The federal tax overhaul exposes the problem by punishing New Yorkers with double taxation

by Dan Smith

This week Wall Street fund AllianceBernstein announced that it was the latest in a line of finance businesses fleeing New York in order to lower, among other things, its property taxes.

This is the latest story of Wall Street banks relocating far away from Wall Street—i.e., outside of New York.  One Bloomberg radio commentator opined, “this is a seminal shift, if AllianceBernstein is capable of moving and is going to make the move, others shall follow.”

Businesses aren’t the only ones leaving—New York’s population is on the decline, in no small part due to taxation.

That’s because the silver lining regarding property taxes used to be that they are deductible from federal taxable income. But that’s done. The federal tax overhaul which was signed for 2018 disallows property tax deductibility (caps it, along with all other state and local taxes, effectively eliminating it for many, given New York’s nation’s highest tax burden). That means that individuals will now be double taxed—paying federal income taxes on money that was already paid in local (and state) taxes. New Yorkers who rent will likely find their rents creeping up as their landlords pass the higher taxes on to them.

Such double taxation will surely drive down New Yorkers’ property values and force more to leave our state for places such as Florida, which has lower property taxes and no state income tax (because they spend less than half what New York does, despite Florida’s larger population). Governor Andrew Cuomo has proposed cumbersome gimmicks in an attempt to help New Yorkers avoid the double taxation, but most say the IRS will see through these schemes and disallow them. And none of them apply to property taxes.

Some say that the Republicans were attempting to punish “blue states,” whose state and property tax rates are typically much higher than “red states.” But no matter the reason, a lot of pain is coming for New Yorkers.

And while the federal taxation rule change is the catalyst for the sudden pain, let’s be clear: the problem is quite simply the high taxes in New York.

Property Taxes – What are they and Why are New York’s so high?

Property taxes are an easy way for municipalities to raise funds. It’s a fixed target. You either pay your taxes, or you lose your property. To many, it’s like paying rent on land you already own—seemingly a violation of property rights. In their best light, they are like HOA fees you “agree” to pay when you buy your property, subject to changes by local government. But their ease of collection from typically the wealthiest people—landowners, makes them a staple for trying to raise funds for: public schools, first responders, sewage treatment, local road maintenance, parks, general administration, as well as hundreds of other uses.

And New York localities spend a lot of money—among the most in the nation.

Bloomberg news reports that three of the five most expensive counties in the nation for property taxes are in New York, while other reports say that New York has nine of the top 10 highest property tax counties in the nation. Overall, New York state’s property taxes are twice the national average, third highest overall.

The New York state legislature has put a soft cap on local government spending (the “tax levy”) which limits increases in annual spending to the lesser of two percent or the inflation rate, unless local government gets 60 percent approval of going over the cap, after public hearings are held.

While a cap is a great thing for those of us who are payers of property taxes, it leaves localities struggling to meet fiscal challenges—many of which come from the state. That’s because there is no limitation on Albany’s or federal requirements of local government with new and expanded rules they write, for which no state or federal budget monies are provided to comply. These are the dreaded unfunded mandates.

With both a property tax cap and increased requirements from Albany and Washington, local governments find they are getting squeezed. Many turn to other forms of taxation: fines and fees—everything from increases in mobile phone taxes (New York’s are 50 percent higher than the national average) to diverting police from preventing violence and turning them into tax collectors: plaguing non-violent people with more traffic stops to raise funds via traffic/parking summons or civil asset forfeiture.

What Can be Done?

Solutions to the problems localities face are not simple, but Albany can help:

• As we’ve proposed here, new unfunded mandates from Albany need to stop and old ones need to be eliminated. New York localities need to be protected from federal mandates, whenever possible.
• Albany can cut back on dozens of rules and regulations which stifle local businesses, among these are New York’s ever-growing minimum wage and jobs-killing occupational licensure laws.
• Public schools need to be free to run without Albany interference so that they can meet their fiscal and unique educational challenges in creative and cost-effective ways.
• State government spending in Albany can be cut dramatically, thereby relieving pressure on New York taxpayers and therefore local governments.
• Public employees’ pensions need to be transitioned from defined benefit plans to defined contribution plans or otherwise restructured to meet their near- and long-term fiscal challenges without massive tax increases which will surely come, otherwise.

No matter what, New Yorkers are looking at tougher times with the federal deductibility of state and local taxes being capped/eliminated. Albany can do a lot to ease the burden on localities so that property taxes can be controlled.

The post New York’s Property Tax Spiral appeared first on Larry Sharpe, Libertarian.

Your property can be taken by the police for no reason—and it’s guilty until you prove it innocent.

By: Dan Smith

Civil asset forfeiture is an area of law which permits local, state or federal law enforcement to seize your money or other property (car, home, etc.) if they suspect you might be involved with a crime.

The practice is nicknamed, “Policing for Profit,” by critics who see that law enforcement officials have highly questionable incentives in this arrangement. If police come across money (or other assets) in nearly any situation, they may take it and there’s almost nothing the owner can do about it. Your money or property is presumed guilty whether or not you are charged or convicted of a crime. Some estimates say that’s the case more than 80 percent of the time.

