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March 04, 2015
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Why are property taxes so darned high? The third in a series of articles

Ken Hilton

The first article in this series, published by The River Reporter on December 26, 2013 revealed that Sullivan County’s local property tax burden is among the highest in the nation, more than twice the national average. The second article, published in our January 30, 2014 issue, provided a general overview of the kinds of local government services that tax revenues pay for. This, the third in our series, explains why our local property taxes are so high today.

Reason #1: A huge growth in the size and costs of local governments

This may come as a surprise to many, but over the past six decades our federal government has barely grown in size, while our state and local governments have mushroomed in both the number of their employees and in their overall costs. Here, for instance, are the civilian government employment numbers for 1955 and 2010.

Number of civilian government employees

1955 2010 % change

Federal 2.4 million 2.8 million +17% growth

State 1.2 million 4.4 million +267%

Local 3.9 million 12.2 million +212%

Seen as a percentage of the total U.S. workforce for both years, changes in government employment over these 55 years are even more striking.

Government employees as a % of the total U.S. workforce

1955 2010 % change

Federal 3.6% 1.8% -50%

State 1.8% 2.8% +55%

Local 5.9% 7.8% +24%

Tax data show the same trend over the past six decades. Below are the comparative total revenues for local, state, and federal governments, shown both as total current dollars, and as percentages of Gross Domestic Product (GDP).

Sullivan County budgets show similar growth over these 55 years, growing from an annual budget of $3.5 million in 1955 to $190 million in 2010.

Bottom line: Federal government revenues declined as a percentage of GDP from 1955 to 2010, and federal government civilian employment as a percentage of the national workforce fell by 50%. Yet, over these same years state and local government employment and tax revenues ballooned. In our state, local property taxes grew by twice the rate of inflation from 1995 to 2010, and the overall cost of local government grew by even more.

Over only five years, from 2000 to 2005, average New York State county budgets rose by 23%, town budgets by 35%, village budgets by 32%, school district budgets by 33% and fire district budgets by 40%. And yet, over these same five years, the overall cost of living (CPI) rose by only 13.4%.

Reason #2: The rural nature of Sullivan County

Perhaps the fairest way to judge the burden of property taxes is to compare those taxes to the incomes of the taxpayers. Judged this way, we find that the counties in New York State with the greatest local property tax burdens are Essex, Hamilton, Sullivan, Delaware and Ulster—all rural counties with sparse populations.

In densely populated areas, we might find hundreds of homeowners (taxpayers) living along a mile-long stretch of highway. But in sparsely-populated rural areas like ours, there might be only a few. A major cost for local governments is the maintenance of roads, and they levy taxes to pay for these costs. In highly populated communities those costs are shared by many taxpayers; but in rural communities, like ours, those costs are borne by only a few. Consequently, property tax rates are higher. We’re captives of our geography and demography.

There are several additional reasons Sullivan County’s property taxes are so high, and as this series of articles continues next month, I’ll be looking at tax exemptions, an insufficient commercial tax base, and our state’s large number of governmental units.