Cuomo panel suggests a property tax ‘freeze’

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Governor Cuomo. (AP Photo/Mike Groll)
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ALBANY—A state tax commission appointed by Gov. Andrew Cuomo offered a blueprint on Tuesday for the governor's long-mentioned desire to reduce state taxes, suggesting $1 billion in property tax cuts and $1 billion in business tax reductions over the next three years.

Most of the recommendations had been previously reported, including a property tax “circuit breaker” to provide a rebate for homeowners whose property taxes exceed a percentage of their income, an increase in the estate tax exemption—the panel proposes increasing it from $1 million to $5.25 million, and reducing the tax rate from 16 percent to 10 percent—as well as a more rapid sunset of a 2009 surcharge on electricity consumption and the elimination of a special bank tax.

The report also recommended what would effectively be a “freeze” on property taxes in localities that abide by Cuomo's pre-existing cap on property tax growth. In return, they would receive state money to hold property tax rates steady, and would be eligible for a second round of money if they work to consolidate services with neighboring municipalities.

The governor, a Democrat, joined members of his panel for an event at SUNY Old Westbury on Long Island. Cuomo said he had not read the entire 11-page report, which was delivered to him on Friday, but called it “impressive” and said the commission was on the “right track.”

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“How do we use the tax code in this state to actually improve the economy?” Cuomo asked. “The property tax is the largest single tax in this state. … Nobody knows the income tax rate. They know, and they can tell you to the cent, how much they pay in property taxes. It is a crushing tax on people; it is also a crushing tax on business.”

Indeed, the report did not recommend any immediate changes to the state's income tax rate, despite the urging of former Gov. George Pataki, its co-chair, but the third paragraph contains a recommendation that the top rate recede to 6.85 percent from 8.82 percent. That rate was scheduled to recede in December of 2011, but Cuomo and legislators extended it twice in the last several years. In an apparent nod to Pataki, the report says, “some Commission members favor setting aside any future surplus to help ensure the 6.85 rate is restored in 2018.”

While an earlier Cuomo-convened tax commission issued over 200 pages of detailed analysis, this report did not contain any specific parameters for the circuit breaker, one of its marquee recommendations.

The report did not detail how the state budget could accommodate the plan, but speaking to journalists after it was unveiled, Cuomo said, “because we have been cutting costs for the past three years — and we've cut costs dramatically for the last three years … we've brought some fiscal discipline and we believe because we're spending less that we'll have a surplus we can use to cut taxes.”

The report seemed designed to balance the interests of businesses and wealthy people in New York City, which account for the bulk of the state's corporate and income taxes, with Cuomo's desire to provide broad-based relief in the suburbs and upstate.

Upstate business groups, including the Business Council, immediately praised the plan in a six-paragraph statement, but Kathy Wylde, head of the Partnership for New York City, issued a statement that reflected the tension for the city's highest earners.

“The New York City business community supports recommendations of this commission to reduce some aspects of the tax burden, including simplification and consolidation of business and bank taxes, accelerated phase out of a surcharge tax on utilities, and raising the threshold for estate taxes to conform with federal standards,” she said. “On the other hand, it should be noted that New York City is the primary source of surplus state revenues – largely generated by the income tax on high earners (the so-called 'millionaires’ tax') - but New York City residents do not directly benefit from the commission’s proposed use of $1 billion of this surplus for property tax reductions for suburban and upstate New Yorkers. It is critical that the Governor, legislative leaders and Mayor-elect de Blasio work to ensure that the city secures a fair share of the state revenues we generate for important priorities like public education.”

No legislators were featured in the report's release, and most were mum on the recommendations, with the exception of Senate Democratic Leader Andrea Stewart-Cousins, who praised the plan.

Union-allied progressives raised immediate concerns, particularly over the proposed reduction of corporate taxes and changes to the estate tax, and the lack of specifics over the property tax components.

“There is absolutely no guarantee of fairness in these recommendations,” said Michael Kink, executive director of the labor-backed Strong Economy for All. “For millionaires and billionaires, it's a massive tax cut. It doesn't address the glaring income inequality that's crushing the New York economy.”

UPDATE: Senate Republican Leader Dean Skelos, whose members dominate a coalition that controls the chamber, welcomed the report but said the state should go further and pass a law capping annual spending increases.

"As part of next year’s budget, it is critical that we deliver broad-based tax relief to as many New Yorkers as possible," he said in statement.

Assembly Speaker Sheldon Silver, whose Democrats dominate that chamber, was far less effusive. He has aligned himself with New York City Mayor-elect Bill de Blasio's push to raise income taxes as a mechanism for funding expanded pre-K programs.

"I am pleased to see the Governor’s report looks for ways to reduce taxes for hardworking middle class New Yorkers. The Assembly has long advocated for a circuit-breaker which targets assistance to those most in need of relief," Silver said. "Any proposal should be premised on a principle of fairness to all New Yorkers, city residents, suburbanites and rural residents alike. At the same time it is important that we have the resources necessary to fund vital programs including education, universal pre-k and the DREAM Act. We will continue to work with the Governor and the Senate to help make this a reality and develop a prudent, fair and balanced budget."

Other Democrats in that chamber, including Brooklyn Assemblyman Karim Camara, have said they don't see a way to support tax cuts when government programs are already squeezed.