By ADAM SICHKO
The Albany Business Review

New York Gov. David Paterson has endorsed the recommendation of a state panel to cap annual property-tax growth at 4 percent as a key way to reduce the burden on businesses and homeowners.

The state Commission on Property Tax Relief issued its preliminary report Monday, and Paterson said Tuesday he accepted the plan.

"The growth of property taxes in this state is unsustainable, especially for the elderly, working families and small businesses just starting out," said Paterson.

The report suggests limiting the growth of property taxes to 4 percent, or 120 percent of the Consumer Price Index, whichever is less. The state's local taxes are 79 percent above the national average, and property taxes are often the largest tax that businesses pay, the report notes. The cap would apply to all school districts outside the state's "Big Five" cities - New York, Buffalo, Rochester, Syracuse and Yonkers.

"High tax rates are a clear disincentive to businesses, making the task of attracting new jobs more difficult," the commission says in its report. "A small business is extremely sensitive to overhead expense, which includes property-tax expenses - paid either directly or indirectly through rent."

The report calls a property-tax cap "a first and essential remedy."

The state's top business lobby has echoed that statement. The tax cap "offers a real chance to make New York's economy competitive again," said Kenneth Adams, head of The Business Council of New York State Inc., noting that property taxes rose at an average of more than twice the rate of inflation from 2000-05.

The report also recommends a controversial "circuit breaker" provision that would cap property taxes after they surpass a set percentage of a taxpayer's income. The state would then pay most of the taxes owed beyond that point. About 35 states have some form of this concept in place today.

The commission's report says that a circuit breaker is a "tax shifting device (that) shelters one class of taxpayers by placing the burden on a state-level funding source, such as state income and business taxes." The report noted that while the state's School Tax Assessment Relief program is another form of such tax relief, businesses are not eligible for STAR rebates.

Thomas Suozzi, Nassau County executive and head of the commission, has declined to say how the state could pay for a "circuit breaker." He has said that lawmakers are not willing to do so by increasing income taxes on the wealthiest New Yorkers.