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On a recent day at City Hall, Mayor Michael Bloomberg presented his annual $46 billion budget in the Blue Room on the west end of the building, while City Council Speaker Gifford Miller presented his budget in the Red Room at the east end of the building.
But when the two spoke about their rival tax cut plans, it seemed as if they had magically changed places.
The billionaire Republican Mayor Bloomberg sounded like a populist, accusing the City Council of catering to corporations and of neglecting the working people of the city.
"Somebody’s got to pay for the services," the mayor said, "and the truth of the matter is, the homeowners are less able than big business."
Meanwhile Democratic Speaker Miller sounded a lot like a Republican, arguing that a permanent, across-the-board tax cut for businesses and landlords would help stimulate the economy.
"They want a tax cut; they don’t want a check," said Miller. “They want to see their taxes go down.”
This year, New York’s budget battle has come down to tax cuts. Mayor Bloomberg wants to give $400 to each owner of a co-op, condo, and private house. Speaker Miller wants to reduce the property tax rate for all homeowners and businesses by two percent.
Despite their different approaches, the mayor and the speaker both start with the same basic assumptions about tax cuts:
And -- though not stated explicitly -- both officials clearly assume that the tax cuts will help get them elected in 2005.
However, many budget watchdogs argue that neither plan is particularly good for the city.
Can the city afford a tax cut? And do they really produce what politicians promise - or are they just a way to get votes?
The theory of how taxes affect the economy, simply put is: If government taxes an item, it adds to the cost. As the price rises, fewer consumers wish to purchase the good and the quantity produced also decreases. The government gets the revenue from the tax, but both the consumer and the producer of the product bear the increased cost, and demand for the product will fall as a result.
The tax is not just a transfer of wealth from consumers and producers to the government; it is a permanent loss of economic activity to the whole society. This is why most economists agree that taxes reduce some of the incentive to spend, save, and invest.
At the same time, though, taxes pay for essential services that citizens demand from their government, such as schools, police officers, fire departments, and libraries.
While federal taxes have been instituted and rescinded in America since the mid-1800's, the notion of using tax cuts to "fix" the economy, experts say, is a modern one.
President John F. Kennedy issued one of the first major tax cuts designed to stimulate the economy, which was passed by his successor Lyndon Johnson in 1964.
Kennedy's plan instituted a new standard deduction, increased deductions for childcare expenses, and lowered taxes, including for those in the top tax bracket. The idea was that each dollar a person spent instead of paying taxes would go to another person who would spend it again. The plan used the immediate boost in economic activity to justify a government deficit. And the initiative is one that many economists point to as an example of successful tax relief. For a time, the national economy rebounded.
In local economies like New York's, tax cuts are often used to make a city more competitive with the surrounding area, and with other cities. New York City depends on an array of property, income, sales, and business taxes for revenue, and some argue that they affect people's decisions about where they work and live.
“There is some evidence that higher property taxes - all else being the same - are a factor in where people choose to live,” said Sanders Korenman, an economics professor at Baruch College.
However, one must also consider what those taxes are paying for. If taxes are cut, government spending must be cut as well.
"I don't mind paying my taxes because they fund valuable services like education," said Korenman. "You must look at taxes and expenditures together as a whole.”
Many people in the city point to the repeal of the commuter tax in 1999 as one of the worst tax cuts for New York City. State legislators in Albany eliminated the tax on people who worked in the city but lived in the suburbs as part of a political battle between the two parties over one upstate legislative contest.
The loss of the commuter tax costs the city $500 million a year in today's dollars - or enough money to pay for all of the city's parks along with all of its programs for senior citizens and for youth.
Once the discussion gets beyond basic economic theory, experts have wide and divergent views on whether tax cuts actually benefit New York City.
E.J. McMahon, a fellow of the Manhattan Institute, for example produced a study in 2001 concluding that 80,000 jobs - or one in every four new jobs in the city - had been created by local tax cuts in the previous five years.
