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Property Tax Cap: Is it the right choice?

January 4, 2012

Center on Budget and Policy Priorities

The Center on Budget and Policy Priorities is a policy organization in Washington D.C. that works with state governments and fiscal policies.  Their research allows state governments to form fiscal policies that would best suit their needs and their particular financial situation to alleviate poverty.  The Center looks at both the short and long-term impacts of fiscal policies to make sure the state is making the best policy decision.  

The Center has researched state property tax cap policies (which are becoming a trend) and has focused one report, Hidden Consequences: Lessons From Massachusetts for States Considering a Property Tax Cap, on the impacts of the Massachusetts property tax cap, Proposition 2 1/2, which has been examined by other states thinking about enacting a property tax cap.  The report outlines tax cap impacts that should not be over looked including the fact that property tax caps should not be implemented during a weak economy because when local governments decrease their revenue from property tax caps they have to make up for the lost revenue through state aid or other sources, which may not be available.  Also, a property tax cap will not make local government services cost less and savings from a more efficient government is exaggerated.  The report sends the message that states should be weary when adopting property tax cap legislation and points out some of the finer points that must be considered.

The report is available here.

New York Conference of Mayors

The New York Conference of Mayors (NYCOM) is an organization that consists of policy experts and the mayors of the State of New York and is dedicated to serving the interest of New York’s local governments.  New York has recently passed property tax cap legislation that prohibits municipalities from increasing the property tax levy rate more than 2%.  However, this does not mean that a resident’s property taxes will not increase by more than 2% because only the levy rate is capped.  NYCOM issued a report, You Can’t Cap What You Can’t Control, discussing New York’s property tax cap and how the legislation will not solve the fiscal problems local communities are facing if mandate relief provisions are not enacted.

The report suggests that without mandate relief a property tax cap will not allow a local governments to truly provide property tax relief to its residents.  Mandate relief provisions that are suggested and discussed include temporarily freezing public sector wages, requiring local government employees and retirees to contribute to the cost of health insurance, restructuring pension cost sharing and benefits, reform the Taylor Law (collective bargaining), and reforming the prevailing wage provisions under New York’s Labor Law. 

The NYCOM report is available here.

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