January 17, 2007
Assemblyman Fred Thiele's proposal to cap property taxes (reported elsewhere in this issue) is an ambitious plan and one to be taken seriously — and cautiously.
Tax relief implies we will pay less. In reality, however, it means taxes will shift.
If we pay less in property taxes, we'll have to make up the shortfall somewhere else, income tax or sales tax, for example.
This is why a red flag appears. If Thiele's proposal were to become reality, any family that earns $150,000 gross annual income would have its total property tax bill, which includes school taxes, capped on a sliding scale from $7500 down.
Unfortunately — and Thiele acknowledges this — the cap would eliminate a much needed handcuff on school spending, public oversight. This is because since most of us would fall under the protection of the cap, we would be immune to school spending no matter how inflated it becomes.
The end result would be we'd have to make up the shortfall. If it were an income tax, the result would be disastrous for the East End, where many of the property owners are second homeowners. In other words, their income might go toward shortfalls in their primary school districts, leaving year-rounders to pay twice as much.
Of course, this is just one possible scenario. The trouble is, once a bill is introduced, changes occur, and what is good for one congressional district may not be good for another.
At least under the current scenario, the rich property owners on the East End pay their share, and ease the burden on the rest of us, and school districts are held accountable for excess spending, at least in theory, by property owners.
Our second problem with the Thiele bill is another provision that would cap increases due to reassessment. Although sure to be popular in Southampton, if passed the bill would have the exact opposite of the desired effect. Reassessment corrects imperfections in the property tax system that allow for some property owners to pay less than their fare share. It is, when done correctly, an antidote for the kind of thing Thiele hopes to address. Under a properly run real-value based assessment every homeowner pays his share no more, and no less. To subsidize some would be to unfairly place more of a burden on others.
The quibbling aside, this is the first time in memory a lawmaker has come up with an idea to keep property taxes in line, and the way some of our schools and municipalities are spending, it is a welcome dialogue to enter into.