Solving High Property Taxes

In a project that newspapers everywhere ought to try, the New York Times looked recently at property tax bills in New York's suburbs and found an astonishing range. How astonishing? In Woodlynne, N.J., the property tax rate per $100,000 in home value was a staggering $3,063 a year. On Long Island, Sagaponack homeowners paid only $163 per $100,000 in value. The reasons for the range are complicated. But here's some advice to elected leaders: Beware of the so-called solutions to this problem. They'll only make things worse.

So what explains the range? Well, New York's suburbs are in three states, and how these states dole out responsibilities for supporting schools, roads, public safety and so on explains some of it. But only some; there's a lot of variety within the states. (Example: While Woodlynne homeowners pay more than $3,000 per $100,000 in value, homeowners of Avalon, N.J., pay only $224.)

Duplication and cost of government explain some of it. As an official in Fairfield, Conn., told the Times, it helps his city's homeowners that Connecticut has all but eliminated county governments, removing a layer of taxation. He pointed to nearby Westchester County, N.Y., where tax rates are higher. "There's a lot of duplication in Westchester," he said, "with village and town and county layers, and you've built in some redundancy. If you did a management study for local government like they do in business school, you'd never split things up like this."

Schools take in the lion's share of property taxes in many communities, and some systems pay their employees better than others, which pushes up tax rates. The average teacher in Fairfield, for example, made $64,760 last year, but over in Great Neck, N.Y., he made $80,276.

You get the idea: Some of the range is created by the states, some by the structure of government, some by local preference. But if you add all these things together, it still doesn't explain the wide difference in average homeowner tax rates. What does? It's the tax base, stupid. The wealthier the homes and, more important, the greater the amount of commercial property, the lower the rates per $100,000. Go back to the extreme cases. The average home price in unlucky Woodlynne, N.J. is $79,900, while the average house in lucky Sagaponack goes for a cool $3.2 million. Local taxes in Woodlynne are a burden, then, while in Sagaponack they're more like an annoyance, somewhere between the endless search for good lawn service and the unreliability of Jaguars.

But there's an even greater reason that local taxes vary: the amount of commercial property. Simple formula: the greater the amount of commercial property, the lower the tax rate on residential taxpayers. Drop an office building, industrial park or shopping center into your town and watch the taxes on owner-occupied houses decline. You can even afford gold-plated government if you have enough commercial land. Great Neck, where the teachers are paid so well, has 40 percent of its land in commercial uses.

There's an incredible range in these suburbs in the amount of land taken by commercial uses. White Plains, N.Y., which has a full-fledged downtown shopping district, is 60 percent commercial. Nearby Scarsdale, N.Y., is only 6 percent commercial. Not surprisingly, the median property tax in Scarsdale is more than three times the median tax in White Plains.

OK, so what to do? Most local officials are pleading for greater state aid, particularly for funding the schools. A few have raised the notion of tax sharing, so that the suburbs with a lot of commercial land help out those with a little. (Not likely. As one professor who studies localities told the Times, those asked to give up the tax base "will fight that to the death.")

We have a simpler solution: Do nothing. Land uses and property tax rates aren't acts of God; they're the results of local decisions. Take the schools. Yes, the school tax burdens are steep in some suburbs, but good schools ensure that you'll be able to sell your house for a good price one day. As one fiscal policy researcher told the Times, "Without even being able to articulate it, suburban home buyers understand this is part of the price they are paying for a house — so, in a perverse way, high school taxes are linked to high home values."

If localities want to change things, then, they can. They can accept less government, less desirable schools — or, better yet, redevelop parts of the community as commercial districts. Bottom line: We don't need to relieve Scarsdale's homeowners of their high taxes. They're perfectly capable of relieving them on their own.