Options for Property Tax Reform: Equitable Revenue Raising Reforms for NYC's Property Tax
The Most Important Economic and Fiscal Decisions Facing the Next Mayor
Mayor-elect Bill de Blasio inherits a budget that is balanced in the short-term and has relatively modest gaps in the later years of the four-year financial plan prepared by the Bloomberg Administration. But the balanced budget provides no money for pay increases for past years when municipal employees worked under expired contracts, does not fund the expanded prekindergarten program that is a high priority for the new administration, and makes no provision for other new needs or initiatives that may be identified. In order to address these concerns, more money will be needed.
New York City’s property tax deserves an especially close look as a potential source of revenue for two reasons. First, the property tax is the single largest source of tax revenue for New York City. Second, New York’s complex and opaque property tax is riddled with inequities and inefficiencies. Budgetary necessity will likely require some form of increase in the property tax levy. The moment should not be wasted as an opportunity to make the system more transparent and equitable as well.
The purpose of this report is to describe three options for increasing property tax revenues. The first of these options maintains status quo inequities; in contrast, the other two address some major problems with fairness and efficiency that characterize current policy. In assessing each option we focus on the effective tax rates (ETRs) borne by property owners and how the burden of raising additional revenue would be spread across different categories of property. The ETR for a property is equal to the tax billed to the property owner divided by the property’s market value.
This paper was developed for a CBC Conference, The Most Important Economic and Fiscal Decisions Facing the Next Mayor, held on December 6, 2013 in New York City. A video of the presentation and panel discussion can be found here.