A Stitch in Haste

Dear Homeowner:

On July 21, 2004, the City Council voted into law my rebate proposal allowing me to present you with the enclosed property tax rebate check. This rebate honors the sacrifices you made in order to help New York City's recovery during difficult times.

Sincerely,
Michael R. Bloomberg

I hate getting money in the mail like this!

No, I'm not being sarcastic. The problem with Mayor Blooperberg's little publicity stunt is that it's a flat refund -- everybody got the same $400, regardless of how much property tax they actually paid.

Just as a lump-sum bill is a regressive tax (the poor pay a higher percentage of their income), so too is a lump-sum rebate a progressive tax (the poor receive a higher percentage of their income back and the net tax schedule becomes even more progressive).

As the joke goes, you don't have to be a rocket surgeon to figure that out.

I paid $3,048 in property taxes in 2004 and got $400 back. Someone who paid $30,048 would have also gotten $400 back. Someone who paid $448 would have also gotten $400 back.

Is this what Blooperberg considers fair?

Even the most brazen socialists must have some limits. Or do they?

And as a sidebar: The stunt of physically mailing checks (at what cost, incidentally?), with Blooperberg's warm-fuzzy-feeling message certainly has no ulterior motive -- right? Mayor Mike's above that sort of petty politicking just as his re-election campaign is getting underway -- right?

And gee, where could a Republican possibly have gotten such a noxious idea?

Oh, right, from this guy. Silly libertarian me...

Now where did I put those deposit slips?

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I recently received my second annual property tax rebate from the New York City government.

So here's my second annual complaint about it.

Why exactly is the City intentionally overtaxing property owners only to give them $400 rebates every year?

Well first of course is the brazen election-period timing — how else to explain a tax rebate in October, less than one month before Election Day?

More importantly, however, is the desire to sneak in a stealth progressivity into property taxes. Under a sane fiscal policy, property taxes (like income taxes) would be strictly proportional: own more property, pay more taxes.

But in a city that is over 80% liberal Democrat, "mere" proportionality in taxation is unacceptable. The rich simply must be surcharged in some way. So one of the most liberal Democrats in the city — Mayor Michael Bloomberg — stopped pretending to be a Republican just long enough to craft this rebate nonsense.

Here's how it works: Every property owner who pays at least $400 in property taxes gets a $400 rebate, regardless of how much they actually paid.

Pay $401 in property taxes, get $400 back. Pay $4,001 in property taxes, get $400 back. Pay $40,001 in property taxes, get $400 back.

Suddenly a proportional tax becomes progressive.

And since the progressivity is cloaked in a rebate check, some people will actually be grateful for it.

Despite the fact that the first rebate was rationalized as the result of an "unexpected" surge in revenues, the rebate returned for a second year. Never mind that checks get lost or misdirected in the mail (no direct deposit is available). Never mind that paying property taxes only to get a rebate can complicate people's income tax returns. Never mind that a $400 rebate, like income tax withholding, constitutes a compulsory interest-free loan to the City. Never mind any of that — expect the tax-and-rebate system to become permanent. It's just too deliciously obnoxious for New York's liberal politicians to give up.

---

I will note, however, that this year, unlike last year, neither the rebate letter nor the check were signed by Mayor Bloomberg himself as a petty propaganda stunt. Because he doesn't believe in petty propaganda stunts.

So this year it was all wound and no salt. B.F.D.

Dear Homeowner:

The Mayor and the City Council have a approved a third property tax rebate. Your enclosed rebate check is the City's way of thanking you for keeping New York City strong during difficult times.

Sincerely,

Martha E. Stark
Finance Commissioner

And this will therefore be the third time I have blogged about it, first with a post, reprinted below, from February 7, 2005, followed up by this post from October 16, 2005.

Two items of note this year:

--The State of New York is now mimicking the City's program with its own tax rebate check placebo. It's a placebo, because tax rates aren't changing; an already-established rolling tax reduction program is merely being reconstituted as a tax-and-rebate program, complete with mailed checks. The maximum check will be $50. A lot of effort for not a lot of money and exactly zero added tax relief. Splendid.

