New York City’s tax policy encompasses the various personal income, corporate, and property taxes levied by the city and state to fund public services and manage the municipal budget. This page covers CBC’s work on tax competitiveness, property tax reform, business tax rates, economic development tax incentives, and the impact of tax policy on resident and business retention.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The Administration should not raise taxes, which will make the City less attractive for New Yorkers who fund our schools, police, and sanitation—and the businesses that create jobs and support our economy.
The City should redouble its efforts to find more substantial savings by the Executive Budget and commit to an affordable, efficient government that provides quality services for all New Yorkers.
The Mayor should ensure that every one of the people’s $127 billion is used well, before asking them to dig into their pockets.
The Mayor should partner with municipal unions to redesign work processes and broaden responsibilities, then share the gains.
Key Data
In October 2026, the CBC reported that New York City spent $2 billion on tax breaks in 2025, with half ($960 million) attributed to the Industrial and Commercial Abatement Program (ICAP) and its predecessor.
In June 2026, the CBC noted that the State approved a pied-à-terre tax expected to raise $500 million annually, while the City planned to reduce the Unincorporated Business Tax (UBT) credit by $68 million.
In February 2026, the CBC warned that economically sensitive taxes generate nearly 60% of City tax revenues, making the budget vulnerable to an economic slowdown.
An August 2025 analysis showed that New York City's share of the nation's millionaires fell from 6.5% to 4.2% between 2010 and 2022, costing the City an estimated $2.5 billion in foregone personal income tax revenue in 2022 alone.
New York City's spending on economic development tax breaks reached $2.0 billion in 2025, with half of that total directed to the Industrial and Commercial Abatement Program and its predecessor. Despite growing expenditures on these incentives, there is mixed evidence regarding their effectiveness in generating economic growth or creating jobs.
Recommendations related to City Tax Policy
Absent paying for itself, a tax break should only be renewed if there is clear evidence that the program is the most cost-effective way to deliver a critical, quantifiable public benefit.
Rather than extending and expanding programs indiscriminately, New York State and its local governments should evaluate how effective existing programs are and use those results to grow what works, and to shrink, eliminate, or reform what does not.
New York should evaluate economic development programs, expand those that are proven cost-effective, and reform or eliminate those that are not.
New York’s State and local governments should focus their economic development activities on the fundamentals that drive New York’s competitiveness, such as job creation and retention incentives with proven benefits and high cost-effectiveness.
To support robust economic growth and direct precious resources wisely, New York State and its local governments should focus economic development dollars on programs that deliver results.
Key Data
$2.0 Billion
— Amount New York City spent on tax breaks in 2025, with half of this amount attributed to the Industrial and Commercial Abatement Program and its predecessor.
$960 Million
— Amount of New York City's tax breaks in 2025 attributed to the Industrial and Commercial Abatement Program and its predecessor, the Industrial and Commercial Incentive Program.
$2,001 Million
— New York City tax breaks in fiscal year 2025, representing an increase from previous years.
$1,876 Million
— New York City tax breaks in fiscal year 2024.
$1,804 Million
— New York City tax breaks in fiscal year 2023.
$1,728 Million
— New York City tax breaks in fiscal year 2021.
The implementation of New York's new pied-à-terre tax has faced significant challenges due to limited public vetting, a compressed eight-month timeline, and insufficient communication regarding the 17,000 letters sent to potentially liable property owners. To improve future tax administration, the City should extend deadlines, clarify public disclosures, and evaluate the tax's broader impacts on property values, revenues, and spending.
Recommendations related to City Tax Policy
The City should take this opportunity to evaluate the pied-à-terre’s impact on property values, transactions, supply, ownership patterns, and tax revenues.
The City should evaluate the broader related impacts of changes in supply and ownership, not just on property taxes but on all revenues and City spending.
The City should communicate more clearly regarding letters sent to owners whose properties may be subject to the tax, including who would receive a letter, why the Department of Finance needed additional information to determine eligibility, and the next steps.
Sound tax administration depends on sound policymaking, which requires adequate legislative vetting, sufficient implementation time, clear communication, and ongoing evaluation based on evidence.
Key Data
17,000
— The approximate number of letters sent by the City to owners whose properties may be subject to the pied-à-terre tax.
eight months
— The amount of time the Department of Finance had from enactment to revenue collection to implement the new pied-à-terre tax.
seven weeks
— The timeframe within which the Department of Finance developed regulations and administrative processes for the new tax.
eight days
— The number of days after the law took effect that proposed rules were released.
five days
— The number of days after the public hearing that the proposed rules were adopted.
