Why are my property taxes so high, and what are they paying for?

Jan 5, 2012

Why are my property taxes so high, and what are they paying for?

In the case of county property taxes that answer is actually simpler than you might think. Your county property tax bill is largely determined by the state, not your county government. Over the decades, the State Legislature has directed local taxpayers to pay for an ever growing share of the State’s social service/welfare programs and Medicaid. Most states across the country do not require county government to play such an active role in financing and administering these state and federal programs.

In 2012, counties in New York, including New York City, will spend more than $11 billion in property and other locally derived taxes to support State mandated spending largely for social services and Medicaid. For counties, State mandates raise your property taxes—that is why mandate reform is so important for homeowners and businesses.

In 2012, Medicaid alone will cost $7.3 billion. For most counties, more than half of the property tax levy goes toward Medicaid, and when you include a handful of other state mandated programs such as Safety Net family assistance, early intervention public health services, special education pre-school, indigent defense legal services and probation more than 90 percent of the county tax levy is used to pay for State mandated programs.

The New Year may however, bring renewed hope for homeowners struggling with high property taxes. The Governor’s Medicaid Redesign team has recommended the phase out of property tax financed Medicaid Program. And, bi-partisan legislation has been introduced S.5889-B (Gallivan), A.8644 (Paulin) that would fundamentally alter how the State pays for Medicaid by gradually removing the requirement that counties pay for Medicaid.

Additionally, the Citizens Budget Commission recently released a report that highlights why New York’s current approach to funding Medicaid is unsustainable and that “… it places an inequitable burden on taxpayers in less affluent communities…”

Having the State take responsibility for financing its own Medicaid Program would be a win-win for the state and for property tax payers. First, by the State taking responsibility for Medicaid, a program they control completely from setting eligibility and payment rates to utilization and fraud control, accountability to the taxpayer will be improved. Second, as Medicaid costs are reduced for counties they will be able to ensure the recently enacted property tax cap is implemented successfully and over time will actually be able to reduce property taxes and continue to provide local services which the community needs.

How can the state afford this? The Medicaid Redesign Team (MRT) reforms will save the state and federal government billions of dollars each year over the next decade and generate over $100 billion in cumulative savings for the State and Federal government over the next decade. Additionally, the implementation of federal health reform will provide countless opportunities for the State to lower its spending on Medicaid and related health insurance coverage programs that the federal government will now cover. Finally, the economy will gradually pick up steam and state revenues will recover. Given these factors, there will be more than ample fiscal resources available to the State to finally pay for their own Medicaid program.

The State Legislature and Governor have proven they can do amazing things when they make it a priority—ending the local Medicaid mandate should be their next priority—this will lead to lower property taxes and help improve New York’s economic competitiveness. With this as the top Mandate Relief Legislative priority in the State Capitol, we can all have something to look forward to in the New Year.

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