A Modest Proposal for Property Tax Reform

Letitia James, the city’s public advocate, has waded into the brewing battle over reforming the city’s arcane and archaic property tax system. That system has already inspired a lawsuit by a group called Tax Equity Now New York, which is asking the courts to impose reforms that politicians have failed to achieve for decades.

In an op-ed article in Crain’s, James acknowledges that reform will take years and will require cooperation between city and state lawmakers – never a given. She then offers her own modest proposal, which includes these highlights: 

Rebates. Getting rid of the 6 percent cap on the the amount any property’s assessed value can increase in a given year would lead to the displacement of longtime residents in gentrifying neighborhoods, James argues. “Instead,” she writes, “the city should provide a direct rebate to middle-class and lower-income homeowners, condo and co-op owners, and renters (say, for couples earning less than $150,000 or individuals making less than $100,000).” 

Tax the Rich. One way to raise revenue, James suggests, is to eliminate the assessment cap for single-family and small multi-family homes valued at $5 million or more, and to end the tax abatement for co-ops and condos valued at $3 million or more. “Simply put,” James writes, “if you own such a valuable property, you don’t need the government putting a thumb on the scale in your favor.” 

Pied-a-Terre Tax. Individuals who own underutilized properties must pay their fair share, James argues. “That means instituting a graduated pied-à-terre tax in which homeowners who do not pay city income taxes but utilize city services are charged an escalating rate based on the value of their properties.” 

Warehousing Tax. Vacant lots and vacant buildings across the city are being warehoused and wasted while absentee landlords wait for neighborhoods to gentrify and property values to rise, James notes. “To discourage this harmful practice and capture the squandered value of unused land,” she writes, “an escalating warehousing tax should be instituted that increases every year these buildings and lots remain empty with no plan in place.”

Flip Tax. "A flip tax should be created in which the assessment cap is lifted for newly purchased properties in neighborhoods where the market value exceeds the capped assessment by 3 percent or more,” James writes. “Such a tax would both raise revenue and help stem the tide of displacement from gentrification.”

In closing, she concedes, "This plan will not end the need to simplify and overhaul the property-tax system."