The NYC FY 2027 Executive Budget relies heavily on one-time resources and short-term savings, leaving the city with projected budget gaps growing from $7.1 billion in fiscal year 2028 to $9.8 billion in fiscal year 2030. To achieve long-term fiscal sustainability, the city must reduce spending growth and increase reserves rather than relying on temporary budget fixes.
Recommendations related to City Tax Policy
Double Executive Order 12 saving initiatives to $2 billion in fiscal year 2027 and increase by $1 billion annually thereafter to reduce spending without cuts to critical services.
Implement additional actions to reduce costs stemming from CityFHEPS, due process (Carter) cases, and other fast-growing areas.
Fund additional new spending and City Council initiatives with recurring savings.
Increase the fiscal year 2027 General Reserve to $500 million to protect against economic volatility and unexpected spending shocks.
Key Data
$6.6 billion
— Upward revision to the fiscal year 2026 and 2027 tax revenue forecast.
$500 million
— Expected annual revenue from the newly approved pied-à-terre tax on luxury, non-primary residencies.
$68 million
— Planned reduction in the Unincorporated Business Tax (UBT) credit on City personal income taxes.
4.7 percent
— Tax revenue growth rate experienced by the City.
0.8 percent to 1.3 percent
— Surcharge range for one- to three-family homes, co-ops, and condominiums valued over $5 million that are not owned by residents.
Sherif Soliman has more than 30 years of experience in government and currently serves as Budget Director of the New York City Mayor’s Office of Management and Budget. In this role, he oversees the city’s fiscal policy, including the development of the expense and capital budgets, the city’s bond and…
New York already leads the nation in tax collection, and further tax increases would likely weaken the state's economic competitiveness by driving away businesses and high-income residents. Instead of raising taxes, the state and city should focus on improving the efficiency of their existing $263 billion and $127 billion budgets to meet public needs.
Recommendations related to City Tax Policy
The State and New York City should hold the line on taxes and not include State or City tax increases in their one-house or enacted budgets.
The State and New York City should double down on getting the most out of their existing budgets by efficiently delivering high-quality services.
Key Data
$44 billion
— The amount by which state taxes this fiscal year are projected to be higher than just five years ago.
14.776%
— The combined top marginal personal income tax rate for New York City residents.
17.44%
— The tax rate on business activity in New York City.
140,000
— The number of more people who moved from New York State to other parts of the country than moved in during 2024.
$263 billion
— The total budget for the State.
$127 billion
— The total budget for New York City.
The city's preliminary budget proposes a false choice between raising taxes or depleting reserves, but the administration should instead focus on eliminating inefficient spending to balance the budget. Raising taxes would make the city less attractive for residents and businesses, while relying on optimistic tax revenue projections creates significant financial risk.
Recommendations related to City Tax Policy
The Administration should not raise taxes, which will make the City less attractive for New Yorkers who fund our schools, police, and sanitation—and the businesses that create jobs and support our economy.
The City should redouble its efforts to find more substantial savings by the Executive Budget and commit to an affordable, efficient government that provides quality services for all New Yorkers.
The Mayor should ensure that every one of the people’s $127 billion is used well, before asking them to dig into their pockets.
The Mayor should partner with municipal unions to redesign work processes and broaden responsibilities, then share the gains.
Key Data
$127 billion
— Total amount of the city's preliminary budget that the Mayor should ensure is used well.
$1 billion
— Initial amount of savings identified in the budget.
$1.2 billion
— Amount pulled from the Rainy Day Fund and the RHBT to balance the City budget.
$100 million
— Amount of in-year reserves remaining, leaving virtually no budget cushion.
$6.7 billion
— Projected budget gap in fiscal year 2028.
nearly $2 billion
— Potential commercial property tax increase that could be harmful to the economy.
New York City faces a significant budget shortfall that should be addressed through operational efficiency and spending reform rather than increasing taxes on businesses and high earners. Raising taxes risks weakening the city's economic competitiveness, as the city already imposes some of the nation's highest tax rates on residents and corporations.
Recommendations related to City Tax Policy
The City should spend its $120 billion budget efficiently on effective programs before considering asking New Yorkers for more.
The Mayor should set ambitious minimum savings targets—not for blunt across-the-board cuts, but to generate options so he can make strategic choices that focus programs without harming New Yorkers.
