New York Gov seeks cap on local property tax hikes

NEW YORK (Reuters) - New York Gov. David Paterson said on Tuesday he will ask the state legislature for a 4 percent cap on local property tax hikes because they are climbing twice as quickly as inflation and salaries.

Paterson said rising property taxes, which largely pay for schools, were driving people out of the state, and called on New York City, which instead uses its general fund to pay for education, to help the struggling upstate region.

"Our neighbors to the north continue to see their neighborhoods twisted and wasted, our children are giving up and moving out of state at the first chance they get, and our adult population hasn't experienced any assistance, other than the School Tax Relief (program) from the government in the last decade," Paterson told Albany reporters.

In a statement, the Democrat said he accepted the main recommendation of a tax commission whose report unveiled on Monday said this tax should not increase in any year by more than 4 percent, or 20 percent above the consumer price index.

Paterson said the legislature will get the bill this week. Its session ends in 20 days but he said it did not necessarily have to be enacted before the November elections.

Republican Senate Majority Leader Joseph Bruno noted the proposed cap mirrors a constitutional amendment his house approved. Democratic Speaker Sheldon Silver reiterated that his house had "long called for meaningful tax relief, including the use of a 'circuit breaker' endorsed in the report."

Paterson said the state must enact a property tax cap before a circuit breaker, which would give homeowners an income tax credit for a percentage of property taxes paid when that levy topped a set percentage of a person's income.

Paterson's new bill would cover all counties, cities and towns that spend 62 percent of their property taxes on schools, but not New York City and a few other big cities.

Paterson said he modified the commission's cap to let voters decide on any tax hikes below 4 percent. But he adopted other aspects, including letting school districts save any unused part of the annual cap to spend in the future and requiring 55 percent of voters to approve any increases that top 4 percent.

If state aid climbs at least 5 percent, a 60 percent majority would be needed.

(Reporting by Elizabeth Flood Morrow in Albany and Joan Gralla in New York; Editing by Diane Craft)