“The lesson is clear: Tax cuts work,” wrote McMahon. “And in the years ahead, the best way to continue building New York’s job base will be to continue reducing its still-heavy tax burden – and by all means, avoiding adding to it.”
However, others, like James Parrott of the Fiscal Policy Institute see the same Giuliani era tax cuts as mistakes that helped create huge deficits for the future.
“I can’t think of any [recent] local tax cut that has made sense,” said Parrott.
Parrott argues that the way for government to create jobs and make the city more attractive is to invest in education, housing, and new development projects. “In general, what the city can do to stimulate the economy," he says, "is most often on the spending side."
Most voters, however, want it both ways. They want their taxes to go down. And they want good schools, roads without potholes, and a police force to keep them safe.
"There is a core belief in the American political culture that government should be small, but we also want services," said Doug Muzzio, a political science professor at Baruch College. "The public wants a free lunch."
Today, the Republican Party presents itself as advocates for smaller government and lower taxes, while the Democratic Party emphasizes vital services like education and social services for citizens.
But this was not always the case.
The first federal income tax was issued by a Republican administration, during the Civil War. For decades, it was the Democrats who painted the Republicans as a high taxing, big spending party.
It was not until the 1980’s that the Republican Party made tax cuts a fundamental part of the party’s ideology.
President Ronald Reagan argued then that tax cuts could not only stimulate the economy, they could also shrink government while creating greater wealth for the nation. Economists still debate whether the Reagan cuts really led to boom times, or just created huge deficits.
Today, tax cuts are once again the rule of Washington, where Republicans control the presidency and both houses of Congress. President George W. Bush has continued the tax-cutting legacy, issuing plans for $330 billion in tax cuts over the next decade. Even growing deficits and the Iraq war have not deterred officials.
“Nothing is more important in the face of war,” House Majority Leader Tom DeLay said last year, “than cutting taxes.”
The national trend has even had a profound effect on New York City, a town where Democrats outnumber Republicans five to one -- and where just six years ago, there was another apparent ideological switcheroo in a fight over a tax cut: In 1998, Miller's predecessor, Democratic Council Speaker Peter Vallone, Jr., called for the elimination of a 12.5 percent surcharge on the personal income tax, which cost the city roughly $500 million a year. Bloomberg's predecessor, Republican Mayor Rudolph Giuliani, said the city could not afford it. The reasoning behind the plan was no secret: Vallone's aides said that the speaker needed a tax cut to attract votes in his race for governor. The tax cut went through, but it did not translate into a win for Vallone.
“Since the late 1970’s and 1980’s, the political notion that tax cuts can help the economy has become more prevalent,” said Marcia Van Wagner of the Citizens Budget Commission, a group that has advocated reducing taxes in New York. “It’s become the political theme everywhere.”
Both Mayor Bloomberg and City Council Speaker Miller argue that their tax cut proposals will help stimulate the economy and return some of New Yorkers’ well-earned money.
Mayor Bloomberg wants the city to write a $400 check to all homeowners who had to pay the 18.5 percent property tax increase imposed in 2002. Business owners and landlords of large buildings would not be eligible.
City Council Speaker Gifford Miller wants to roll back property taxes two percent across the board, including for commercial property owners. A single-family homeowner with a $400,000 house would get about $50, and the owner of a condo of the same value would get about $125. In addition, Miller would eliminate the entire 18.5 percent property tax increase for senior citizens on fixed incomes.
But under Speaker Miller’s plan, the mayor charged, the average homeowner in Queens would get just $49, while Con Edison would get an $8 million tax cut. Miller responded with charges of his own, calling Bloomberg's plan a "Bush-style gimmick."
The mayor’s plan would cost about $250 million a year and would have to be approved by the State Legislature in Albany. The speaker's plan would cost $297 million, and the council could enact it with a simple majority of its own members, or 26 votes.
However, many budget watchdogs argue that neither plan is particularly good for the city.
