STAR Fails the Test of Sound Tax Policy

We really want to spend less of our money on taxes, any taxes. It may surprise some people in Albany, but New York State taxes per capita are the highest of any state in the nation save Maine (according to the Tax Foundation).

Where do you suppose the kind, generous state of New York gets the money to send STAR checks to school districts? From state taxpayers, of course, many of whom are also homeowners. One tax goes down—but another goes up (like those fat-reduced products that now have twice the sugar).

Moreover, with some of the taxpayer anger siphoned off by STAR, it appears that school districts actually have raised taxes more than they would have otherwise, offsetting about one-third of the savings (this according to a study from the Maxwell School at Syracuse University).

So not only has our total tax burden not gone down—STAR has actually made it go up. That’s particularly true for owners of apartment buildings and commercial and industrial properties, since those properties aren’t eligible for STAR.

Well if tax rates haven’t gone down, maybe STAR has made the tax system fairer, which would be a good thing, right? Of course fairness is a subjective concept. I can think of lots of ways to measure it. Here are a few options:

Option One: Taxes are fair when each of us is treated the same (like going out to dinner with friends and splitting the bill equally). But STAR savings per person range from $87 in Jefferson County and $140 in Albany and Erie counties to $303 in Westchester County and $257 in Putnam County. Let’s use property wealth as a guide. A “fair” STAR would distribute benefits roughly according to assessed value. Yet Essex and Warren counties get about $2 in STAR for every $1,000 in assessed value while Montgomery and Broome counties get more than four times as much. STAR fails under this notion of fairness.

Option Two: Some would say that taxes are fair when the poor are favored over the rich. By this measure, STAR payments should be related to median household income. Which, it turns out, they are: The higher the income, the higher the payments (I did a quick regression analysis and found that more than 40 percent of the variation in STAR is explained by median household income). And renters, typically less well-off, are left out in the cold altogether. Failed again.

Option Three: Tax reduction is fair when the savings are distributed according to “tax effort”—how much you’re paying before the cuts. So this explains why Nassau STAR payments are 12 percent of local tax revenue while Chenango and Orleans counties are receiving 35 percent. More tax relief goes to people who pay more, but inconsistently. And this flies in the face of Option Two. So no joy here.

There are lots of ways to cut school property taxes. Most important, we should do more than just shift the burden. Let’s cut costs by trimming back state mandates on public schools.