those taxes tend to rise with home values, even if incomes aren’t keeping pace. “Their homes are appreciating greatly over time. The incomes are not,” Brooks said of many of his constituents, including some who opt to leave the state or simply walk away from their houses which leads to “zombie homes.”
Moreover, with the state’s 2 percent property tax cap becoming permanent this year, the state’s vast education lobby is looking for alternate streams of revenue. Adding to the challenge is the new $10,000 federal limit on local property tax deductions. Homeowners in high tax areas like Westchester County or Long Island feel the impact of that since they used to be able to write off unlimited amounts of their school and county taxes from their income tax filings. Now they hit a ceiling at $10,000.
There are plenty of ideas to fix this but none of them would be easy to implement, experts said.
Some states are looking at things like soda taxes to help pay for schools, while others such as Michigan, have instituted statewide property taxes on secondary homes such as vacation cottages, to fund education.
One thing that lawmakers shouldn’t bet on is marijuana tax revenue, should recreational marijuana become legal.
Despite all the talk of windfalls, the actual amount that would be generated, even at a 20 percent rate, would be a “drop in the bucket” of more than $24 billion in state aid for schools, said Daniel Thatcher, program director for the National Council of State Legislatures.
“It’s not enough to really get at the problem,” he said.
While it wasn’t the focus of Wednesday’s hearing, a few lawmakers did make note of New York’s high levels of education spending – which according to recent Census data now averages more than $23,000 per pupil, the nation’s highest.
“It’s not always about what you make. It’s about what you spend,” said Sen. Bob Antonacci, R-Syracuse.
And the economists noted that pension and health care costs for retired teachers and other school employees will continue to consume more and more tax dollars. That’s especially true in upstate rural districts that are losing students – and taxpayers -- due to population losses.
“We’re paying more out in retirement than we are for the active teachers. It is a problem, but I don’t know how you solve it,” said Sen. Betty Little, R-Queensbury.
One possible way to shift the burden of property taxes is to bolster the circuit breakers, or income-related discounts or rebates on property taxes, participants said.
New York already limits the School Tax Relief or STAR tax break to families with incomes below $500,000. But the breaks could be more progressive – that is, tied to a sliding income scale, they said.
States such as Vermont have done that, with the result being that people’s property tax bills are more in line with their incomes.
Despite the challenges, participants said they believe the lawmakers were right in trying to rethink the dependence on property taxes.
“You’re doing the right thing by taking a critical look at your property tax system. It’s a great first step,” said Parker.
“There needs to be a constant conversation.”
Added Mayer, “We have a lot of work to do.”