While the city government has a surplus this year, it is expected to have a $3.7 billion deficit in the fiscal year that begins in July of 2005. Even the mayor admitted that if the economy and tax revenues returned to their highest levels in history – which is unlikely – the city would still not be able to close the budget gap in future years if costs continue as expected.
More fiscally conservative groups like the Citizens Budget Commission say officials should use the money to pay down some of the city's debt. In a letter to the mayor, the group said that although it supports reducing taxes in the city, that his plan was a "mistake" that "distributes the money in a way that is largely ineffective in promoting economic competitiveness."
Left-leaning groups like City Project want the money spent on education and social programs. "Any tax cuts at this point in time - whether proposed by the mayor or the council - are premature and fiscally irresponsible,” said City Project's Bonnie Brower.
While the political rhetoric often oversimplifies the debate over whether taxes are good or bad, budget experts warn that the public must carefully consider various issues when evaluating any tax proposal.
“It very much matters which tax you cut or raise, and how you do it,” said George Sweeting of the Independent Budget Office.
Who Gets the Tax Cut?
One consideration is whether a tax affects all people equally.
In the case of the city’s property taxes, many agree that the elected officials would do better to reform the current system than to issue pre-election tax cuts. In 1993, Mayor David Dinkins did an assessment of the property taxes and found that the system was "inordinately complex” and “poorly understood by taxpayers." Commercial real estate owners, multiple apartment landlords, and utilities pay much more than single-family homeowners.
“I have friends who own brownstones in Park Slope who pay next to nothing in property taxes,” said Van Wagner.
Who Needs A Tax Cut?
Another issue is who is most able to afford a tax increase.
Last year, for example, the mayor and City Council imposed a surcharge on personal income taxes for residents who make more than $100,000 a year and couples who make more than $150,000 a year based in part on the argument that they are more able to afford it. However, it could be argued that the sales tax – which also rose in both the state and city to a total of 8.625 percent in 2003 – is tougher on lower-income people.
“With any tax cut one must ask if this is being done to improve efficiencies, or if one party wants to appear to give money to one group or another,” said Korenman.
Does It Make the City More Attractive?
Also, various taxes may have the ability to make the city more or less competitive with surrounding areas.
The city, for example, has lower property taxes for individual homeowners compared with those in the suburbs, but the city also has several business taxes that make it more costly for companies to have their offices in New York.
Can the City Afford It? The most important measure is if the government can really afford a tax cut. And that is when the arguments circle back to the beginning.
Some would argue that if the city government cut spending and lowered taxes, that the whole economy and government would fare better. Others argue that tax cuts will starve essential services, making the city dirtier, more dangerous, and in general a less desirable place, inducing people to leave.
“No economist will argue that taxes do not affect an economy,” said McMahon. “The argument is over how much it affects the economy, and how that is offset by other spending.”
Whether or not Mayor Bloomberg’s or Speaker Miller's tax cut is approved this year, some warn that the city’s situation is growing more tenuous. Budget experts on all sides agree that the city’s long term budget situation – with growing debt, increased costs for health care, and increased labor costs – is troubling.
And a recent report by the Federal Reserve Bank of New York concluded that the city’s tax revenues are less reliable than they were 30 years ago because they rely heavily on income and business taxes, which are less predictable than property taxes. As the city’s economy rises and falls, the report argues, so will the government’s finances.
As in the past, that means that today's tax cut may soon be replaced by tomorrow's tax hike.
Related Links:
Citizens Budget Commission
City Project
Independent Budget Office
Federal Reserve Bank of New York
Fiscal Policy Institute
Manhattan Institute
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If Ikea has its way, the old maritime community of Red Hook will soon be home to the chain's largest store in the country. The massive furniture and housewares store could bring 9,000 cars a day to the area near the Gowanus Canal and will certainly change the character of the neighborhood. So as part of its pitch to sell throw pillows with Swedish names, meatballs in lingonberry sauce and birch veneer storage units on the Brooklyn waterfront, Ikea has promised jobs. On its Web site, Ikea pledges to create 500 to 600 new jobs, many filled by community residents. And the company says these are not dead-end, low-paying jobs but positions offering competitive salaries, health benefits and tuition reimbursements as well as training and growth opportunities.
