Who, exactly, IS paying?
I received a check in the mail today. A check from the government. For over $300! Oh, happy day! But then I looked at the letter explaining why I got this check. In totality, it said:
This year’s State Budget provides tax relief by reimbursing homeowners for the increase in their property taxes if their local government or school district stayed under the state’s 2 percent property tax cap. This check reimburses the growth in your school property taxes because your school district stayed under the state property tax cap.
Now, it is important to note that the 2 percent property tax cap isn’t really a 2 percent property tax cap. But for the purposes of this piece, that is really neither here nor there. My school district did something that triggered a refund for its taxpayers. Bully for me! But… where did this money come from? I get an extra three hundred bones… but that money didn’t appear out of thin air, did it? Someone had to pay for it, right? Hey… maybe even me! Via other taxes! Hmmm…
I offer this to the commentariat for their thoughts, particularly about the potential for the government to be playing a bit of a shell game with one of the most fungible resources on earth (MONEY!) and the incentives this plan may create for local school districts.
PS: I’m not sure how I feel about the letter being address to “Taxpayer”. On the one hand, I’m glad that the government recognizes that, hey, yea, I’m frickin’ paying for you a-holes! On the other, am I not a man? Is my wife not a woman? Do we not have names? Oh… wait… They wrote the check out to “Zazzy Maiden Name ALSO KNOW AS Married Name”… presumably some sort of clerical error. So, maybe “Taxpayer” is more accurate…
I should note that, years ago, I’d have received this check and simply thought, “AWESOME!” Or perhaps even, “THIS IS GREAT GOVERNANCE!” I will say that having exchanged ideas with the good folks here and over at PL — be they liberal, conservative, libertarian, or something else — has encouraged me to think about these things differently. It is not necessarily a shift in ideology, but a recognition that the world is more complex than it might seem and that I need to think about it in a complex way to really make sense of it. Thank you, everyone, for that.Report
Sounds like your local school district came in under budget for its various activities. You should see if you can measure its performance accordingly–and, as you are an educator yourself, you’re in a better position to do so intelligently than most taxpayers.Report
I don’t think this is it, @burt-likko . It says the money comes from the state budget. My hunch is that this is a weird way to reward taxpayers for supporting governments that keep taxes low. The state refunded me money but my school district kept what I paid them. Huh?Report
If you’re a teacher in the district, then it seems like the administration could have given you a raise (which would have likely been more than $300 unless your town is all teachers) but instead chose to return the money back to the town. You may want to ask your union rep if he/she thinks they’re working at a charity 🙂
But seriously, this kind of “shell game” tends to pop up when you’re in the public sector. In grad school I was on a fancy NSF fellowship that had an absolutely draconian tax-filing process, and I always wondered why the government funding organization doesn’t simply withhold my taxes and make the process easier for everyone. More generally, John Oliver had an informative segment on how state lottos often advertise as raising revenues “for education”, but in actuality any excess money that the lotto revenues bring in is actually spent in other departments, or even returned to high-income tax-payers (thereby making the lotto effectively a wealth-transfer program from poor to not poor). Perhaps the concept that money is fungible needs to be more carefully explained in our civics classes?Report
I work in an independent school. But again, the quoted letter indicates the state paid me this money (and the check confirms this). My little bit of sleuthing indicates the 2% “cap” (see second link) was a way of placating tax-averse voters. So, for me, I not only see slow tax growth but also a surprise refund! Others get a bunch of math thrown at them to explain why the cap wasn’t a cap. AND SOMEONE is footing the bill on my check.Report
Does your state have a revenue sharing program, where they kick into local schools based on some sort of formula? If so, the lowered budget probably meant the state kicked in less, and this was a rebate on what you paid in income tax that didn’t go into the school system.
But I’m only guessing based on how school funding works in my state; they’re all different.Report
It is because the local budget and the state budget have two different funding sources.
Your local taxes are based on property values. Take note that the letter said “homeowners” rather than “citizens” or “taxpayers” or “residents”. As such, they are a regressive tax. The state budget is primarily financed on income taxes, which are progressive.
Furthermore, since the rebate is only available to towns and school districts that stay within the cap, it acts as a carrot for those governing bodies to stay within the cap. Since Albany is the one dangling the carrot, it is up to them to provide the carrot.Report
As discussed, the letter said taxpayer.Report
Yes, but if you read for comprehension, you would see that it is homeowners are being reimbursed, homeowners being a subset of taxpayers.Report
The tax was only assessed on homeowners.Report
So what’s the confusion?
