ALBANY – The average homeowner is looking at a modest annual property tax savings under a proposal announced Monday by Gov. Andrew M. Cuomo, while businesses would receive breaks in utility expenses and corporate income taxes.
Taxpayers will, however, have to be patient: The full impact of the plan would be backloaded and would not fully take effect until the state’s 2016-17 fiscal year.
While Cuomo said the property tax package, when fully implemented, would be worth an average of $350 in savings per property owner, a budget watchdog group insisted that the savings would be worth only about $40 to $80 annually per property taxpayer across most of upstate.
The governor’s election year proposal, which will be subject to legislative approval during budget talks this spring, was floated Monday in advance of his State of the State address Wednesday.
Some business groups hailed the plan, while advocates for various social programs said Cuomo’s idea would take money away from public schools, health care and other areas of the budget.
The tax cuts are being made affordable by a projected $2 billion surplus, the governor said, but that level of black ink is not expected for a couple of years. Monday, the governor’s budget director, Robert L. Megna, could not say how much money the tax cuts will be worth to New Yorkers in the coming fiscal year that begins April 1.
That did not stop the Cuomo administration from announcing the package of tax breaks at a news conference that included a number of local economic-development officials from across the state.
The governor called the cuts the “essence of our economic package,”’ which will be more fully outlined in his 2014 budget plan, and vowed to give special assistance to property owners and businesses, including upstate manufacturers.
When Cuomo’s plan is fully implemented in 2016-17, he said, the cuts will be worth $2.2 billion annually, though there is nothing to stop future governors or lawmakers from tinkering with the cuts to steer taxpayer savings to other areas of the budget, especially if the economy turns sour in the future.
Legislative leaders offered diplomatic praise for the plan and said they look forward to negotiating the details in state budget talks.
Cuomo said his plan to keep state spending in 2014 growing at no more than 2 percent will still allow New York to pay for a tax cut because of improving state finances, thanks largely to a stronger economy – albeit one growing slowly. The governor’s plan largely accepts last month’s recommendations from a commission led by former Republican Gov. George E. Pataki and former Democratic State Comptroller H. Carl McCall.
The governor said he intends to push a plan to freeze property taxes for two years by having the state pick up the cost of increases in the levy.
But the offer comes with two caveats: Localities must agree to live within the state’s 2 percent property tax cap program and, in the second year, also demonstrate “concrete” steps to share or consolidate services with nearby localities.
Localities don’t have to join the program, Cuomo said, but if they do not, they will have the politically delicate duty to explain to local voters why they will not get a state income tax credit to help pay their property taxes.
After that two-year program ends, a “circuit breaker” program would kick in, aimed at reducing the property tax burden on lower- and middle-class homeowners. It would apply to households with total incomes of less than $200,000 and be worth up to $1,000 as a tax credit against state income taxes. It would affect about 2 million people, state officials said.
Property taxes in the state total $49 billion annually for homeowners and businesses. “The property tax, I believe, is the most crushing tax,” Cuomo said.
The governor blamed high property taxes in New York on the 10,500 different levels of government entities across the state, a theme he raised more than four years ago when he was attorney general.
Over the years, the state has not mounted a serious effort to try to reduce or stem the increase in the number of local government taxing authorities.
On business taxes, Cuomo said, he is accepting the commission’s plan, including reducing the corporate income tax rate for upstate manufacturers to zero, and decreasing the state income tax rate to 6.5 percent, from 7.1 percent.
An assessment on utility bills, currently due to expire in 2018, would end in 2014 under the Cuomo plan.
While several business groups praised the tax-cutting effort, some conservative and liberal groups issued warnings about the package’s value.
“How do you call this meaningful?” E.J. McMahon, president of the Empire Center for New York State Policy, said of the property tax savings, which he said would be worth only about $60 for average homeowners in Erie and Niagara counties.
“Are they honestly saying that giving folks in Western New York $60 a year is going to boost the upstate economy? Really?” he added.
McMahon noted that the plan provides less than the guaranteed $350-per-property tax rebate checks approved last year that will conveniently hit residents’ mailboxes just before election day this fall. Residents seeing the steepest property tax savings under Cuomo’s plan – which McMahon estimated at $275 a year – live in Westchester County.
McMahon also said that the number of units of local government is about one-third the Cuomo estimate and that most of them are towns and school districts that voters have shown little interest in merging.
Groups whose financial sponsors include labor unions dismissed the Cuomo plan for providing, in the words of one, “gratuitous tax cuts for millionaires” in corporate and estate tax breaks, while ignoring calls to limit tax credits to companies for job-creation efforts that would have occurred with or without the tax advantages.
Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, said Cuomo’s plan would give the owner of a $5 million home a $1,000 tax break, while one with a $250,000 home would get $50.