Tax-Cap Tales

Gov. Andrew M. Cuomo had a remarkable legislative rookie season. He pushed through same-sex marriage, ethics reform and a 2 percent property tax cap. The cap got the least attention downstate (it does not apply in New York City) but could forever rework the face of town and city finances in the rest of the state.

Gotham Extra

Michael Powell on government and politics.

And that could prove quite damaging.

The governor often points to Massachusetts, which enacted a 2.5 percent property tax cap nearly three decades ago. This state offers an island of stability in a recession-tossed sea.

“It’s not how much you spend, it’s what you achieve,” Mr. Cuomo told Utica residents in a meeting I attended last May.

On the screen overhead his Power Point presentation showed Massachusetts (once known as Taxachussets) dropping to the 23rd most heavily taxed state in the nation from the second. And yet the state is the nation’s leader in test scores.

So cool.

Or not.

Massachusetts legislators counter-balanced tax caps with a sharp increase in aid to towns and cities, a step Mr. Cuomo rejected.

The Federal Reserve Bank of Boston authored a series of studies of the caps that raises many troubling questions. Its studies suggest caps have exacerbated wealth inequality, no small matter given New York’s deep divide between rich and poor.

In 2009, a Reserve Bank economist looked at what happened when residents voted to override the caps and impose higher taxes. Of 1,180 override attempts since 2000, 51 percent passed, most often in well-to-do towns.

“When override ballot questions fail to pass, however, municipalities are left with budget shortfalls causing cuts in public services, school programs, public workers, and the like,” the Fed study found.

An earlier 1997 Federal Reserve study by a trio of prominent economists looked at housing prices in Massachusetts. Home values rose fastest in well-to-do towns where residents could afford to override the property caps and services remained intact.

A year later, these economists studied the effect of tax caps on school budgets and enrollment. Again, there was that rich town/poor town chasm. “Families with children appear to be ‘voting with their feet’, moving out of communities that have run up against their tax limits,” the authors found.

Predictions are risky business in public policy. But the Massachusetts experience offers many cautionary tales for New York’s experiment with property tax caps.

Shocked! At Toll Hikes

The practice of politics, not unlike the frequent ingestion of hallucinogens, can leave practitioners sounding as if they are at direct variance with observable reality.

So when news broke a week ago that the Port Authority would propose $4 toll increases on Hudson River bridges and tunnels, reporters sought comment Governors Andrew Cuomo and Chris Christie (New York and New Jersey, respectively).

It was as if both men were auditioning for the role of Captain Renault in the classic film “Casablanca.” They were shocked, SHOCKED, to hear talk of toll hikes.

So Governor Christie: “You are kidding, right?”

So Governor Cuomo: “I think the proposal is a nonstarter for obvious reasons.”

Of late Mr. Cuomo has grumbled — “There appears to be long-term problems at the authority” — in a fashion that suggests the Port Authority executive director, Chris Ward, might want to fire up his résumé.

Yet none of this can be taken at face value.

Governor Cuomo appoints six members of the Port Authority Board and Governor Christie appoints the other six. (Gov. Cuomo has so far appointed just two of his six potential representatives). Unless we assume these men are incompetents (not likely) or easy-going, hands-off sorts (vastly, highly, absurdly unlikely), we have to assume that they knew a toll increase proposal was coming. (My colleague Michael Grynbaum reported this out rather definitively).

Then again, political reality is often fungible. Three months after Mayor Rudolph Giuliani took office in 1993, the police department released data showing crime had dropped sharply. The new mayor released this news late on a Friday, without comment. Why? Because his aides knew credit for a crime drop so early in his administration should be given to his predecessor, Mayor David N. Dinkins.

When crime dropped again that June, Mr. Giuliani, with no discernible giggle, dropped his previous disclaimer. He took credit for the entire six-month drop in crime. And his crime-fighting reputation was minted. (Unfortunately, few reporters took note of the cognitive dissonance.)

A final point: Skeptical eyes should examine the Port Authority’s books, but keeping a megalopolis moving is expensive. Money is needed to replace the 80-year-old suspension cables on the George Washington Bridge, to rebuild a Port Authority bus station that regularly takes its place among the homeliest structures designed by man, and to construct a new World Trade Center.

Our governors proclaim compassion for hard-pressed toll payers even as they too stick their fingers in the Port Authority’s honey pot. Mr. Christie’s fingers are particularly sticky, as he claims a billion or two to repair, expand and otherwise tend his state’s highways.

“Gotham Extra” is an occasional Web-only supplement to Michael Powell’s “Gotham” column, which appears in the Tuesday newspaper.

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