Even as feuding between the governor and legislature over the state budget escalates in Albany, a new report from the state’s comptroller, Alan Hevesi, is reminding New Yorkers that Albany isn’t the only threat to the safety of their pocketbooks. Local property taxes in the Empire State are through the roof – 49% above the national average per capita. And that number’s on the low side because the statewide figure factors in property taxes in New York City, where property taxes are only part of the way one’s wallet is drained by government. Once the five boroughs are excluded, it turns out that the state’s property taxes are 73% above average.

These taxes contribute to the highest combined state and local tax burden in the country, and that’s controlling for the fact that New Yorkers tend to have higher incomes that would naturally leave them paying more taxes. The average state and local tax bill in the state in 2002 worked out to $131 per $1,000 of personal income, 26% higher than the national average. The comptroller’s report notes that local taxes are almost entirely to blame. At $64 for each $1,000 of income, state taxes aren’t that far above the national average. But local taxes are 60% above the national average, eating up $67 of each $1,000 of income.

What does it all mean? Of particular importance to the current crop of gubernatorial candidates, one lesson contained in the comptroller’s report is that only tax cuts cut taxes. The report notes that school property tax rate increases outpaced inflation even after implementation of the STAR program. Although tax payments after STAR rebates grew less than inflation between 1995 and 2000, that trend has evaporated since 2000. In other words, an attempt to alleviate property taxes simply by shuffling money from one government to another ended up backfiring and leaving everyone with higher taxes.

Quoth Mr. Hevesi’s report: “Although often described as a tax cut, STAR exemptions are actually a transfer of tax burden, from homeowners paying local school property taxes to taxpayers statewide. While STAR indisputably provides property tax relief for those receiving it, its long-term impact may well be an overall increase in State and local taxes. “Which leads to the most important passage in the report, which comes right at the end. In respect of what to do about the problem of high property taxes, Mr. Hevesi notes, “While short-term property tax relief may be the perceived effect [of programs like STAR], the long-term outcome may well be an overall increase in State and local taxes. Future research and policy analysis should be directed toward structural changes and systemic reforms for the property tax.”

Lawmakers in Albany may think they’re doing heavy lifting now, but Mr. Hevesi’s report suggests that they have so far dodged the real heavy lifting. This study highlights the stakes as gubernatorial candidates like John Faso and Thomas Suozzi start debating the best ways to reduce property taxes.