Even more egregious is that the police get to keep the funds if you don’t initiate the complicated and expense legal process to prove your property innocence within 270 days (per New York’s law).

So, the police are clearly incentivized to profit from such situations. They find the money and then they are the judge, jury, executioner and beneficiary of the taken property.

It’s wrong on a great many levels.

Many law enforcement officials feel that civil forfeiture is an important tool for them, particularly in the War on Drugs—where they feel they can cripple narcotics distribution operations by taking perpetrators’ cash.

Such an explanation runs into the highly questionable War on Drugs.

Further, the victims of civil forfeiture tend to be the poor and minorities—as they are more likely to be carrying cash when they encounter police. Individuals from these groups are less likely to initiate negative publicity against the police and have the least ability to defend themselves.  

How Is This Even a Thing?

Besides being unjust from the common-sense viewpoint of ‘innocent until proven guilty,’ one can legitimately ask: ‘How is this practice constitutional?’.

The Due Process Clause of the United States Constitution under the Fifth Amendment states:

“No person shall . . . be deprived of life, liberty, or property, without due process of law.”

So, it certainly sounds unconstitutional.  Unfortunately, this practice has not faced a serious constitutional challenge at the Supreme Court in over 40 years (and that case is quite likely no longer applicable). Prosecutors typically yield before the question can reach federal appeals court and since this is a civil proceeding, your property does not have the right to an attorney, making challenging the law quite costly.  

One might ask:  why is the process of seizing funds a civil procedure, when the crimes themselves with which they’re associated almost always criminal or traffic violations? The answers one gets to that question are highly dissatisfying (e.g., a “thing” cannot commit a crime). But cutting through the legal bull, it seems to be related to the fact that it’s easier for the police to keep your property under this lower standard of proof and our legal system is often about making policing easier on the police.

What’s also ironic is that when people do fight and get their property back, the police often don’t give back or repay what was taken, much less face any punishment. The money for restitution often comes out of general taxpayer funds—so the police really face no penalty for being wrong. Taxpayers’ lose, as usual.

These clear police abuses have been written about more and more in recent years. And some states have rewritten laws to curb some abuses. But much of it is window dressing. President Obama’s DOJ used this tool widely—much more than any past administration, to the point that more money was taken by police in a given year than was taken by burglars committing crimes.  Under some pressure for civil rights groups, Obama announced the practice would be curbed, but then sadly reversed many of those rule changes when he came under pressure from powerful law enforcement groups who profit from the seizing of people’s property.

President Trump has fully backed the practice and his Attorney General, Jeff Sessions,is aggressively using it, and will likely beat Obama’s records. As I write this in March 2018, the DEA is about to hold an auction to sell off $25 million worth of Bitcoin, primarily seized via cases of civil asset forfeiture where no charges were filed.

The bottom line is that the police like it. And in this country, the police get the benefit of the doubt. The police are highly organized and make a lot of money from this practice.  And no public official wants to appear ‘soft on crime.’ So, while the practice is heinous and corrupt and while there have been attempts to reduce the practice, it largely continues.

New York Is An Average Offender of Rights

The Institute for Justice, who regularly defends victims of forfeiture abuse (having won dozens of such cases), rates New York State as an average offender of people’s civil rights in this area, giving us a “C” grade.  Among other factors influencing that grade: New York law enforcement gets to keep 60 percent of the property they seize (the remainder is sent to other agencies), New York’s standard of proof for keeping the funds (“clear and convincing evidence”) in trial is higher than standard civil proceedings, but lower than “beyond a reasonable doubt”—as in criminal proceedings.

However, New York has been particularly opaque about its forfeiture activities. In 2013, a rare disclosure from the NYPD, via being forced to by Freedom of Information filings, showed that they’d seized many tens of millions of dollars from New Yorkers, all with no Due Process. In reality, no one knows how much money has been taken—the NYPD complained to a judge that if they tried to figure out how much, their computer systems would crash.

Statewide information is even harder to come by.

New York has made some strides to investigate and potentially reduce abuses. In 2017, the New York City Council passed a law to demand civil forfeiture data from the NYPD. This led to the NYPD agreeing to new rules limiting seizures in February 2018.  

New York Can Do Much More to Improve

New York State Police and local police, including the NYPD, can do more to track their seizures, to give the public better information about how much the police are seizing and what is happening with the funds.

Ending the failed War on Drugs would eliminate much of the practice.

New York should remove the clearly corrupting incentive of allowing police to keep the property. Police and officials at all levels should turn the property over to the state treasury—the Department of Taxation and Finance, or some other entity unconnected with the seizures or their adjudication. Law enforcement should not be compensated in any way, other than via taxes from their jurisdiction.

Most importantly, New York should require a conviction of criminal activities related to the asset seizure. If a prosecutor can’t make a case or convict the person, why should his or her property be forfeited? It should be returned, with interest.

These changes might be a challenge for the police and the justice system. But “innocent until proven guilty” is a burden which the state must bear. A free society demands it.

The post Civil Asset Forfeiture appeared first on Larry Sharpe, Libertarian.