Cuomo pushes tax break for NYC renters

Very silly. Paying people to rent instead of purchase is dumb. Adding complexity to the tax code even dumber. Lots of people think it was bad policy to provide tax benefits to home buyers, but this makes it worse. The remedy would be phasing out the mortgage tax deduction. What Cuomo is doing is silly and will only wind up producing a budget shortfall that will have to be made up some other way. Doubt this goes anywhere but if it does those same people that benefit will likely see their taxes go up in some other way.

But hey , saying tax-cut or tax credit sure sounds nice.

Why Riversider would you be against parity for renters? Why if renting is the prudent financial choice should the renter be punished within the tax code, Riversider?

I'm against this and I'm a renter for now. Also, I agree with RS that phasing out the mortgage tax deduction is exactly what needs to heppen instead. They phased it out in the UK and the world didn't end, I think they did it over 10 years.

The reason is, this would make it hard for investors to make money renting out units in New York State and City, and that's not good.

Outside the city the cap rate is not good and the margins are thin. Inside the city you have the risk of T&L disputes that as a landlord you're going to lose.

It sounds like your comparing apples and oranges. This is a state tax credit, while the mortgage tax deduction is a federal government tax deduction. Shouldn't you be comparing property taxes to the tax credit?

"Outside the city the cap rate is not good and the margins are thin. Inside the city you have the risk of T&L disputes that as a landlord you're going to lose."

-- So the solution to investors overpaying for property is to allow them to freeload by paying less taxes? Isn't a more appropriate solution to allow investors who overpay to lose money so that prices drop to reasonable levels? Why should we subsidize these takers?

"Paying people to rent instead of purchase"
-- This comment is almost 180 degrees backwards.

One of the largest redistributive programs we have is the subsidies to homeowners, paid -- necessarily -- by non-homeowners. Renters pay income tax on the money they spend on rent; homeowners and coop shareholders do not pay any taxes on the implicit rent they pay. This massive subsidy to owners/shareholders is compounded by the rule that mortgage interest can be deducted, unlike any other interest used to create non-taxable income.

If Cuomo's proposal were to "pay people to rent" (which it isn't), at best it would be a slight move to counteract the far larger subsidies in the opposite direction.

The property tax deduction is Federal law: the Federal government at one point recognized that it should allow the states to fund themselves without forcing affluent citizens to pay taxes twice on the same income. It isn't a subsidy so much as a recognition of how our federal system works.

The property tax deduction doesn't apply to most NYC homeowners/shareholders, because the AMT takes it back. The AMT was amended to include this provision in order to pressure high-service, high-tax states to adopt the low-service, low-tax model of the less successful parts of the country.

Nothing Cuomo or the NYS legislature can do is likely to affect these Federal rules.

Cuomo's proposal, instead, is a complicated way to reduce property taxes, with a slight attempt to have landlords pass some of the tax cut through to renters. The attempt to get some of the tax cut to renters probably won't work, since landlords are likely to be able to raise rents to take whatever tax benefits renters get.

Since the property tax funds essential -- and mostly seriously underfunded -- government programs, including education, transportation, water/sewer/garbage and similar infrastructure, cutting it is a bad idea. We need to spend MORE, not less, on these essential services.

Instead of cutting property taxes, why not cut the overblown prison budget (e.g., by eliminating prison for non-violent drug offenders) or pressure the Federal government to return to revenue sharing.

Meanwhile, the actual largest unfairness of the property tax is that NYC coop shareholders are undertaxed: their buildings are appraised as if they were rent-stabilized rentals, instead of at market value. Why not fix that subsidy to the moochers and takers?

>or pressure the Federal government to return to revenue sharing.

What do you mean by this?

> phasing out the mortgage [interest] tax deduction is exactly what needs to happen instead

I agree. We should eliminate all deductions and have one low tax rate. Steve Forbes proposed this in 1996. Unfortunately, it will never happen. Machiavelli put it best:

"“It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries, who have the laws in their favour; and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it."

what is the meaning of your handle?

Until then, I think renters should be allowed to deduct the property-tax portion of their rent. It is only fair, since co-op and condo dwellers get to deduct their mortgage interest and property tax. It could be argued that people who can afford co-ops and condos in NYC have less of a need for tax deductions than us screwed market-rate renters.

how many times does hfscomm1 go into 9d8b7988045e4953a882

c0c0, you are speaking gibberish.

what do you mean by this?

Hi C0C0! c0c0c0c0c000!

looks like you're getting excited.

what's next?

c0c0c0c0c000! c0c0c0c0c000! I'm talking gibberish baby talk to C0C0!

I think renters should be allowed to deduct the property-tax portion of their rent.

Not according to the law it's not. renters are not owners. the benefit should not flow through. If you want a flow through structure, we have that already and it is called a cooperative.

Now Riversider is talking gibberish with me and C0C0!

so the renters will be allowed to deduct and the owners will also be allowed to deduct? that sounds like a double rebate of taxes.

http://www.cbpp.org/cms/?fa=view&id=3948

ab_11218
5 days ago
Posts: 2007
Member since: May 2009
ignore this person
report abuse
so the renters will be allowed to deduct and the owners will also be allowed to deduct? that sounds like a double rebate of taxes.

What's your point? Government is still net taxing the taxees. It's the takers who are receiving more from the government than they are taxed.

This is an effort from Cuomo to redistribute wealth.

Property taxes in NYC are disproportionately shouldered by rental landlords. Cuomo understands this burden.

