A lot has been said of taxes over the years and, generally speaking, none of it good. Take the greatest mind of all time, Albert Einstein, who had less trouble with theoretical physics and quantum mechanics suggesting the “hardest thing in the world to understand is income tax.” Mark Twain was less perplexed by taxes but derided them nonetheless when he asked what’s “the difference between a taxidermist and a tax collector? The taxidermist takes only your skin.”
Lack of Transparency in Property Tax Calculation
For far too long, New York City officials have been doling out tax bills across all property types with seemingly no rhyme and reason and little transparency in the calculation. Sure, they first estimate a home’s market value and then determine an “assessed value” to which they apply a tax rate. Sounds simple enough but what goes into the market value and assessed value calculations? Hard to know for sure but the resulting tax bills can be rage inducing and, for some, discriminatory.
Inequities in Taxation
A few examples highlight the inequitable outcome of the current system. The owner of a brownstone in Park Slope valued by the city at nearly $6.5 million receives an annual tax bill of $15,000, or 0.2% of the value. Another townhouse in the same neighborhood valued at $5.4 million pays $12,000 in taxes annually (again 0.2% of the value). In the Bronx where lower-income folks reside, a home valued at $780,000 has a $7,500 tax bill, or just under 1% of the home’s value.
Peculiarities of Condo and Co-Op Taxation
Condo and co-ops can have appalling low tax bills as well. Take the sale of a $115 million penthouse condo at Central Park Tower which was valued by the city at a mere $10 million. In fact, the entire 179-unit building was valued at $308 million. So, what’s going on? Taxes on co-ops and condos value the buildings as if they were rentals and take into account rent stabilized buildings when making those calculations. The result: obscenely low values for tax purposes and very happy residents. The irony, of course, is that politicians in Albany often cry foul that the rich aren’t paying their fair share.
Legislative Constraints
To further complicate the byzantine property tax system, state law caps the increases year-to-year and over a five-year period on certain smaller properties with few units. According to one study, these smaller homes are responsible for 15% of the total property tax revenue but make up nearly 47% of the market value in NYC.
Disproportionate Burden on Multi-family and Mixed-use Properties
The lion’s share of property taxes are paid by owners of multi-family and mixed use properties. They contribute an outsized percentage of the $32 billion in property taxes collected annually by NYC. But this too can be befuddling as two properties with the same number of apartments and similar net operating incomes can have wildly different tax bills depending on what neighborhoods they are located.
Acknowledgement of Inequities
Many acknowledge that the property tax system is inequitable and opaque and politicians, in the past, have tried and failed to overhaul the system. But change may be afoot. In 2017 a group of property owners, renters, and other advocacy groups formed Tax Equity Now New York (TENNY) and filed a lawsuit claiming homes with equivalent values are currently assessed and taxed at different rates depending on where they are located often disproportionately affecting racial minorities. Last month, the lawsuit was cleared by NY’s highest court to proceed.
The Role of City and State Lawmakers
This suit may have legs and rather than fight the lawsuit, city and state lawmakers should take the opportunity to revamp and streamline the very messy property tax system abhorred by many. A tall order for sure and perhaps beyond the competency of our representatives.
Sources:
Zaveri, M., & Baker, C. (2024, April 2). His brownstone is worth $5.4 million. why is his tax bill so low?. The New York Times. https://www.nytimes.com/2024/04/02/nyregion/nyc-property-tax.html
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