Rising Property Taxes Overwhelm Many

February 20, 2011 Rising Property Taxes Overwhelm Many Who Are Living on the Edge By WINNIE HU Gov. Andrew M. Cuomo’s campaign to cap property taxes has angered school and municipal officials who say that limiting local tax revenue will make it impossible for them to cover rising expenses and will result in drastic cuts in services. Nevertheless, the tax cap has wide support among New Yorkers,... [more]

February 20, 2011 Rising Property Taxes Overwhelm Many Who Are Living on the Edge By WINNIE HU Gov. Andrew M. Cuomo’s campaign to cap property taxes has angered school and municipal officials who say that limiting local tax revenue will make it impossible for them to cover rising expenses and will result in drastic cuts in services. Nevertheless, the tax cap has wide support among New Yorkers, polls have shown, with many homeowners saying they are struggling to pay property taxes, which have risen steeply in the last decade as wages have stagnated, savings have dwindled and housing values have fallen. How burdensome are these property taxes? In a recent report by the Tax Foundation, a nonpartisan research group in Washington, New York ranked fourth in property taxes among the states, with median taxes of $3,755 in 2009, compared with $1,917 nationally. New Jersey, which passed a property tax cap last year, was first with $6,579. The report also found that in five New York counties — Westchester, Nassau, Suffolk, Rockland and Putnam — the median taxes were $7,295 to $9,044, with homeowners typically paying from 7.8 percent to 8.6 percent of their income in property taxes, compared with 3 percent nationally. But “tax burden” is in the eye of the homeowner. Michael McCall, a marketing professor at Ithaca College who studies consumer spending, said feeling overburdened was, in part, a psychological state, one based on earnings, debt, home value and even what friends in other states were paying. In that sense, property taxes are one piece of a complex personal financial picture, and what may seem affordable to some may not to others. “Everybody complains about property taxes, but not everybody’s on the same rung on the financial ladder,” Mr. McCall said. Still, he said: “There are definitely people who can’t afford it. They’ve cut as much as they can from their budgets and there is just no more to give.” The New York Times recently interviewed four families who said that rising property taxes were sending them over the edge of financial stability. They included a couple moving to Nova Scotia to pay lower property taxes, and an 81-year-old woman from the Rochester suburbs who was mentioned by Governor Cuomo in his State of the State address last month because she continued to work in a school cafeteria so she could pay her taxes. Here are their stories. Jacqueline Cohen and Vaughan Smith Jacqueline Cohen and Vaughan Smith moved their pottery business and 12 cats to the Ulster County, N.Y., community of High Falls from Columbus, Ohio, in 1994. They paid $210,000 for an 1824 farmhouse on 1.9 acres, and spent $70,000 to build a studio out back. They later invested an additional $10,000 to add a gas kiln. After 17 years, though, they are moving to Nova Scotia — driven, they say, by the taxes on their home, which have tripled to $10,065 a year while their net income has fallen to $35,000. “I think property taxes are destroying our community,” Mr. Smith, 55, said, adding, “Families have to choose between paying their property taxes and buying health insurance and putting food on the table.” After paying their property taxes, the couple had about $25,000 left over for food, utilities and other living expenses. Health insurance was $8,000. Water was $700 a year, and garbage pickup $600. Switching to a wood stove lowered their heating oil bills to $600 a year from $2,000. As sales of their hand-crafted bowls, mugs and tableware have slowed, they have withdrawn $5,000 to $10,000 a year from their savings to cover their costs. “We’ve tried to hang on,” said Ms. Cohen, 54. “We’re self-employed and we don’t have a safety net of pensions. We have to be able to save, and that’s why we don’t see a future here.” The couple used their remaining $300,000 in savings to buy a 2.5-acre waterfront property in Nova Scotia, where they will pay just $1,440 in property taxes that include water and garbage pickup. They plan to sell their High Falls home, which is assessed at $430,000. They will pay a sales tax of 15 percent on items in Nova Scotia, compared with 8 percent in New York. But Mr. Smith calculated that income taxes would be about the same — roughly a third of their income. With Canada’s socialized medical system, they will no longer have to spend $8,000 a year on health insurance. Add what they will save in property taxes — more than $8,000 — and Mr. Smith said: “We’ll win by thousands. For regular working people, you’re better off." Geraldine Sullivan Geraldine Sullivan has spent her 81 years in the Rochester area, the last 50 of them in a 1928 Dutch Colonial-style house in Irondequoit that she bought for $15,000. The house is now valued at $73,000, according to property rolls. But while