The Administration should implement a citywide performance management system to improve services and guide smarter budget decisions.
The Mayor should request relief from Albany’s class size mandate that costs the City $1 billion, partly to support high-performing schools serving low-need students.
The City must update 20th Century labor relations, technology, and bureaucratic processes to meet 21st Century needs.
Key Data
$8 billion
— The estimated budget gap facing New York City.
$2.3 billion
— The amount the City spent more than it received over the past three years.
$3 billion
— The annual cost to the City resulting from its shrinking share of the nation's millionaires.
17.44%
— The top combined corporate tax rate in New York City.
11.5 percent
— The corporate tax rate in New Jersey, compared to New York City's higher rate.
19 percent
— The increase in City spending since 2023.
New York City businesses currently face the highest combined corporate tax rate in the nation at 17.44 percent, and proposed increases would further threaten the state's economic competitiveness. Instead of raising taxes, the state should focus on improving affordability, reducing burdensome regulations, and curbing ineffective economic development spending.
Recommendations related to City Tax Policy
The State should hold the line on taxes.
Policymakers should review and reduce burdensome regulations that do not serve New Yorkers' interests.
The State should curb the $5 billion in economic development tax breaks, capital spending, and programs that fail to deliver results.
The State should shift funding from lower-impact programs to affordability and other priority needs.
The State should drive service quality and efficiency improvements with performance data, accountability, and targeted programs.
Key Data
17.44 percent
— The top combined corporate tax rate currently faced by New York City businesses, which is the highest in the nation.
22.48 percent
— The projected top combined marginal tax rate in New York City if the state were to raise its corporate tax rate to match New Jersey.
$19.7 billion
— Total statewide business tax collections in fiscal year 2025.
$7.4 billion
— New York City business corporation tax collections in fiscal year 2025.
$3.6 billion
— New York City unincorporated business tax collections in fiscal year 2025.
2nd
— New York's ranking as the most regulated state based on a review of state codes, rules, and regulations.
New York State and its localities lead the nation in tax collections, with per capita taxes reaching $12,495 and spending hitting $15,894 per person in 2023. These figures place the state significantly above the national average across all major tax categories, including personal income, corporate, property, and sales taxes.
Key Data
$15,894
— Total state and local expenditures per capita in 2023, which is 40% higher than the national average.
$12,495
— Total state and local taxes collected per capita in 2023, ranking as the highest of all states.
$153
— Total state and local taxes collected per $1,000 of personal income in 2023, the second highest in the nation.
$18.4
— Corporate income tax revenue per $1,000 of state gross domestic product in 2023, which is higher than all other states.
$3,454
— Local property tax collections per capita in 2023, which were 71% higher than the national average.
$2,890
— Sales tax revenue per capita in 2023, which is higher than 42 other states.
New York City faces a projected fiscal year 2027 budget gap of $8 billion, with spending growth having outpaced inflation by $14.5 billion. Addressing this deficit requires prioritizing effective programs and improving operational efficiency rather than resorting to tax increases.
Recommendations related to City Tax Policy
New York should prioritize making smart but tough choices—prioritizing what works and shrinking what doesn’t—before turning to the easier option of raising taxes.
Key Data
$8 billion
— Estimate of the City's fiscal year 2027 budget gap.
$14.5 billion
— Amount by which City spending would be lower today if it had tracked inflation.
$1 billion
— Reported savings from rebidding the City's health insurance plan.
New York City's high-income residents and businesses already face some of the highest tax rates in the nation, and further increases risk shrinking the tax base and undermining long-term economic vitality. The city should maintain current tax levels to remain competitive and instead focus on managing its $120 billion budget to deliver high-quality services.
Recommendations related to City Tax Policy
The City should hold the line on taxes because high-income residents and businesses already pay nation-leading rates, and further increases make the city less attractive.
The administration should signal that New York City is open for business by keeping corporate tax rates where they are and seeking additional regulatory reforms.
Key Data
13.5 percent to nearly 14.8 percent
— Combined State and City income tax rates for households with adjusted gross income greater than $2.2 million.
6.5 percent to 4.2 percent
— The decline in New York City’s share of the nation’s millionaires between 2010 and 2022.
$2.5 billion
— Additional revenue the City would have received in tax year 2022 if its share of the nation's millionaires had remained constant.
17.44 percent
— The top combined marginal corporate tax rate, consisting of the City rate, State effective rate, and MTA surcharge.