The pitch has apparently convinced Dorothy Shields, a community activist and retired teacher's aide. "Hundreds of people need jobs," she told Newsday. "It will stop a lot of people doing things that are against the law."
The controversy over Ikea is being echoed throughout the city. With every new project put forth -- the West Side stadium for the Jets, waterfront development in Long Island City for the 2012 Olympics, the Nets arena in downtown Brooklyn -- the developers and the politicians that back them promise jobs. This is as it has always been, and, as in the past, it is an enticing prospect in a city with a current unemployment rate of 8 percent, more than two percentage points higher than the national level.
Such new projects are a linchpin of the Bloomberg administration's strategy to improve the city's economy and put its residents to work. Rather than focus on manufacturing or new industries such as biotechnology, the city has zeroed in on big events, such as the forthcoming Republican convention, and big projects. But do such projects really create jobs? If so, are local residents the ones who get them? And just how good are the jobs?
Seen from one perspective, East New York, the neighborhood in Brooklyn once called the murder capital of the city, was transformed into a kind of urban fairy tale, when 50 acres of rubbled wasteland became the site in 2000 of the Gateway Center, a new mall.
Related Companies and Blackacre Capital Partners spent $192 million to create the mall, which offers 640,000 square feet of stores, including Target, Old Navy, BJ's Wholesale Club and Babies R Us, as well as a new exit ramp off of the Belt Parkway. The mall, developers claimed, created 1,700 permanent jobs.
Supporters of this project and others like it say that they create revenue and provide a magnet that can lure potential customers to a neighborhood where they will patronize older businesses along with the new mall.
"It's a no-brainer. The city gets net new jobs without thinking twice about it," says Patty Noonan of the Partnership for New York City, a research and advocacy group composed of business leaders. While construction brings noise, dust, dirt and closed sidewalks, such inconveniences are "all signs that people want to live and work in these places. They're generally positive economic indicators," Noonan says. And she says some new projects can create prized office jobs as well as retail and food service position. They "provide the cutting-edge space that companies want," she says.
For others, however, the signs do not bode so well. Corporations get huge tax breaks, but do not always create all the jobs they claim they will. And while a new project might generate revenues, the money goes straight to the city, not necessarily to the neighborhood most affected. Many new big box stores and malls are occupied by out-of-town business that may offer the best jobs to suburbanites and give the poverty-wage work to city dwellers. All this can leave some residents feeling trampled.
New York City Councilmember Charles Barron, whose East New York district includes the new Gateway Center shopping mall, says the jobs created have hardly been worth the hype and inconvenience for area residents. "The jobs offered are entry-level, minimum-wage jobs," he says. "The management positions go to people outside of our community, to white people."
Statistics from other projects provide reason for skepticism about some of the businesses' claims. State Comptroller Alan Hevesi released an audit in March that showed businesses do not always deliver the jobs they say they will. The audit, which did not cover New York City, examined the effectiveness of the Empire Zone program, the state's plan to foster economic development in poor areas by giving businesses special tax breaks and other incentives. Hevesi's staff examined 375 businesses and found that they had created a total of 2,380 fewer jobs than they estimated they would when they applied for the program. In fact, almost a quarter of the businesses surveyed had actually cut workers. And in many cases, the companies received tax breaks that far exceeded the benefits, including new jobs, that they provided for their communities. In fact, the report said, 34 businesses that cut workers "apparently improperly claimed certain tax breaks totaling approximately $2.4 million."
Administrators of the Empire Zone program say that Hevesi's office ignores that fact that the size of the tax breaks is usually determined by the actual number of jobs created, not the projected figures. But some businesses made up numbers or did not report at all, and the state does not always check the figures, a 1995 state comptroller's report found. This means that numbers of estimated new jobs, as well as some accounts of actual jobs created, are as diaphanous as a spider's web before a raging rhino.
To address similar problems in New York City, the City Council in 1993 enacted a law that requires the Economic Development Corporation to report on the tax abatements, low-cost loans, and other financial incentives it gives businesses. Aimed more at companies that get benefits from the city for retaining, rather than creating, jobs, the law directed the development corporation to issue a report every year on deals that are worth over $250,000 or that cover preservation of at least 25 jobs.
In a 2001 analysis of seven such reports, the Independent Budget Office found that the reporting law had not accomplished what it set out to do. In fact, the annual reports regularly understated the cost to the city of job retention arrangements and exaggerated the positive effects. Although it did not mention specific companies, the budget office also found that some data was unreliable because it does not have to be verified. "Firms appear to be under no obligation to live up to their jobs created' projections in order to maintain the benefit received," the budget office found.
Development projects spawn temporary construction jobs as well as permanent positions. Rebuilding Lower Manhattan, for example, is expected to generate 10,000 construction jobs each year for the next 13 years. World Trade Center leaseholder Larry Silverstein has pledged to make sure that construction contracts go to minority- and women-owned businesses, which have long been underrepresented in their contracts with the city.
But not everyone takes special steps to ensure that those who need jobs wind up getting them. National chains often bring in outside workers for construction jobs and some management positions, says Perry Winston, architectural director at Pratt Institute Center for Community and Environmental Development. "National firms have national constituencies, or regional firms have regional constituencies, for hiring retail as well as construction. It's hard for them to come in and determine who is a good local contractor," explains Winston.
And many of the businesses at Gateway are from outside the area. The center had three spaces for family-style restaurants. But owners of the local 280-seat Lindenwood Diner (where John Gotti used to confab) felt left out. "All of these big restaurants are going in and we were never offered anything," owner Nick Tsakonas told the Daily News. "We've been in this community 32 years. We have over 60 employees. Everybody knows us. We're very upset. We've been trying to contact them, but we can't seem to get anywhere." Instead, the restaurants in the mall, such as Olive Garden and Red Lobster, are nationally owned chains that can fork out high rents of $30 per square foot.
But even when national chains operate the businesses, local residents can get the jobs. In 2002, the construction of the Time Warner Center, a glass and steel behemoth on Columbus Circle, was wreaking havoc with 3,000 construction workers raising noise and dust.
So New York City Councilmember Gale Brewer thought her constituents should get some jobs in return. Every week for six months, city and state officials, as well as general contractors, building management and shop owners met regularly to coordinate outreach and hiring procedures.
As chair of the City Council's technology committee, Brewer helped put together a web site that job-seekers could use to find jobs in the building. Time Warner Center's managers, Related Management Companies (subsidiary of Related Companies, developers of both the Time Warner Center and the Gateway Center), footed the bill for the web site.
The businesses were hesitant at first. "They were scared," Brewer says. "The private sector doesn't trust the government. . . They thought, "Why should we work with them?'"
One reason was that the city offers consulting services on regulations mandated by Equal Employment Opportunity, the Disability Act and other laws. The luxury Mandarin Oriental Hotel, for example, canceled its contract with a private company that advised them on these issues, says Brewer, "when they found out the city could do it for free."
Much of the effort focused on the Mandarin Oriental Hotel, which had been bombarded with job seekers. The city Department of Small Business Services narrowed down the 6,000 applications to about four for each open position and passed them on to the hotel's human resources department, which did the hiring.
In the end, nearly 70 percent of the 389 new hires at the five-star hotel were from New York City: 90 Manhattanites got jobs. Brewer estimates that her constituents from the West Side made up 20 percent of all those hired. Mandarin also brought on hotel and restaurant workers, including former Windows on the World staff, who had been displaced by the September 11 terrorist attacks.
The entire process was a first for the city, and the city hopes to replicate it in all five boroughs. With the Fulton Fish Market slated to relocate to Hunt's Point by the end of the year, the Department of Small Business Services is working with the area's economic development corporation, community-based organizations and other parties on outreach, hiring and training of new employees.
The lowest paying hotel job at the Mandarin pulls in about $16 per hour, plus benefits. That is because in New York's hotel industry, workers are unionized.
Early on, Mandarin signed a neutrality agreement with the Hotel Trades Council, an umbrella group for the city's nine hotel workers' unions. "Management was very cooperative. It is an agreement, and they kept their end," says union spokesperson John Turchiano. "Rather than getting into any types of fights, they said it's smart business." In return, workers got full medical coverage, pension plans, family benefits, access to scholarships and a legal fund, and salaries ranging from $30,000 to over $100,000 a year.
Not all the jobs at the Time Warner Center are as good. Whole Foods, for example, opposes having a union represent its employees.
And whatever the success of the effort at the Time Warner Center, other communities have had a more difficult time. In 2002, for example, residents of Canarsie, another neighborhood near Gateway, complained that they were not being notified of job openings at the center. "My impression is that Canarsie is being left out and shut out again," Reverend Matteo Rizzo of the Informed Voices Civic Association said at a community meeting.
And Barron says that what happened on the West Side of Manhattan, he says, is "not what happens in communities of color. We do meet with everybody, we make those demands," but still do not get good jobs. “I’m not demeaning anybody’s labor, but these are entry-level jobs,” says Barron. It might be more tolerable if at least the store was owned by a local entrepreneur. But when the owners are out of state millionaires, it raises his ire.
"There's a difference between economic development and economic exploitation," he continues. "When you give a corporation a tax break to hire us on a minimum wage basis, that's straight up exploitation."
Workers in some Home Depots have complained of salaries of only $10 to $12 an hour and say they do not get overtime pay that they are entitled to.
Whatever their failings, the big corporations may offer better salaries and benefits than small neighborhood businesses. One assistant manager at the Home Depot in Gateway Center told the New York Times, "It's a good thing to be able to get a job right here in the neighborhood, a job with benefits, not some mom and pop place way off in the city." His boss told the Times that of the 248 jobs filled at Home Depot, 200 hailed from around East New York.
But the question is whether government and business can do more to create better opportunities for the residents. "Of course [the new projects] are going to create jobs," says Bettina Damiani, project director of Good Jobs New York, which tracks corporations receiving tax breaks. "The real issue is what's the quality of those jobs. Do you create job ladders and training? There's not a citywide policy that would guarantee those things would happen."
The New York City Council's responseto Mayor Michael Bloomberg's preliminary budget offers a refreshing display of alternative budget choices. After releasing his cryptic, status-quo plan in January, the mayor has mostly left the budget stage to the council. And since both the council and the Independent Budget Office's March report say there are substantially more revenues available for next year than the mayor indicated, the council has taken the initiative to find new ways to spend the money.
The council also adds a broader vision, to address the city's always fragile revenue base, though their proposal is politically naĂŻve.
The core of the council's alternative plan stems from its projection that tax revenues this year and next are much higher -- $900 million higher -- than the mayor's projection. (The IBO report projects $667 million in higher tax revenues over the two years.) For fiscal year 2005, the council comes up with over $1 billion in anticipated new revenues ( the added tax revenues, plus some new agency cuts and rejection of the mayor's $250 million property tax rebate to homeowners). The council proposes spending the bulk of this new money this way:
· $97 million: New spending initiatives, mostly to reduce class size and increase library hours
· $292 million: Restorations of mayor's cuts and enhancements
· $145 million: Funding private bus franchises
· $344 million: Tax cuts, primarily $236 million for a two percent property tax cut
Rainy Day and Surplus
The council, like the mayor, is taking a generally conservative fiscal position, promoting budget reserves and budget surpluses. For instance, the council would take another $100 million to create a "Rainy Day Fund," an emergency fund for tougher times. And it would support a $374 million surplus for 2005, on top of the mayor's projected $650 million surplus, creating more than a $1 billion surplus at the end of fiscal 2005. (The IBO estimates this fiscal year will end up with a $1.6 billion surplus.)
