Who's Responsible for New York City's Regressive Property Tax System?

Across the country, rising electricity bills are causing concern among customers and policymakers. While there are many causes for higher energy costs, including data centers in certain service territories, challenges from restructured markets, infrastructure needs, increased electrification, extreme weather events, and other inflationary pressures, property taxes, which are passed through to utility customers, are a sizable and growing portion of electric bills, particularly for some New York utilities.

One data analysis of nationwide utilities shows that New York City’s electric utility, Consolidated Edison, is a statistical outlier with customers paying outlandishly high taxes embedded in their electric bills that Con Ed collects on behalf of local governments (See Chart 1). In fact, Con Ed’s rate of 26.2 percent is nearly four times the utility average of 7.2 percent and the median rate of 7 percent (See Chart 2). Con Ed officials have publicly testified that approximately 30 percent of its median customer’s monthly bill was comprised of taxes and fees imposed on the utility and simply passed through to the consumer, while about two-thirds of those taxes and fees,17 percent of the total bill, are municipally levied property taxes.

This issue is not new. For decades, policymakers in Albany and New York City have recognized the unintended inequalities caused by a set of laws known as the New York State Real Property Tax Law, which has created a regressive shift in tax levies from New York City’s and Nassau County’s homeowners onto all utility customers. The utility tax has the effect of collecting significantly higher tax revenues from rental properties in large multi-family buildings even as it provides tax relief to wealthier homeowners in single-family houses by pushing a greater portion of the real estate tax burden onto less wealthy renters.

Previous efforts by New York lawmakers to reform the utility tax have failed, which should be troubling since Con Ed’s tax rate is both regressive and nearly four times the national average. But New York’s political landscape is changing. Under the leadership of Mayor Zohran Mamdani and Governor Kathy Hochul, is there now an opportunity for elected officials in the city and the state to address this unfair utility tax as part of a political mandate to bring about economic fairness for working class and low-income New Yorkers? Many observers hope the answer is “yes.”