I hope you all had a chance to see the Northern Lights this weekend. This spectacle is in the wake of a total eclipse of the sun here in Plattsburgh, with nature in all its magnificence in barely a month. It would be cool to see a volcanic eruption here, but I’m certain that’s not going to happen, unless I am referring to our dramatic increase in local taxes. 

This is the time of year when local government reaches out to New Yorkers and lets us know that their assessment of the value of our homes has increased, even if the market value, called an appraisal, has not.. 

These annual reassessments have for the last half dozen years resulted in higher and higher algorithm-generated values, with many taxpayers in my area reporting a doubling of their taxes in six short years. That works out to annual increases in assessments of 12%. 

The United States is unique among developed nations in that the assessment is used to pay for the costs of local government that includes public grade school education. Higher value homes then bear a greater burden for the provision of a public good all of society enjoys - the education of our youth. 

Economics is the study of efficiency. It develops tools to do a balancing act. On the one hand is the benefit conferred by doing a bit more of some activity, and on the other hand is the costs of such an increment. Efficiency demands that we do no more of something should its additional cost exceed its incremental benefit. And, we should do more of something if we receive a greater improvement in benefit than cost. Thus we find the right level for our consumption of goods and services, our investment in private enterprise and opportunities, and in the optimal provision of government services. 

As economists strive to find the balancing point of efficiency, we trust our leaders will also enhance fairness, which economists call equity. We shall see that, come tax assessment time, decisions are made on our behalf that are neither efficient nor equitable. 

We recognize the collective personal  cost of government services at a local level. It is the sum total of our assessments, in thousands of dollars, times the tax rate per thousand dollars of value that is determined by local government and school board elected officials. 

Should we have more local government, in the form of better roads, newer equipment and vehicles for government workers, and higher civil salaries? Certainly, if there is no cost. 

But, in economics, everything has a cost, and the cost of local government is growing out of control. I live in the state of the Union with the highest level of state and local taxation, which averages 12% of all income. One in eight dollars earned goes to pay for local and state government. 

If this rate is the highest in the country, it is nigh impossible to argue that it is too low. And yet, when local governments reassess their value of our properties, but do not proportionately lower the tax rate attached to that reassessment, our local officials are making the bold statement that its citizens are not taxed enough. 

I always strove as a mayor of a city in New York to find the correct tax rate that balanced what citizens needed, what could be done collectively, and what is the capacity of citizens to pay a tax. Once that balance is reached, if the computer algorithm that assessors use to determine what they think your house is worth rises, then the tax rate would fall commensurately so that the proper product of the assessment and rate continues to be paid. This is the responsible and ethical thing to do. It is also efficient and equitable.

Even so, I was mindful that not all households can easily afford our local taxes. A retiree on fixed income may struggle to pay local taxes, which in our area can represent the single largest component of their annual budget.

Many Canadian communities recognize that a taxpayer who may have a valuable housing asset but little income in retirement cannot afford to pay these annual levies. Such communities respond by permitting the tax payment to be deferred, with a modest rate of interest charged, until the taxpayer sells their home, perhaps upon death. That way, nobody is forced out of their home because they cannot pay their taxes. The fiscal coffers receive the taxes due, with interest, but the deferred payments allow people to stay in their own homes.

Where I live, county treasurers tolerates you to stay in your home and defer taxes for a couple of years, with interest. However, if the taxpayer still cannot pay, the treasurer sells their home through foreclosure.. To add insult to this traumatic injury, local officials argued they were entitled to any profit between the auction proceeds on one’s home and the taxes owed. A couple years ago the Supreme Court rightfully determined that such profits should not go to local government but should instead be returned to the former homeowner. This is some small consolation because the taxpayer is still without a home. 

Local taxes affect lives. There is no reasonable argument for enjoying the windfall to local coffers when their computer algorithms tell them one’s house is worth more and when they do not lower the tax rate by the same amount. Instead, too often local governments view this windfall as free money to spend as they wish. 

A lesson I have learned is that councils are sometimes more political than economic. Some elected officials set tax rates, often somewhat surreptitiously, under the premise that taxpayers have short memories or may not notice. While some responsible local councils or legislatures lower the tax rate when assessments rise, others do not. 

Since property values rise consistently over time, especially at times like now when people suffer a fear of missing out (FOMO) and strive to purchase homes before they get even more expensive, we have seen home prices rise faster than inflation. If the cost of running local government and schools rises with the rate of inflation, this means that the tax rate must be lowered every year as assessments rise. I have heard of one unfortunate local who had his assessment increase by $800,000, at an annual cost of more than $20,000. That's not the total tax. That is just the increase in taxes owed this year for a home that is assessed at only a little more than the average value of a home in Vancouver, Canada, but at more than ten times the tax burden.

Even an extremely modest home assessed at $250,000 in my city owes almost $9,000 in taxes annually. What else do those of modest means spend $750 monthly on, except for local taxes? Not state taxes, not food, not insurance, not travel or entertainment, not utilities, and, for existing mortgages, not even mortgage interest. Nothing but local taxes.

That excessive rate of taxation explains why New Yorkers have the highest tax burden in the country, and it creates a hardship for those who are trapped by homeownership and the desire to live out their days near their families. It is time to roll back the total tax levy to a period before assessment and tax rate smoke-and-mirrors, adjusted for inflation.

I am not holding my breath, though. Local officials who bank on the opacity of tax increase keep the tax rate constant and reap windfall revenues as assessments rise. They then spend with a lack of frugality they do not exhibit in their personal lives. It’s just too easy and tempting to try to trick the electorate and avoid the hard work necessary for fiscal discipline. Home ownership is also put out of reach for low income households, and retirees are forced to sell their homes, leave their extended families, and move to more tax-responsible jurisdictions elsewhere. Such displacement is surely not efficient and nor is it equitable. It is playing with people's dreams and aspirations.

We could solve this dilemma with simple State legislation that a) allows retirees to defer taxes owed at a rate of interest equal to the bond borrowing rate of the municipality to ensure local government loses nothing by assisting in the affordability of local taxes for the low income and retired residents and b) require the tax rate to fall at the same rate as assessments increase. Kudos to those local governments that acknowledge the burden on our least fortunate taxpayers and lower tax rates in the same proportion as assessments rise to keep the overall burden constant.

Meanwhile, if your local government does not adjust the tax rate accordingly, try to take some cold comfort in all the brand new municipal vehicles and equipment you see on the road, the beautiful high school stadiums and AstroTurf fields, and the increased size and salaries of municipal employees. Those taxpayers pay for gold-plated local government while their parents and grandparents are forced to retire somewhere else, far away from their families. It isn't easy to live in the highest tax burden state in the nation and one of its most highly taxed communities. But, it is also not smart to enjoy such a dubious distinction when taxpayers can vote with their feet and their moving vans. We need only look to the mass migration from New York State to lower tax states.