Why isn’t the tax cap really 2 percent? How is the tax cap determined?
The New York State property tax cap law requires schools to use an eight-step formula to determine how much they can increase their tax levy each year. Although it is often described as a “2% tax cap,” the calculation does not always work out to be an even 2 percent. Very few school districts have a 2% tax cap because the formula causes the cap to vary from district to district.
There are five main factors that contribute to the tax cap, or allowable increase in the tax levy. They are: the current year tax levy, inflation rate, capital and retirement exclusions, payments in lieu of taxes, and tax base growth factor (set by the NYS Department of Taxation and Finance). These factors change every year and vary from district to district.
Here is a short video that explains how New York State uses a formula to determine each school district’s tax cap number, which rarely works out to 2 percent: