Tax relief comes at a price

By JAMES J. COFFEY

April 28, 2008 05:53 am

— Former Gov. Elliot Spitzer established the New York State Commission on Real Property Tax Relief. This year, staff members of the commission came to Plattsburgh on April 9 to receive input from residents regarding the problem of escalating real-property taxes. The commission, I believe, will serve a very important purpose, not so much in uncovering problems they we're unaware of, but providing political cover for our elected representatives at the state and federal level. This is not meant in any way to demean our elected officials.
Being an elected official is a difficult job that requires courage and a thick skin. That said, it is difficult for an elected official to advocate increasing any tax or closing a government installation located in their district. It is widely recognized that the best way to close federal installations, such as Air Force bases, is to transfer the responsibility and political heat to a commission that is not elected by the people.
Hopefully, the Real Property Tax Relief Commission will make clear that there are three dominant truths that have to be recognized before the problem of escalating real-property taxes can be resolved.
The problem is simple. Sometimes, with difficult problems, there is a tendency to make them appear complex when in actuality they are relatively straightforward. Regarding property taxes, the solution is simple, but not easy. The solution is to decide what source of tax revenue governments should rely on to pay the costs associated with state and local government. We can look to the income tax, capital gains tax, sales tax or real-property tax.
To the extent the government attempts to reduce one of those taxes, the other taxes are increased. Essentially, we are squeezing a balloon; cutting tax does not reduce taxes, it transfers the tax. Our elected representatives must be made to acknowledge that by reducing income tax, they will be increasing the real-property tax.
The process is political. High taxes on property do not come about by some mysterious force. When our representatives at the state and federal level decide it is in their political interest to establish their bona fides as tax cutters by cutting income or capital-gains tax, they are indirectly increasing real-property tax. Unless the voters hold the representatives that they elect accountable for increases in real-property tax, little progress will be made.
Unfunded mandates increase the tax on real property. Unfunded mandates represent a deliberate shift of the tax burden from income to real property. The state government receives its revenue from income tax, capital-gains tax, sales tax and estate tax. Local governments get revenue from sales tax and property tax. Once again, there is nothing mysterious or complicated.
The State Legislature has the option of funding or not funding mandates. It is clearly a straightforward political decision with a consequence that burdens real property. By way of example, if 10 people go out to eat and everyone orders what they want, but five people refuse to pay, the burden of paying shifts to the remaining five. In this example, the five that are stuck with the check are local governments.
This should not be taken as a political screed against our elected officials at the state and federal level. I understand that it is difficult for an elected official to oppose the reduction of the income tax, when their colleagues are trumpeting their cutting of income tax to their constituents. Hopefully, this commission can make clear to the voting public that tough choices have to be made and that a decision must be made as to what tax is the most equitable -- income tax or the property tax.