The Tax Foundation reported that property taxes in three areas around New York are so high that the loss of the property tax deduction will affect income of many residents substantially. This will, in many cases, drop the discretionary income these people have.
The New York counties are is not the only ones facing a similar heavy burden. While it is too early to tell, discretionary income in many areas around the nation could be curtailed and undermine consumer spending.
According to the organization:
Property taxes are an important tool to help finance state and local governments. In fiscal year 2014, they comprised the largest source of state and local tax collections, at 31.3 percent.
Median property taxes paid varies among states. The lowest median property tax is $214 in Richland Parish, Louisiana, in the northeast part of the state. The three counties with the highest median property tax all have bills exceeding $10,000 – Nassau County, Rockland County, and Westchester County, all located in New York state and near New York City.
Because home prices tend to be higher in the suburbs of large cities, the problem will affect a large portion of the population, most likely led by the middle class.
The information raises the specter that many Americans will have less money to spend next year. Since about two-thirds of gross domestic product (GDP) is driven by consumer spending, its growth is bound to be dented, although no one can know how much until the lack of a property tax deduction begins to bite.
Most economists expect GDP growth to be slightly below 3% next year. Some expect the number to be barely above 2%. The recent positive activity in home buying and rise in stock prices are based largely on increases in employment and a modest rise in discretionary income among certain segments of the population. The demand for home prices and buying of stocks could be affected by the new law.