Incidence of the Residential Property Tax in Nine Counties of New York State

Abstract

This paper is concerned with the incidence of the residential property tax on ownerand renter-occupied housing units in nine counties of New York State. The counties which comprise the study area include the five boroughs of New York City and the suburban communities of Nassau, Rockland, Suffolk, and Westchester. These counties were chosen to determine whether any differences exist in the incidence of the property tax between predominantly urban counties where most housing units are renter-occupied and suburban areas where most homes are owner-occupied. The methodology employed follows closely that used by Emanuel Tobier in Appendix E of the Economics of the Property Tax by Dick Netzer.1 Estimates are made of the incidence of the property tax on owner-occupied and renter-occupied units separately, and then these two statistics are combined to obtain a composite picture of the tax in? cidence. All three estimates prove to be markedly regressive when considered on a current income basis, which is in conformity with the results of similar studies.2 The income inelasticity of housing has been indicted as the major cause of this regressivity and decreased investment as a major effect. This study makes no attempt to measure the incidence of the property tax when a permanent income hypothesis is used, nor does it attempt to measure the progressivity of government expenditures which are financed by and benefit those who pay the property tax. Including these two concepts would probably decrease the regressivity of this tax, and in the case of a lifetime income basis make the tax proportional to in? come.3 In order to temper the effects of regressivity, a progressive property tax is proposed which would be a function of both the assessed valuation of the home and the income of the occupant. It is hoped that such a rate would shift the burden of the tax to those who are most able to pay and induce lower and middle income families to invest in homes. This progressive rate structure is also proposed in realization of the fact that 197