Ms. Sullivan’s home is paid off, she said, she has to work part-time as a kitchen server at a local high school to help pay the property taxes. In 2010, she paid $1,748 in school, town and county taxes (it would have been $3,276, but she benefited from a tax break for the elderly). Ms. Sullivan also paid $970 in property taxes on 23 acres of woods in the nearby town of Sodus that she and a friend bought as an investment for $14,000 more than two decades ago. She said the taxes on both properties claim about 17 percent of her net income of about $16,000 from the part-time job, Social Security and a small pension and 401(k) from Bausch & Lomb, where she worked in accounts payable for 25 years before retiring in 1995. The rest goes to groceries, doctor’s bills and repairs on her home, she said; in 2009, a water line break cost her $1,000. She does not have a television, a cellphone or a computer. She shops at dollar stores and keeps the second floor of her house closed off to save on heat. Ms. Sullivan said she had always lived modestly, raising three children by herself after a divorce. She said she hoped to preserve her land for conservation and to leave the money in the 401(k) to her three children, who are financially struggling themselves. Ms. Sullivan does not intend to move anytime soon but worries that she will no longer be able to afford to stay in her home. “I have everything in boxes,” she said. “When the day comes I can’t work anymore, I’ll just leave.” Jacquelyn Fike and Charles T. Fike Jacquelyn and Charles T. Fike moved their young family to the suburbs of Westchester County in 1974. They bought a three-bedroom house in Bronxville for $98,000 and, in 2005, took out a $350,000 mortgage to build a second floor for their son, Charles, 40, who has developmental disabilities on the autism spectrum. The Fikes each worked for more than 30 years at IBM; they have a net income of $130,000 annually from their combined pensions, Social Security and investments. They have also saved $850,000, which they hope to leave for their son’s care. But Mrs. Fike, 72, said that while they had planned carefully for retirement, they have had to dip into their savings to pay their property taxes, which have increased eightfold, to $34,181 a year from $4,200 when they moved in. The taxes claim 26 percent of their income, with annual mortgage payments of $22,800 absorbing an additional 17 percent. “We have done the best we can and we have been careful,” Mrs. Fike said, adding that they had forgone vacations and were sharing a 2001 Mazda since their second car had been crushed by a tree. As they grow older, medical bills have become a growing concern. Mr. Fike, 77, has Alzheimer’s disease and requires costly nursing care, which is currently covered by long-term care insurance that will eventually be exhausted. “Then some difficult decision will have to be made,” Mrs. Fike said. The Fikes also support their son, who receives about $800 a month in disability payments, some of which is used for therapy. He also works part time in the summer, maintaining tennis courts in the village, and collects cans and bottles for recycling. Mrs. Fike said she was reluctant to sell the house, now assessed at $1.5 million, because it is the only home that their son has ever known. “My son has made a life for himself in Bronxville,” she said. “He’s comfortable and he can be more competent when his home life and community are stable.” Still, Mrs. Fike said that she might have no choice some day. “It’s so upsetting that I don’t want to think about it,” she said. “Moving is all down sides; there’s no positives to it.” Kimberly Smith and Gregg Smith For Gregg and Kimberly Smith, the rising property taxes on their four-bedroom house in Walden, in Orange County, were one more in an avalanche of financial troubles. Mr. Smith, 41, a former telecommunications executive, was laid off twice after moving to New York in 2005. He said he and his wife had since depleted $50,000 in savings, racked up $60,000 in credit card charges from paying living expenses, and are filing for bankruptcy protection. Taxes on their 1.5-acre property rose 24 percent to $6,079 in five years, even as the market value went down; it was recently appraised for $267,000 by a local Realtor, or $82,000 less than they paid for it, the Smiths said. The couple gave up their home in November, defaulting on a $290,000 mortgage that they said they could no longer keep up with. They moved with their three younger children to Lakeland, Fla., where they stayed at first with relatives and now rent a house for $1,650 a month. Mr. Smith said they had always felt obligated to pay their property taxes, even when that meant cutting back on something else, like movies or groceries. In 2010, their property taxes claimed 9 percent of the family’s net income of $69,000. (The mortgage cost $2,465 a month until they stopped paying.) “It’s not like we saw an increase in services or better roads,” Mr. Smith said. “When nothing improved — and actually got worse — and my property value went down, it just made no sense.” http://www.nytimes.com/2011/02/21/nyregion/21taxes.html?pagewanted=1&_r=3&partner=rssnyt&emc=rss [less]