--The IRS has put the City on notice that these rebate checks are taxable income for any federal income tax payer who itemized their property taxes in the corresponding year. This is a fair and obvious interpretation of the Internal Revenue Code, but it is also a major headache for both the City and taxpayers. A headache that would not occur if the City simply lowered tax rates. Splendid.

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Dear Homeowner:

On July 21, 2004, the City Council voted into law my rebate proposal allowing me to present you with the enclosed property tax rebate check. This rebate honors the sacrifices you made in order to help New York City's recovery during difficult times.

Sincerely,

Michael R. Bloomberg

I hate getting money in the mail like this!

No, I'm not being sarcastic. The problem with Mayor Blooperberg's little publicity stunt is that it's a flat refund — everybody got the same $400, regardless of how much property tax they actually paid.

Just as a lump-sum bill is a regressive tax (the poor pay a higher percentage of their income), so too is a lump-sum rebate a progressive tax (the poor receive a higher percentage of their income back and the net tax schedule becomes even more progressive).

As the joke goes, you don't have to be a rocket surgeon to figure that out.

I paid $3,048 in property taxes in 2004 and got $400 back. Someone who paid $30,048 would have also gotten $400 back. Someone who paid $448 would have also gotten $400 back.

Is this what Blooperberg considers fair?

Even the most brazen socialists must have some limits. Or do they?

And as a sidebar: The stunt of physically mailing checks (at what cost, incidentally?), with Blooperberg's warm-fuzzy-feeling message certainly has no ulterior motive — right? Mayor Mike's above that sort of petty politicking just as his re-election campaign is getting underway — right?

And gee, where could a Republican possibly have gotten such a noxious idea?

Oh, right, from this guy. Silly libertarian me...

Now where did I put those deposit slips?

Two activist legislators in New York seem to think so:

Assemblyman Keith Wright (D-Harlem) and state Sen. Diane Savino (D-Staten Island) announced Sunday that they have reintroduced The Renter's Tax Credit which would provide a $300 credit to individual renters who earn less than $43,000 a year and families who earn less than $75,000.
...
"For too long, the renters of this city have long felt the sting of rising housing costs, because they don't qualify for any of the tax benefits that come with homeownership," she said yesterday.

Some hasty stitches:

--The proposed "renters rebate" mirrors the $300 property tax rebate that New York City homeowners receive. To which my response is: Two wrongs don't make a right.

--Isn't this a case of New York City elitism? Why shouldn't lower-income renters in Poughkeepsie, or Ithaca, or Binghamton, or Buffalo receive the credit too? Are they less important, or less worthy, than New York City's working class?

--If "rent is too high," then why craft a tax provision that encourages people to stay as renters? Shouldn't the policy, if there's going to be a policy, be to encourage renters to become owners instead? Would you give tax credits for cigarettes in order to enable lower-income smokers to afford nicotine patches?

--A related point, courtesy of introductory economics. If you instantaneously double everyone's income and wealth, then prices, for everything, will simply double (net of some background noise). The effect of a universal tax credit is not quite so dollar-for-dollar (due to demand elasticities and other factors), but the direction of the vector is the same: Give every lower-income renter an extra $300 per year, and they will simply bid up the price of their rentals. Perhaps not by $300 per year, but by some amount. This move would enrich landlords as well as renters -- perhaps more so. The laws of economics are not subject to repeal by any legislature.

--It may do little good to say it again, but the purpose of taxation ought to be to raise revenue, not to manipulate people's lives, reward them for "correct" behavior or penalize them for "incorrect" behavior. ("Correct" or "incorrect"? To whom? By what standard? Blank-out.)

These warm-fuzzy-feeling maneuvers are much like the person who, faced with a wobbly table, keeps sawing off too much of another leg, until there's no table left. While the obvious alternatives escape them:

1. Keep taxes low for everyone, and fairness will take care of itself.

2. Get out of the way, repeal all the various laws that making building in New York City next to impossible, and let real estate developers actually develop -- including housing. Demand creates its own supply -- except when government gets in the way.