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The Most Important Economic and Fiscal Decisions Facing the Next Mayor

Options for Property Tax Reform: Equitable Revenue Raising Reforms for NYC’s Property Tax Andrew Hayashi. The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission Conference December 6, 2013. Raising Property Tax Revenue by Fixing Inequities.

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The Most Important Economic and Fiscal Decisions Facing the Next Mayor

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  1. Options for Property Tax Reform:Equitable Revenue Raising Reforms for NYC’s Property TaxAndrew Hayashi The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission ConferenceDecember 6, 2013

  2. Raising Property Tax Revenue by Fixing Inequities • The new administration will seek to raise revenue • That revenue can be raised from the property tax in ways that reduce inequities due to:   • Class share system • Assessment caps and phase-ins • Valuation of condos and co-ops  

  3. Example of Interclass Inequities Source: New York City Department of Finance, Property Tax Rolls, Fiscal Year 2013.

  4. Example of Intraclass Inequities Source: New York City Department of Finance, Property Tax Rolls, Fiscal Year 2013.

  5. Why Inequities Matter • Interclass Inequities– intended to encourage homeownership, but: • NYC differences are excessive relative to social benefits of homeownership • Low homeowner taxes shift burden to rental properties • Economically inefficient— discourages most productive uses of land • Intraclass Inequities– inherently unfair, and: • Favors appreciating property over depreciating property • Caps and phase-ins sacrifice revenue rather than simply smoothing cost over time

  6. Three Revenue Raising Options–$2 Billion • Option 1: Conventional approach – Proportional rate increases • Option 2: Tax all homeowners at the same higher rate • Narrows gap between homeowner and other property types • Evens tax rates among homeowners • Option 3: Eliminate caps and phase-ins • Narrows tax rate difference among properties of the same type • Modest closing of gap between homeowner and commercial property tax rates

  7. Option 1: Proportional Tax IncreasesRaises revenue but maintains inequities

  8. Option 2: Treat Homeowners EquallyRaises revenue and eliminates inequity among homeowners • Raises $2 billion entirely from homeowners and co-op and condo owners • Treats homeowners and co-op and condo owners in the same manner • Eliminates caps for homeowners

  9. Addition to the Levy and Change in ETR by Property Type in FY 2015 Under Option 2

  10. Distribution of Class 1 Tax Levy With and Without Assessment Caps by Property Value in FY 2013

  11. Option 3: Eliminate Caps and Phase-Ins

  12. Effective Tax Rates by Property Type, FY 2015

  13. Summary • Can raise significant revenue by eliminating inequities among properties of the same type • Efficiency and equity benefits to reducing gap between owner-occupied and rental properties • Strong case for changing or eliminating assessment caps • Owners can be protected with less costly methods (loans or circuit breakers) • Caps largely benefit the most valuable properties

  14. Tax Revenues The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission ConferenceDecember 6, 2013

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