LoHud Community View 11/14/2017 (UPDATED VERSION)
Westchester Putnam School Boards Association
Lisa Davis, Executive Director
450 Mamaroneck Ave, 3rd Fl, Harrison, NY
WARNING: SALT is currently on the table, and it will affect more than your health! The proposed federal tax changes to SALT (State and Local Taxes) and mortgage deductibility would significantly affect our region, and constrain school district revenues for years to come. This issue underscores the New York metro area’s high cost of living as compared to other parts of New York State and the nation, and the reality of how public schools are funded in our area.
While state, local, and property taxes are currently fully deductible, the Senate proposes to eliminate these deductions in their entirety while the House bill would cap the local property tax deduction at $10,000. In most states, and even in most counties in New York, the House cap would exceed the local property tax and thus have no impact. However, our high property value region receives much less state aid, and thus we are highly dependent on the local property tax for our school district revenue. According to ATTOM Data Solutions’ 2016 property tax analysis, Westchester residents average $16,500 a year in property taxes. Thus, under the House bill’s $10,000 cap, for the average homeowner, $6,500 in property tax would no longer be deductible, and under the Senate bill, not a penny of your property tax payments would be deductible.
The House bill would reduce the threshold for federal mortgage deductibility from $1,000,000 to $500,000, further impacting taxpayers in our region. Again, this would be a realistic threshold in most states, but given the high property values in our area, a $500,000 maximum deduction would represent only a portion of the home mortgages in our region. The Senate bill would retain the current $1 million mortgage deduction cap, which already disproportionately affects homeowners in our high property value region.
The bottom line is that states like New York subsidize federal spending, and these changes would further increase that imbalance. A report from NYS Comptroller Di Napoli states, “for every dollar New York generated in federal tax receipts, it received 84 cents back in federal spending—compared to a national average of $1.18.” (New York’s Balance of Payments in the Federal Budget, Oct 2017).
While removing the deductibility of state and local taxes and implementing a $10,000 cap on property tax deductibility, the House bill would expand the use of 529 college savings plans (which are deductible for state income taxes and earnings grow tax free) to allow annual withdrawals of up to $10,000 to pay for K-12 private and parochial tuition and expenses. This sure looks like a voucher program with tax benefits for the 10% of families who opt for private or parochial education.
These changes to the federal tax code represent a direct attack on public education. The deductions allowed under the current tax law mitigate the personal effect of local property taxes for homeowners in high property tax regions such as ours, and the net tax impact provides an incentive to pay taxes to support public education. Under the proposed reduction in deductibility, even with the NYS tax levy cap in place, there will be undue pressure to cut school district expenditures, and this will ultimately starve our schools of needed resources.
As an organization that focuses on public school governance issues in our region, the Westchester Putnam School Boards Association is greatly concerned about the impact this will have on our taxpayers, and on the ability of our school districts to raise the revenue needed to support an appropriate, well-rounded education for every student, given our regional cost structure. At a time when student need is increasing and there is clear understanding of the short and long term benefits of addressing students’ mental health and other issues, we need more, not less, federal support for public school districts.