New York is requiring higher payments into public employee pension plans, and Peter Baynes, executive director of the New York State Conference of Mayors and Municipal Officials, is worried. His statement yesterday, September 3, called the rate increases “grim news for local governments and property taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. payers.”
Property values are still far below the bubble highs of 2005, and in some places they’re still dropping, so property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. payers are already stressed. The requirement to pitch more money into public pensions, known to be far more generous than any private sector pension, probably doesn’t appeal to property owners’ sense of civic duty the way some other tax increase proposal might.
Although some local governments have their own sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. revenue, many do not and rely almost entirely on property tax revenue. Baynes compared the current government payments into public employee pensions to current property tax collections.
“To put this in perspective, the average city’s pension bill currently equals 20 percent of its entire property tax levy,” Baynes said. “When combined with other mounting fiscal pressures on local governments, this jump in pension costs will undoubtedly lead to property tax increases and cutbacks in essential municipal services.”
For more on this, NY fiscal watchdog E.J. McMahon has followed this story closely.Share