After years of gouging us and making us shoulder even more of the weight caused by the recession, Cuomo needs to cut our property taxes. But instead of cutting our taxes to a reasonable level (or at least a less outrageous level) Cuomo decides to rebate my money to my tenants. He clearly is just taking my money and giving it away. Now that the economy is better and there is a budget surplus we should be thanked for picking up so much of the slack during such a difficult time and the noose should be loosed from our necks.

Instead of giving my tenants my money, he should just stop taking so much from me.

The property tax is deducted, just not by the renters. The landlord deducts the property tax and all other expenses from its income (which in most instances makes it a non-tax payer). Allowing the renter to deduct the property tax would have the same tax deducted twice.

The idea that property taxes are disproportionately shouldered by rental landlords is total dunk. It may be true comparing UES/UWS coops with rentals, but condo taxes are not remotely cheaper than rentals. As financeguy notes, fixing coop under-taxation is easy.

Guess what - if renters get a tax break rents will simply rise where not rent controlled. The rental market basically extracts what it can from a renter - and deductions will change that paradigm. Same as the deduction for ownership gets factored into sale price

Jazzman, you seem like you are new to New York. I say, Welcome to New York Jazzmacaca.

Cuomo doesn't want to give you more money. You already own the place. He wants to give money to renters who represent more voters than landlords, and to New landlord developers to build New rental housing.

We might have sympathy for you, but you've stated that any renter who tries to negotiate with you has a strike against them (and at the same time you are ok with negotiating in general, e.g. with a broker for his fee), so you go out of your way to set up renter vs. tenant, and in this instance where you don't have control, you are the loser. You make your bed.

>Guess what - if renters get a tax break rents will simply rise where not rent controlled. The rental market basically extracts what it can from a renter - and deductions will change that paradigm. Same as the deduction for ownership gets factored into sale price

Such theories are nice when you live in an Ivory Tower. This is New York City.

nyc_sport - you say "The landlord deducts the property tax and all other expenses from its income (which in most instances makes it a non-tax payer)."
If it pays property taxes how can it be a "non-tax payer?"

I have never had a building have a net income that was greater than my property tax for that building. Said another way. My property tax bill for every building I own, over every year I've owned them, is always more than 100% of the net income for that property.

So to say that these buildings are "non-tax payers" is absurd.

I also stand by my claim of rental landlords burdening property taxes. A $3MM rental building pays more in tax than a $3MM condo. (obviously I agree about the ridiculous co-op taxes and I'll add that townhouse rate are absurdly low too)

I wonder if rent-stabilized tenants will be eligible for the tax deduction.

What is a typical monthly amount in taxes for 750K condo in manhattan? 750K coop?

Of course Jazzman didn't know the NYS politial environment before he bought, he was unaware of the cash flow characteristics of the buildings he bought beforehand.

I live in many places; not a tower of Ivory. Most people in NYC pay way more for rent than they should. Guarantee they will stretch a little more (pushed by the landlords) if they get a tax break

There aren't many $750K condo listings in Manhattan, so easy to check. The unabated median looks to be around $500, e.g. 212 East 70th or 825 WEA.

A $750K co-op in my building would be about the same. That makes sense, as the city determines both co-op and condo taxes by using more-or-less-comparable rental buildings.

i agree with eriegel about rents rising.

why they don't do a broker fee tax deduction? these brokers do minimum and get maximum in Manhattan. if you tell anyone in Brooklyn or Queens that you'll chanrge them more than 1 month fee, they will laugh at you.

I have seen many people say that co-ops are under taxed and financeguy said it above. How are they under taxed in comparison to condos if they use the same basic formula? I have a 1BR coop and if anything, I think the taxes are high.

fieldchester - how many times do we need to go through this. property taxes as a percentage of revenue were perhaps 10% when i bought most of my properties - now the taxes are about 25% of revenue (note - that's 25% of revenue not 25% of net income). Rent stabilization law REQUIRES that the annual rent increases must be large enough to cover the increases in my expenses but even the government admits the rent increases recently aren't nearly enough to cover the increase in expenses. So the government admits they are breaking their own laws.
Was I supposed to predict that the government wouldn't follow the laws before I bought? Isn't it reasonable for me to complain about this injustice? Or should I just take it like a good little boy?

From the Indepedendent Budget Office for 2012
Single family homes account for 49% of market value and pay 15% of all property taxes.
Multifamily rental building are 24% of value and pay 40% of all of the taxes.

Here's a short article about the issue from 2011.
http://www.crainsnewyork.com/article/20120430/REAL_ESTATE/120429889

And to my point about property owners carrying an unjust amount of the burden during the recession -

http://mycrains.crainsnewyork.com/stats-and-the-city/2012/commercial-real-estate/property-taxes-revenue

Clearly our property values where off at least 20% in 2009 and 2010 so why did total property tax receipts go up by so much those years? My rents were down, oil expense off the charts, vacancy at all time highs for me, bad debt at all time highs, length of time to evict nonpaying tenants went from 5 months to 12 months etc etc - and still the City raised our taxes.

Now that the recession is nearing it's end/ended the City should stop squeezing us so hard. We picked up the slack - we did our part - we took one for the team - thank us and then show your appreciation by reducing the amount of taxes we pay.

bob420: Your thinking is correct, as is illustrated by the information NWT provided. Coops and condos are taxed on the same basic methodology. What's more, condos are more likely to benefit from abatements like 421a, which would make coop taxes look very high compared to certain new developments. Aside from that, there shouldn't be major differences, on the whole.

Phasing out the mortgage tax deduction is not the answer.

The middle class needs LESS taxes, not more.

The only fair solution is to make ALL housing payments (rent/mortgage/maintenance/condo association dues) tax deductable. Period.

What if we tax consumption rather than income?