Municipal finance’s newspaper of record, The Bond Buyer, featured a podcast discussing the effect of the SALT (State and Local Tax) deduction cap on property taxes. I hadn’t thought about it before, but this was a jarring wake up call: the change in the law places a laser-sharp focus on property taxes that is even more intense than it usually is. For Nassau County, that is really saying something.
Before we dig in, let us immediately dismiss the farce of Rep. Tom Suozzi joining with Rep. Peter King sponsoring a bill to repeal the tax cap. They both know it’s not going anywhere, but they got press coverage showing them barking behind a podium that makes it seem like they’re responsive. This is what I detest about retail politics: the bill is an insult to the intelligence of the voters, and only a fool would believe this meaningless stunt will accomplish anything. It’s just the usual shtick.
The SALT deduction may not be worth preserving for a number of reasons. For one, it allowed blue states to get lazy about cost constraints. As long as the deductibility existed, dozens of interest groups lined up to feed at the trough. SALT acted as a palliative against this abuse, which gave you the $150,000 a year gym teacher. Maybe ending it forces a rethink, but as we see with Suozzi and King, the most insipid methods will be exhausted first. Almost as absurd are the workarounds Gov. Cuomo is trying to pass in order to sneak under the cap, limbo style. So far, not working, and not even plausible as a policy.
As far as mortgage interest being deductible, I have long argued for a complete phase-out. All the deduction does is artificially inflate the cost of housing. The result is an affordable housing crisis, and at the fringes of that crisis, creating homelessness. For a long time, it has been policy to advance housing, which is not a bad thing in itself. It becomes a bad thing when we tell people it’s a path to future riches in old age. You can’t have affordable housing and decades of price appreciation at the same time. Both constructs work against each other, so people need to think what kind of outcomes they want because what we have now is surely less than optimal, if not, in some communities, socially devastating.
The other issue for Long Island is the grotesque manner in which it manages its property tax structure. Again, the key goal is to rely less on real property tax revenue, and there are specific policy remedies that can be taken to do this. But that seems to be too much like work, so we’ll dump the problem on the assessor’s office. Given their seamless record of mass inaccuracy in the past 40 years, I would not expect a happy ending.
Not only is the county executive’s attempt to re-assess every property a fool’s errand, doing it in the midst of the biggest change in federal tax policy is akin to a suicide mission. We’ve done these mass re-assessments before, each one with more disastrous results, but (Laura) Curran maintains the preposterous conceit that this time, we’ll get it right. This time, we will surely reassess hundreds of thousands of properties with surgical accuracy and everyone will be happy with the results and no one will be able to challenge the outcomes. The only greater conceit was that she was qualified to develop policies that would actually remedy the problem. It seems Nassau will have to wait longer for another chance at competent management. But, as John Maynard Keynes said, “in the long run, we are all dead.”