Property Cap Proposal in New York City

Scott Baker

[Letters send by Common Ground NYC chapter to top officials.
Reprinted from GroundSwell, January-February 2011]

Common Ground NYC chapter president Scott Baker reports that at the chapter's Jan. 23, 2011 meeting each of about 20 people signed a letter to Andrew Cuomo about the misguided proposed property tax cap and another letter to Assemblywoman Linda Rosenthal about the LVT. The letters, with permission, are reprinted below. The chapter hopes to avoid New York becoming Proposition 13ed.

The Honorable Andrew M. Cuomo

Re: Enacting Property Tax Relief

Governor Cuomo's proposed property tax cap will set the cap at the rate of inflation or 2%, whichever is less; prohibit any property tax levy above the cap unless endorsed by both the local governing board and a 60% electoral majority, and provide only limited exceptions such as extraordinary legal or capital expenditures.

Whether it is a tax cap or a circuit-breaker that several "progressive" organizations like the unions are proposing, neither is a sound policy. What makes sense to those who understand land economics is to shift the tax off improvements and onto land. This would tend to lower the tax for most homeowners and shift the burden to underused parcels (e.g., vacant lots, derelict buildings, and land containing unexploited natural resources). For those homeowners who do own property and are hard-pressed to pay, there is another option, called deferral, wherein the Land Value Tax would only be collected upon sale of the property.

Arbitrarily capping the property tax will be a disaster equal to that of proposition 13 in California, which single-handedly brought down the most prosperous state, while providing taxless windfalls for large landholders like the oil & gas industry. Furthermore, a cap on taxes forces up prices, and promotes sprawl while taking away funding for education. Ideally, we should only pay a Land Value Tax, and no tax on buildings or other improvements.

Our proposal is to eliminate taxes on all productive activity, charge 8%/year on assessed values of Land (in NYC) instead. Then, the state will free up underused land (22 square miles in NYC alone!) for productive purposes, end the land speculation that is responsible for the current economic crisis, and produce more affordable housing. This revenue-neutral proposal will attract new businesses and prevent flight of existing businesses.

On behalf of Common Ground NYC, please enact a Land Value Tax, not a property tax cap.

***

The Honorable Linda Rosenthal

Dear Assemblywoman Rosenthal:

New York needs your sponsorship right now on the passage of State Assembly Bill #A05671 (as of in 2010) to provide a fifth property class for vacant/underutilized sites. As you know, this will allow for a higher tax on these properties and force developers to develop vacant and underutilized land, or sell it to someone who will. Passing this bill will help end urban blight and provide affordable housing and business opportunities.

This bill, plus bill #6207 (already passed) to omit the huge tax break on vacant and underutilized sites above 110th street, are only the beginning of the reform effort needed to shift the tax burden from buildings to land instead. By taxing land, and not improvements, we will encourage appropriate development in dense urban areas like New York City. For more information, see www.urbantools.org or commongroundnyc.org.

The bill reads, in part:

AN ACT to amend the real property tax law, in relation to the creation of a vacant land property classification

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

Section 1. Paragraph class four of subdivision 1 of section 1802 of the real property tax law, as separately amended by chapters 123 and 529 of the laws of 1990, is amended and a new paragraph class five is added to read as follows:

Class four: all other real property which is not designated as class one, class two, [or] class three OR CLASS FIVE. CLASS FIVE: REAL PROPERTY WHICH HAS REMAINED VACANT FOR A PERIOD OF NINETY DAYS OR LONGER DURING A TAX YEAR AND IS NOT UNDER CONSTRUCTION OR REHABILITATION.

New York would not be the first city or state to look into Land Value Taxation. Altoona recently went in this direction, finishing a 10-year phase-out this year, by completely eliminating building taxation. The results in positive Building Permits Issued are already being felt, compared to comparable cities like Johnstown. In addition, California is likely to have an initiative on the ballot taxing 75% of the rental value of land sites: Prosper California Tax Reform Initiative.

On behalf of Common Ground NYC, please move the Land Value Tax bill #AO5671 out of committee and onto the floor so it can be enacted into law.