Homeowners paid a tax. Because the local government met a budgetary goal, the state reimbursed the tax increase.Report
Where’d the state get the money to reimburse me?Report
You don’t know how the state of New York raises revenue?Report
Here’s the school funding breakdown in my state (from the website): “the state pays an average of about 63 percent of the funding for local school districts, with less than 37 percent coming from local taxes.”
Does that help with your conundrum? The state is reimbursing you outa the general fund allocated for education.Report
Before I decide if I want to type out the answer, can you tell me if you are playing dumb/using the Socratic method, or are you truly ignorant of how the state in which you live raises revenue?Report
If the state took in more money than it allocated for spending, then in a sense the money for the refund didn’t come from anyone, or it could be said to come from you, yourself.
Alternatively, since there are always more requests for spending than there is allocation, and that money could have gone to any of them. So from that perspective the money came from everyone or anyone in the state.Report
The tax is only paid by homeowners? Property taxes aren’t applied to rental units?Report
I believe rebate checks only went out to individual homeowners, though I assume property and school taxes are charged to both rental units and commercial properties. So those groups are similarly “subsidizing” this little bonus.Report
And I’ll bet homeowners tend to be wealthier than renters, which would make this gambit rather regressive.Report
In my state(s) (MN, WI) to my knowledge there isn’t this anti-spending incentive built into state property tax relief, but there is state property tax relief. You just get a refund if your property taxes are so much. (It may not even be dependent on local rates, tbh, I’m not sure.) And there’s a version of it each for renters and for owners. Maybe NY doesn’t have the renters’ version, but maybe @kazzy merely received the form otter specifically for the owners’ credit.Report
“bit of a shell game with one of the most fungible resources on earth ” Gov’ts have been doing that since at least the roman times….Report
From what I know of NY school funding, this is pretty bad.
My understanding is that a huge chunk of school funding comes from local property taxes–Which can be a real issue since property taxes are assessed as a percentage of property values–and property values vary pretty significantly in a state like New York.
The median home price in Westchester County is about ten times the median home price in Allegany County. Figure that because of higher costs, it’s about twice as much to provide the same quality of education for a student in Westchester vs. a student in Allegany. Also, I strongly suspect that property values are on the up in Westchester and flat or falling in Allegany–so in order to maintain equivalent levels of service, school districts in Westchester can keep taxes where they are or lower them, while those in Allegany need to raise them.
Basically, though this seems like a tax rebate for those who live in areas willing to be frugal with their education budgets, the main beneficiaries are those who live in districts where the residents have enough money that frugality isn’t necessary.Report
I don’t know all the in’s and out’s of NY taxation and funding (despite living here), but I will say that we have a weird way of assessing property taxes. We bought our house for $399K a little over three years ago. Fair market value seems to put it in a similar range. But for tax purposes, it is assessed at just $80K. And this is the norm… at least for my area. I have no idea where the $80K number comes from, but suffice it to say that “assessed value” and “fair market value” seem to have little to do with one another.
I don’t know what that means for your assessment here, but it seemed worth pointing out.
Your last point is what I was trying to make sense of. Who does this ultimately benefit? Money is being put back into my pocket. Whose pocket is it being taken out of? My town in particular is unique with regards to demographics so I’m not sure where we stand (collectively) on the SES spectrum and, thus, can’t say with any certainty whether movie is moving up or down the ladder. My wife and I personally are in the top quintile of household earners nationwide, but because we are probably lower than that statewide but higher than that within our municipality, I don’t know how representative we are of people receiving such checks.Report
As I understand it, the assessed value is theoretically based on the fair market value – that is, a property owner can only challenge the assessed value on the grounds that it’s above market value, not that it’s not as far below the market value as their neighbour’s property. And nobody’s going to go complaining that their property is assessed too cheaply.
To avoid costly challenges, many municipalities try to low-ball market value by a large amount, so a normal real estate market downturn won’t result in a huge flood of reassessment requests, and an unplanned drop in tax revenue.Report
the suburbs around here are vicious about reassessing houses. Particularly if you buy a house — then your assessment goes up to what you bought it for. Steep tax for newcomers.Report
Thanks, @dragonfrog .