Reducing Class Size, Increasing Library Hours
Two plans make up most of the council's $97 million in initiatives. Reducing class size in kindergarten to third grade (from an average of more than 21 to 20) takes $38 million, and restoring at least 6-day service for all libraries (and 7-day for some) would cost $30 million.
Restoring Cuts
The $292 million of restorations are primarily a response to the "hidden cuts" that the mayor failed to acknowledge in the preliminary budget. These are mostly ongoing programs supported by the council that the mayor does not "baseline," (i.e., he drops them out of the budget) for subsequent years. This obfuscation constrains the council and confuses the public.
Among the council's major "restorations/enhancements" are:
$20 million in aging,
$11 million for youth employment,
$34 million for youth services,
$12.5 million for cultural affairs,
$2.75 million for legal services,
$59 million for child care (including $10 million for child care slots and nearly $9 million for preventive services), and $5.3 million for housing.
Tax Cuts
The council's $344 million tax cut plan sets up a challenge to the mayor's proposed one-shot property tax rebate for homeowners, but given the reality of the $3 billion tax increases in this year's budget, the overall fiscal impact of either plan will be minimal.
What does distinguish the council's plan is its targeting of tax relief to lower-income seniors and working families. Some 140,000 senior homeowners would see their 18.5 percent property tax increase wiped out. And 40,000 senior renters would get some relief through a tax abatement for small-building landlords. Moreover, the council once again proposes a small city-funded earned-income-tax credit for working families (costing only $11 million), 75 percent of which would go to families earning under $20,000.
The most expensive ($236 million) part of the council tax-cut plan, however, is its "permanent" across-the-board two percent cut in the property tax rate. Unlike the mayor's plan, and assuming that renters would get some kind of pass-through savings from their landlords, everybody would get at least a nominal benefit.
Both the mayor and council's property tax-cut proposals illustrate how such marginal changes only add complexities and inequities to the city's property tax system. The IBO's March report, for instance, shows the mayor's stated purpose - relieving 420,000 house owners and 180,000 co-op/condo owners of their 18.5 percent property tax increase - doesn't work equally, given the bizarre nature of assessment practices. Most house owners would get a rebate of about $50 more than their 18.5 percent increase, while most co-op and condo owners' rebate would be significantly less than their 18.5 percent increase.
The council adds a couple of other marginal wrinkles to this dysfunctional property tax system. It proposes an $11 million "deepening" of the property tax abatement currently enjoyed by co-op and condo owners, a council attempt (ongoing since the mid-1990s) to equalize tax burdens among homeowners. This would benefit some 65,000 lower-valued co-op and condo units by raising their abatement from 17.5 percent to 25 percent of their property tax.
The other wrinkle flirts with the council's old reputation for comic irrelevancies: $5 million for a property tax credit for homeowners who prune city-owned trees in their neighborhood.
Commuter/Reverse Commuter Tax
The council has a more visionary, if politically unlikely, plan in its other revenue proposal, what it calls a Commuter/Reverse Commuter program. This would be a 1.1 percent tax on the income of 800,000 commuters to pay for services provided to them. (Until repealed by the state legislature in 1999, a 0.45 percent commuter income tax raised about $500 million a year.) Since there are 140,000 city residents who work in suburban New York counties, the "reverse" part is that the city would reimburse those counties for their services to those commuters at an equivalent 1.1 percent of their suburban salaries.
The city would use the net proceeds of such a commuter tax - about $1 billion a year - to pay for the debt service on bonds that would be issued for capital expenditures in the schools and for affordable housing. This money would leverage about $6 billion of education capital and $5 billion of housing capital. The council thinks 40,000 units of housing could be built, half of which (new and preserved) they would target to households earning less than $25,000 a year. The other 20,000 units would be new and targeted to households earning between $25,000 and $104,000.
But such a program would need to pass the state legislature, which has already rejected similar legislation in the past.
Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.