October 29, 2009
GOVERNOR PATERSON DETAILS CIRCUIT-BREAKER PROPERTY TAX RELIEF PROGRAM
Proposal Key Reform Component of Governor’s Deficit Reduction Plan
Spending Cap Circuit Breaker Control Spending and Return Surpluses Directly to New York's Overburdened Property Taxpayers
Governor David A. Paterson today detailed his proposed circuit-breaker property tax relief program that is tied to a cap on State spending, a key reform measure in his Deficit Reduction Plan (DRP). The proposed spending cap would eliminate the State's long-term structural deficit by placing strict controls on spending and then, once the economy has recovered and New York has responsibly balanced its budget, return future budget surpluses directly to New Yorkers in the form of property tax relief.
“Albany is notorious for two things: overspending and overtaxing. My legislation solves both,” Governor Paterson said. “This bill will force the Legislature to control their spending – just like every family in New York has to – and when we generate future surpluses, it will go directly to hard-working New Yorkers in the form of property tax relief and not more State spending. And, as the surplus grows through our actions to control spending, taxpayers will receive a larger and larger benefit in years to come.”
Governor Paterson's spending cap limits growth in the State operating funds budget to the average rate of inflation from the three prior calendar years. A component of that proposal is the circuit-breaker property tax relief program, which will use future budget surplus to deliver property tax relief progressively to those who need it most through a fully refundable personal income tax credit.
The circuit-breaker benefit would be calculated by limiting an individual's property tax burden to a specified percentage of their income. That percentage would decrease based on the size of the surplus. As the State’s fiscal condition improves, the circuit-breaker program provides an increasingly larger benefit to property taxpayers, since households would pay an increasingly smaller percentage of their incomes in property taxes. Individuals with household incomes up to $200,000 Upstate and $300,000 Downstate would be eligible for this program. Those that have incomes below $90,000 Upstate and below $120,000 Downstate would receive the largest percentage benefit.
The amount of recipients and the average value of the benefit would increase based on the size of the State's budget surplus. At the close of each fiscal year, the NYS Department of Taxation and Finance would calculate the benefit after the Division of the Budget has certified the size surplus and directed a portion to the Rainy Day Fund. Average projected benefits are included below:
Surplus |
Recipients |
Average Tax Credit |
$100M -$500M |
868,000 |
$589 |
$500M-$1B |
1,063,000 |
$943 |
$1B-$1.5B |
1,322,000 |
$1,129 |
$1.5B-$2B |
1,668,000 |
$1,188 |
$2B-$3B |
2,125,000 |
$1,405 |
In order to provide real property tax relief to everyday New Yorkers, local school districts will also have to do their part to control spending. As such, Governor Paterson's circuit breaker proposal includes a provision to encourage fiscal responsibility at the local level. This provision presses localities to keep spending and property tax bills under control.
Under Governor Paterson's proposal, the size of the property tax bill used when calculating the gross circuit-breaker benefit could not increase by more than 1.2 times the rate of inflation or 4 percent (whichever is less) from a specified base year.
For example, if a family's property tax bill increased from $5,500 to $6,000 and the inflation rate was 4.0 percent, only $5,720 of the tax bill ($5,500 multiplied by 104%) would be used in calculating their gross circuit-breaker benefit – not the full $6,000.
Conversely, if a household's property tax bill increased by less than 1.2 times the rate of inflation or 4.0 percent (whichever is less), they would receive an added benefit. For example, if a family's property tax bill increased from $5,500 to $5,600 and the inflation rate was 4.0 percent, a $5,720 property tax bill ($5,500 multiplied by 104%) would be used for the purposes of calculating the gross benefit – or $120 in excess of the actual tax bill.