I wonder if that throws off abstract-level analyses of tax rates and cost-of-living. Let’s assume my town defaults to assessing properties at approximately 25% of their true fair market value for just the reason stated. That means the tax rate will need to be approximately 4x what it normally would be in order to collect the same amount of money. So someone who lacks this knowledge could look at my town and say, “Holy crap! They charge X% in property taxes?!?! I ain’t living there!”Report
@kazzy – it might make it a bit challenging to identify real tax costs. IIRC when we were looking to buy a house, the listing information typically gave the last year’s property tax as a dollar value, not a percentage of anything, which was helpful.
@kimmi – I’ve heard of some places that have a policy of not reassessing property values except when a sale takes place. The idea is that gentrification can make the general cost of living in an area go up, but at least it won’t saddle people who own their homes with a property tax bill that’s just gone way over their budget.Report
The better way to think about is that kids in Westchester and other wealthy suburban counties effectively get much better educations, experiences, and opportunities than kids in poorer districts. They also benefit from largely coming from more stable homes usually.
California has laws that mandate schools be funded equally but there are still places where public schools ask for supplements from the parents. Orinda asks for 3000 dollars per a kid or household. Walnut Creek asks for 500 dollars per a kid or household. These are not mandatory but I imagine that in wealthy areas, most parents contribute.Report
Invoking my inner Tod: why is this in off-the-cuff?Report
Because it’s not very well thought out?Report
Name one time that’s stopped me.Report
Took the words right out of my mouth, @stillwater .
Though, I’d have said something more akin to I think this is an interesting topic but don’t think I have enough to say on the matter to justify a full post.
And I think conversation is being a bit undermined by my poor explanation of things.
To (hopefully) clarify… NYS exercised a quasi-cap of 2% on raises to property and school taxes collected at the LOCAL level. Because my town stayed under the cap, NYS refunded me the difference between my 2013 and 2012 taxes… With no indication that my school district (MWCSD) actually gave up funds.
So, in 2012, I paid X in school taxes to MWCSD.
In 2013, I paid X+300 to MWCSD.
Since $300 was within the cap, NYS (not MWCSD, not Town of Monroe) said, “Here is your $300 back.”
I’m trying to figure out how that all worked.Report
If it makes you feel better, you explained it perfectly fine the first time.
It’s your ignorance of how taxation works that is puzzling to me. I expect such things from @saul-degrawReport
You conceal your confusion behind lots of very pretty prose, which makes it FP worthy. 😉Report
I’m no tax expert, but I would guess that the State of New York gets most of its funding from taxes, primarily income and sales.
But if I’m being dumb, please do enlighten me.Report
I’m no tax expert, but I would guess that the State of New York gets most of its funding from taxes
Is that funny because I’m supposed to say that the State of New York gets ALL of its funding from taxes? Because I’m pretty sure that is not true. Funding comes from a variety of sources, including the sale of bonds, fees, fine levied, and money they receive from the federal government (which itself is usually acquired via taxes but that does seem like an important distinction).Report
It’s funny because the qualifier in the beginning is unnecessary given what follows.Report
More seriously, I guess I still don’t understand what you find puzzling about this. Maybe there’s a there there but I’m not seeing it.
Imagine a different scenario in which the state of NY refunded your school district some cash for meeting their spending goals and then the district (or town, whatever) reimbursed you directly. Does the weirdness of it still exist when you think about it what way?Report
But the state wouldn’t be refunding my district the money. It’d simply be giving my district the money. Unless the state collects funds from individual school districts.
As far as I understand, the state never sees the money I give to my school district. The state paid me out of its own pocket. But we all know the state doesn’t *really* have its own pocket… that money had to come from somewhere. So I’m wondering where it came from.
Furthermore, I’m curious about the incentives this sets up. If every district stayed below the cap, that would mean that educational spending was rising very slowly AND the state government was hemorrhaging back to individual taxpayers, all of whom would be super excited to have low school taxes AND a rebate. But what are the consequences of such a policy long term? Is this a good policy?Report
But the state wouldn’t be refunding my district the money. It’d simply be giving my district the money. Unless the state collects funds from individual school districts.
That’s like concluding that if owe you ten bucks, and Ted owes me ten bucks, I haven’t paid you when Ted gives you ten bucks, no?Report
Not at all.
I pay MWCSD $X+300. MWCSD keeps all this.
The state gives me $300.
What is the relationship here between the state and MWCSD?Report
Presumably, the relationship is that your school district saved the state $X/Ytaxpayer=$300/taxpayer.
