LIA Study: Commuter Tax Unfair

The Long Island Association today released the results of an analysis conducted by its Chief Economist, Dr. Pearl Kamer, showing that middle class households in comparable economic circumstances in New York City and Nassau County carry significantly different tax burdens. A family in Brooklyn with a household income of approximately $36,000 will pay 43 percent less in combined real property and local income taxes this year than a similarly situated family in Hempstead will pay in real property taxes alone. A Franklin Square family with a household income of about $60,000 will pay 46 percent more taxes this year than a similar family in Brooklyn.

LIA President Matthew T. Crosson said, “The argument in favor of a commuter tax assumes that suburban commuters can afford an additional tax burden, whereas City residents are now taxed to their limit. That is not accurate. A majority of commuters are middle class, and those on Long Island already bear a much heavier tax burden than their New York City counterparts. That is true even when the recent increase in New York City’s property tax rates and New York City’s income tax are taken in to account.”

Mr. Crosson continued, “The suburbs do benefit from the city and its services; but city residents also benefit from the suburbs. Right now, suburban residents pay a much heavier tax burden for services in the suburbs than city residents pay for city services. The city’s recent tax increase was significant in relation to the city’s pre-existing tax rates, but in relation to the tax burden of the suburbs it was not as significant. If the city needs additional resources it should look first to its own tax base, and not seek to impose additional tax burdens on suburban residents. The commuter tax is simply unfair.”

Dr. Kamer compared households in specific census tracks having similar median household income levels. Her study took into account recent changes in tax rates for both New York City and Nassau County, where most commuters live. Two levels of income were chosen as representative of middle class families in the New York City and Nassau County, $36,000 and $60,000. (2000 Census data shows that the median household income for Brooklyn is $32,135 and for Nassau it is $72,030.)

Dr. Kamer used as a measurement “effective tax rates”, which is defined as the nominal property tax rate per $1,000 of assessed value in each jurisdiction multiplied by the ratio of assessed to market value. Effective real property tax rates are a means for a homeowner to compare actual tax burdens among many communities. The figures came from a recent study by the New York University Graduate School of Public Service entitled “New York Metropolitan Area Effective Real Property Tax Rates (1997-2000)” authored by Dr. Dick Netzer and Dr. Thomas Conoscenti, who performed calculations for each town and city in Nassau-Suffolk and for New York City as a whole. (The complete figures are available upon request.)

In Dr. Kamer’s study the nominal tax rates per $1,000 of assessed value for each jurisdiction were obtained from the New York State Comptroller’s report: “Overlapping Real Property Taxes, Taxes Levy and Tax Rate Statistics, New York State Local Governments, Fiscal Years ending in 1997, 1998, 1999, 2000.” Assessed market value ratios for residential property were obtained from “The New York State Office of Real Property Services, 1997, 1998, 1999 and 2000 Statistical Summary File”. The two census tract comparisons are as follows:

Table 1 -Comparison of Census Tract 4072.01 in Hempstead and Census Tract 1182.02 in Brooklyn Census Tract 4053.01 656 Location Franklin Square Brooklyn Median 1999 Household Income $60,075 $60,098 Median Value of Owner-Occupied Housing $224,900 $184,700 Effective Residential Property Tax Rate, 2000 21.64 8.29 Residential Property Tax Before 1/1/03 Tax Increase $4,867 $1,531 1/1/03 Residential Property Tax Rate Increase 19% 18.5% Residential Property Tax After 1/1/03 Tax Increase $5,792 $1,814 Current Resident Income Tax Rate 0 3.591% Current Resident Income Tax 0 $2,158 Total Tax $5,792 $3,972 Source: New York University Graduate School of Public Service, U.S. Census Bureau, Long Island Association

Table 2 - Comparison of Census Tract 4053.01 in Franklin Square and Census Tract 656 in Brooklyn

Source: New York University Graduate School of Public Service, U.S. Census Bureau, Long Island Association

Census Tract 4072.01 1182.02 Location Hempstead Village Brooklyn Median 1999 Household Income $36,215 $36,179 Median Value of Owner-Occupied Housing $165,900 $171,600 Effective Residential Property Tax Rate, 2000 21.64 8.29 Residential Property Tax Before 1/1/03 Tax Increase $3,590 $1,423 1/1/03 Residential Property Tax Rate Increase 19% 18.5% Residential Property Tax After 1/1/03 Tax Increase $4,272 $1,686 Current Resident Income Tax Rate 0 3.591% Current Resident Income Tax 0 $1,299 Total Tax $4,272 $2,985 Mr. Crosson concluded, “These are difficult times financially for New York City, but they also are difficult for the suburbs and the people who live here. The State Legislature must not solve the City’s financial problems on the backs of suburban middle class taxpayers, who already bear a disproportionate tax burden and who represent the majority of commuters.”