Critics say rebate plan won't cut taxes

Jul 1, 2015

When Governor Cuomo and legislative leaders announced a new rebate check for property taxpayers, they touted it as a significant “real” benefit to average homeowners. But fiscal watchdog groups say the program is severely flawed, and the money could be better used on something else.

The Empire Center, a think tank rooted in fiscally conservative beliefs, compared the new rebate checks, which will range from around $200 to several hundred dollars, to Frankenstein’s monster. The Empire Center’s EJ McMahon says it’s essentially the resurrection of an earlier tax rebate program, under the STAR property tax relief plan, that was killed back in 2009, denounced at the time by some lawmakers as a gimmick. McMahon says the checks do not represent an actual cut in property taxes.

“It’s a very expensive way to have some of your own tax money take a round trip to Albany and then land back in your  pocket, “ McMahon said.

The timing of the checks is also designed to coincide with the next elections for Senators and Assemblymembers, and will be sent out in the fall of 2016. But McMahon says he does not think most people will be fooled. He predicts most will shrug, and use the money to “pay a little more down on the credit card.”

The watchdog group Citizens Budget Commission, calls the newest checks the latest in a string of what it calls “rebate madness.” Property taxpayers already receive a portion of their own money back, that they paid in taxes, if their school or local government further holds the line on spending beyond the state’s two percent per year property tax cap. Families with dependent children also get a tax rebate, which is taken off their annual income tax payments.

The Commission’s Tammy Gamerman says the new rebate checks are also flawed because they benefit wealthy taxpayers the most. That’s because they are tied to the STAR program, where benefits are higher in places where the price of a home exceeds the national average. The Citizens Budget Commission compared the projected benefits under the new rebate checks for Long Island, where housing prices are high, to the Western New York suburb of Tonawanda, where prices are much lower.   A Babylon, Long Island homeowner who earns $100,000 a year, over time gets back far more money, around $851.00, than does the taxpayer near Buffalo, who would get around $330.

Gamerman, with Citizens Budget Commission,  says the rebate checks are to be paid for through future state surpluses that have not yet materialized. Governor Cuomo has kept state spending growth to 2% or less per year while he’s been in office, and he and lawmakers are counting on the surpluses that will eventually accumulate to finance the checks. But she warns that the economic picture could change rapidly. And she says New York still projects budget gaps in future years,  of over $4 billion dollars in 2018, if nothing is done to change current rates of spending on programs.

“The legislature is  going to have to find real savings,” Gamerman said. “This is becoming harder and harder every year.”

She says the governor and state legislators have already committed to spending more than a 2% increase per year in future years on both schools and government health care.

Gamerman says it’s better to use the surplus, if and when it does occur,  on more mundane but fiscally prudent  things like paying off debt or building  up reserve funds.

McMahon ,with the Empire Center ,says it could also be used for an actual cut in the state’s income taxes or business taxes.

McMahon says there is one bright spot in the recently concluded legislative session,  when it comes to curbing tax increases. He says the four year extension of the tax cap represents billions of dollars in savings over the years, and he predicts it will change the culture, away from double digit speeding growth increases of earlier decades.