As yet, you haven’t given me a reason to deny the presumption.Report
How did the school district save the state money? The district kept its tax levy down. That means it collected less money from taxpayers.Report
Why don’t you do a bit of research into how this refund came about and see if that resolves your worries? Maybe you’re onto something and you can blow the lid off a major scandal. Maybe it’s just run of the mill stuff you don’t understand.Report
I much suspect it’s a way for the state to improperly interfere with local politics, by making county/city governments fear the wrath of constituents who not only are upset about paying higher property taxes, but now will complain about how their neighbour over the county line got a $300 check, and they didn’t. They may not be reimbursing the local governments in any way.Report
On the other, am I not a man? Is my wife not a woman?
If you bleed us, are you not pricks?Report
Check this out, @stillwater … http://nypost.com/2014/03/21/andrew-cuomos-confused-property-tax-cut/
“[Governor Andrew] Cuomo has, indeed, slapped a cap on local property-tax levies — a real accomplishment. But his budget wouldn’t actually “cut” them. Instead, it would shift a little more of the local tax burden to the state tax base — in the long run promoting more growth in local spending and taxes.”
That last bit seems a bit speculative, but it does indeed seem to be the case that the state is taking on costs previously covered at the municipal/district level (and paid for by homeowners within that municipality/district).
“The premise behind what Cuomo calls a tax “freeze” is that temporary rebates would give taxpayers an incentive to lean on local governments to reform themselves.”
“So in the name of “cutting” property taxes, Cuomo actually would spend $1.4 billion to subsidize them…”
Putting this all together…
Property and school taxes (which I’ll just refer to as property taxes from here on out for simplicity sake) were deemed too high by residents. Cuomo wanted to address the issue… or at least be perceived as addressing the issue. As such, he put in place a convoluted system that *encouraged* (but did not require) municipalities and districts to keep tax increases low or nonexistent. He did this by further incentivizing taxpayers to support lower/nonexistent tax increases AND empowering them by requiring tax increases over a certain limit to require support at the ballot box by a supermajority of voters.
So, if my town/district wants to raise taxes over the ‘cap’, they need to put the budget on the ballot. And they need a super majority to vote for it. AND if taxpayers vote against it -OR- approve a budget that is under the ‘cap’ (at a mere 50%+1), than taxpayers will A) see low tax increases AND B) a refund check in the mail. It would seem to me that most taxpayers are going to use this newfound power AND the incentives to employ it to vote themselves low tax increases. And Cuomo gets to take credit for both slowed tax increases AND the checks in the mail. Bully for him!
The problem, as I see it, is two-fold: local government still needs to be funded. If cost increases outpace what the voters agree to pay for, something has got to give somewhere. And while there is something appealing about making government spending accountable to the voters — who foot the majority of the bill — the particular mechanism used here seems flawed.
The second problem is… where is the state getting the money to payout all those checks? Where is that money coming from? It has to come from somewhere. Now, maybe this is one giant shell game and taxes have increased elsewhere, meaning that A) Cuomo’s plan isn’t quite was awesome as it is being presented and B) people who do not receive checks (non-homeowners; people in towns/districts that do not stay under the cap) are subsidizing this little gift for homeowners. Or maybe the state is similarly cutting spending by cutting programs, services, waste, etc. Which might be good or might be bad, depending on what is being cut and who you ask about it.
So, pre-quasi-enlightened Kazzy would have said, “Hey… my taxes haven’t really gone up. And I got a check in the mail! This is great!!!” But quasi-enlightened Kazzy is left wondering: Who is footing the bill at the local level should a gap exist between spending needs and taxes levied? And who is footing the bill at the state level to payout all those checks?
Now, maybe one day there will be a fully-enlightened Kazzy who perfectly understands this all. But I ain’t there yet!Report
Oh, I didn’t see this post of yours before I posted above – to me that sounds exactly like what I’d been saying: he wants to sound like he delivered tax relief that’s not even in his jurisdiction, so he’s trying to manipulate people to resent their local governments if they don’t do what he promised on their behalf.Report
Some years ago, there was a round of “Ralph Bucks” when Alberta’s then-premier Ralph Klein decided the best thing the government could do with its oil-revenue funded surplus was not to invest the fund the existing but terribly under-invested fund against future oil price drops (witness our government’s current austerity panic), not provide better services, but cut everyone a check.
A friend of mine was a fairly prolific graffiti writer at the time. He made a stencil that read “I spent my $200 on spray paint”.Report