When it comes to tax breaks, New York is the state of unintended consequences. Fixing one thing often messes up another.
The latest example of this is the $3.4 billion school tax relief program known as STAR. A change in how the state administers the program means that property owners who are delinquent on their taxes are still getting checks from the state to help pay those taxes.
That’s just wrong.
The state could check with local or county assessment departments to see whether homeowners are current on their tax payments. But it doesn’t. Instead, it can audit homeowners and claw back any state checks that didn’t go to pay the tax bill. The state Department of Taxation and Finance won’t say how many tax cheats have been discovered, citing a policy not to discuss audits. More than 500,000 STAR checks have been mailed so far this year.
The potential for fraud is a consequence of switching STAR from a $30,000 exemption on your school tax bill to a credit on your personal income taxes.
The switch — for new homebuyers and homeowners making more than $250,000 a year — took away from local assessors the headache of figuring out who was eligible for STAR. But this kind of cheating couldn’t happen when local assessors administered the STAR program. If you didn’t pay your taxes, you didn’t get the tax break. Period.
Homeowners getting STAR through a tax credit pay the school tax bill in full. Then the state sends a check to reimburse them for the value of a $30,000 exemption, instead of sending money to the school district to make up for the tax exemptions.
The switch is a budget shell game. It moves the STAR program from the spending side of the ledger to the revenue side. That helps Gov. Andrew Cuomo keep the state budget’s spending growth under the 2 percent tax cap – while not really cutting spending at all. The whole point of STAR is to reduce the tax burden on New Yorkers. Instead, it’s camouflaging more spending.
STAR was never simple, and it’s only gotten more complicated and confusing over the years. The latest change also happens to be an invitation to cheat – something the Legislature and the governor failed to foresee or forestall.