A PROPERTY TAX CUT COULD HELP SAVE BUFFALO
December 9, 2008
There is probably no place where property tax cuts are more urgently needed than in upstate and western New York -- all the territory of the state outside New York City's five boroughs and Long Island. Today the once prosperous upstate economy is in tatters. It's been in an economic decline for decades, giving much of it a Depression-era feel, say Steve Hanke, a professor of applied economics at the Johns Hopkins University and a senior fellow at the Cato Institute; and Stephen J.K. Walters, a professor of economics at Loyola College.
- A quarter of Buffalo's housing stock is vacant and its poverty rate is twice the nation's.
- The city has lost half its population since 1950.
- Syracuse, Rochester and Albany have shrunk by a third.
- Between 2000 and 2007, the region as a whole lost 32,000 jobs.
- Meanwhile, neighboring Pennsylvania gained 84,000.
One reason why is the region has become property-tax hell, say Hanke and Walters. A look at the numbers tells the story: When every U.S. county is ranked according to its average property-tax bill as a percent of home values, nine of the worst 10 are in upstate New York.
All housing markets are local and local government policies can have an enormous impact on property values. Higher property tax rates, for example, inevitably send home values downward, explain Hanke and Walters. Why?
- A $6,000 tax bill adds $500 to a monthly mortgage, and simultaneously reduces the amount a buyer would be willing or able to pay for a home.
- Cut the tax bill and you help struggling homeowners hold onto their houses.
- And lower taxes allow would-be buyers to spend more for homes.
- High property taxes also discourage investment in new homes; builders won't build where property taxes drive buyers away.
The problem of heavy property taxes crushing fragile upstate economies has not gone unnoticed, just unsolved. A special Commission on Property Tax Relief, supported by Democrat Gov. David Paterson, recommended in August that local property tax increases be capped at 4 percent annually or 1.2 times the inflation rate -- whichever is less.
Source: Steve H. Hanke and Stephen Walters, "A Property Tax Cut Could Help Save Buffalo," Wall Street Journal, December 6, 2008.
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