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Answers to Common Questions

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Although New York State now has what is commonly called the “2 percent tax cap,” taxpayers in school districts that follow the law may see proposed increases in their personal taxes that exceed 2 percent. And voters may see proposed district tax levy increases that exceed 2 percent but meet all requirements of the new tax cap law. 

1. Does the tax cap mean my annual property tax can’t increase more than 2 percent? 

No, it means something different. New York’s property tax cap law limits the annual growth of total property taxes levied by school districts and other local governments to 2 percent or the rate of inflation, whichever is less. This amount is called the “tax levy limit.” A budget containing a tax levy increase at or below the tax levy limit is put before the voters in May and requires “yes” votes from a simple majority of voters for passage. However, there are instances where the tax levy limit may exceed 2 percent. 

2. When may the annual tax levy increase exceed 2 percent? 

Under the tax cap law, school districts are allowed certain exemptions that may boost their tax levy limits to more than 2 percent while still requiring only a simple majority for budget passage (see question 4 below). 

In addition, the tax levy may exceed the tax levy limit if 60 percent of voters in each school district approve such an increase. 

3. If the tax levy goes up by X percent, does that mean everyone’s taxes go up by X percent also? 

Not necessarily. The cap does not directly affect property tax rates or changes in individual taxes due in a given year. Tax rates paid by individual taxpayers may differ greatly from one household to another, based on things such as equalization rates, and may exceed 2 percent. The amount of taxes an individual pays can also be affected by changes in assessed property values. 

4. What are the exemptions to the tax cap that school districts may take? 

There are a limited number of specific exemptions to the tax cap that school districts may take. They are: 

  • Growth in “brick and mortar” development that increases a municipality’s full taxable property. 
  • Pension contribution costs that arise from increases in the statewide contribution rate in excess of 2 percentage points. 
  • Expenditures resulting from court orders or judgments arising out of tort actions that exceed 5 percent of the total tax levied in the prior fiscal year. 
  • The local portion of capital expenditures. 

Because school leaders realize their communities are acutely aware of the 2 percent tax cap, they may opt to stay within 2 percent even if it means adopting a budget with a property tax levy increase that is actually below what the law would allow after exemptions. 

5. What if voters reject the proposed tax levy? 

If voters in the district reject the proposed budget, the school board may adopt a budget with a tax levy no greater than what was levied the previous year or put up the same or a revised budget for a second vote. If voters reject the spending plan twice, schools must adopt a budget with the same tax levy as the prior year – essentially a zero percent cap.