What the People Want
by Alfred E. Smith, IV

As a politician, my great-grandfather Al Smith was larger than life. He was speaker of the New York Assembly, Governor of the State of New York and the first Roman Catholic to run for President of the United States. Although he was defeated in 1928 by Herbert Hoover, Hoover's legacy has become synonymous with the onset of the Great Depression, which just goes to show you that sometimes the voters don't always get what they bargain for.

Known as "the patron of the little people" for his dedication to those who were less fortunate than most, my great-grandfather was a beloved politician. That's an oxymoron in today's bare-knuckled arena of politics, which unfortunately has become more of a blood sport than a calling. Voters still have the last word on their representation, so politicians try to give them what they believe the voters want most. Not much has changed in that regard since my great grandfather's time.

Sometimes giving the people what they want is more complex than it appears. Take the discussion over tax caps in New York State. A recent poll of New Yorkers indicated that 74% of the people want their taxes capped which has sent officials, Democrats and Republicans alike, scrambling for voters' support by making proposals to cap real property or local school taxes. Many of the solutions advanced will do more harm than good by giving the people "what they want."

One recommendation advanced by the New York State Commission on Real Property Tax Relief is a classic example of bad public policy. The proposal would cap school district expenditures to 4% or 120% of inflation whichever is less.

It is an across the board solution that doesn't work everywhere. One size does not fit all. Poorer districts would be unable to raise the revenues they need to provide the education their children deserve, while wealthy districts could easily override the cap by local initiative widening the achievement gap the state as a whole has tried to narrow over the last several years. This comes at a time when the gap is narrowing thanks to both local and state investment in public education. Across the board caps would lock in disparities that exist today.

Looking more closely at this issue, what the voters are really after is some sort of personal real property tax relief - not real property tax caps. If the public didn't want greater investment in education, they would vote down their local school budgets. But in each of the last 2 years, 95% of school budgets put before the voters were approved. Clearly, New Yorkers want more resources invested in the schools, but they'd likely prefer that it was the state that did more, not the average homeowner.

As a prodigy of my great-grandfather, I understand the needs of working men and women. Many of the working poor -- the elderly on fixed incomes with small pensions or Social Security, the many hard working families struggling to get by -- are the homeowners clamoring for real property tax relief. A cap will not lessen their burden. In fact, some suggest it will simply become the new floor for regular increases.

There are several proposals that would address real property tax relief. One suggestion is what's known as the "circuit breakers" real property tax rebate. This was one of the recommendations buried in the Commission on Real Property Tax Reform that has been ignored by many.

A "circuit breaker" provision in New York's tax law would work like this: when a homeowner whose earnings and assets are below a set threshold, and their real property tax burden exceeds a certain percentage of their income (say for example 10%), the homeowner would receive an exemption or tax relief for the balance of their property tax. Seniors would no longer be "taxed out of their homes". A cap would not provide the relief a circuit breaker would provide. A recent Siena Research Institute poll found that 75 per cent favor this circuit breaker approach, even if it means raising income taxes on the most wealthy.

For most Americans, their home is their single greatest source of wealth. As its value appreciates, so does their nest egg, their legacy. Tax caps will harm school quality, resulting in lower property values, in effect capping the expansion of regular homeowners overall wealth. This would be an unintended consequence of what some might consider a good proposal.

Those who get true tax relief under the circuit breakers are exactly the ones who need it most. To pay for the proposed tax relief, the State would need to increase revenue sharing with New York's cities and towns. One idea that has been floated to fund the State's new payments to cities and towns includes a modest 1% surcharge on the income taxes of the very wealthy to help fund public education. This seems like a fair progressive way to ensure that the elderly and low-income individuals get a tax break.

There will be a great deal of debate over these issues, especially as election time draws near. A problem as complex as this requires the participation of all stakeholders, including the Governor, Senate, Assembly, along with unions including teachers' groups, state, and local employees, and homeowners. As my great-grandfather used to say "All the ills of democracy can be cured by more democracy." Let's not let bad policy be adopted in the name of "what the people want''.