$120 billion
— The total size of the City's budget, which should be sufficient to provide high-impact services without increasing taxes.
New York City's reliance on high-income earners to fund public services is threatened by a shrinking share of millionaires and a declining value proposition, making further tax increases risky. Instead of raising the nation's highest marginal income tax rates, the city should focus on improving housing affordability, public safety, and service efficiency to attract and retain residents across all income levels.
Recommendations related to City Tax Policy
Expanding housing production to improve affordability is paramount to ensuring that living in New York remains feasible and attractive for a broad range of residents.
Clean and safe streets are equally vital, providing the order and quality of life that residents, businesses and visitors deserve.
High-quality and efficient public services — from transit to education — support a prosperous city.
Stable public finances preserve services for all New Yorkers.
Focusing on the fundamentals strengthens New York City’s value proposition.
Key Data
40%
— Share of New York’s personal income taxes paid by filers with adjusted gross income over $1 million in 2022.
14.776%
— Combined top marginal tax rate for the highest earners in New York State and City.
$2.5 billion
— Additional personal income tax revenue the City would have collected in 2022 if it had maintained its 2010 share of millionaires.
$18 billion
— Projected personal income tax revenue for fiscal year 2026.
22%
— Share of total City tax revenue provided by personal income taxes.
91,000
— Number of more residents who moved out of the city to other parts of the U.S. than moved in during 2024.
New York's share of the nation's millionaires has significantly declined since 2010, resulting in billions of dollars of lost personal income tax revenue for both the State and City. Because millionaires contribute a disproportionate share of tax revenue, retaining and growing this population is essential to funding critical public services.
Recommendations related to City Tax Policy
New York should avoid further tax increases, as raising taxes could accelerate the damaging trend of losing millionaires to other states.
Policymakers should prioritize strategies to retain and grow the millionaire population, as this is the most effective way to fund critically needed services.
The state and city must improve their overall value proposition, as New York's current value proposition has not been attractive enough to keep pace with millionaire growth nationwide.
Key Data
$34 billion
— Total State and City personal income tax revenue contributed by millionaires in 2022.
31 percent
— The amount by which New York's share of the nation's millionaires plummeted between 2010 and 2022.
$10.7 billion
— Additional personal income tax revenue New York State would have received in 2022 if its share of millionaires had remained at 2010 levels.
$2.5 billion
— Additional personal income tax revenue New York City would have received in 2022 if its share of millionaires had remained at 2010 levels.
14.776 percent
— The top marginal personal income tax rate for New York City residents earning over $25 million annually.
44 percent and 40 percent
— The share of State and City personal income taxes, respectively, paid by millionaires in 2022 despite them comprising less than 1 percent of resident filers.
New York City faces significant pressure from high taxes and costs that threaten to drive residents and businesses away. To maintain competitiveness, the city must prioritize fiscal discipline, reform property taxes, and ensure tax incentives are effective while avoiding waste.
Recommendations related to City Tax Policy
Hold the line on taxes—don’t push out residents and businesses who already pay the most.
Reform property taxes to boost fairness and housing supply.
Use tax incentives that work and scrap the ones that don’t.
Key Data
$115 billion
— The amount the City spends annually, which necessitates a focus on making every dollar count through efficient services.
New York State's school aid formulas, including the School Tax Relief (STAR) program and various expense-based aids, currently fail to distribute funds based on actual student need and local fiscal capacity. Reforming these formulas to better account for local circumstances and reallocating funds from wealthier districts to those with greater needs would create a more equitable and efficient education funding system.
Recommendations related to City Tax Policy
The State should eliminate the STAR program to better allocate State resources to where they are needed most.
The State should eliminate High Tax Aid to ensure funding is distributed based on need rather than outdated formulas.
The State should quickly phase-out the hold harmless provision to align Foundation Aid with district enrollment.
The State should more accurately measure a district’s capacity and willingness to raise revenue, and use the actual local contribution as the expected minimum local contribution when it exceeds the measure.
The State should account for a locality’s other spending obligations—including State mandates such as Medicaid, and those driven by economic or social factors such as poverty and unhoused residents—by adjusting the expected local contribution.
Key Data
$3.3 billion
— The amount of annual School Tax Relief (STAR) funding that could be reallocated to better align with district need.
$1 billion
— The projected amount of STAR aid that would flow to the 201 lowest-wealth districts if funds were reallocated proportional to the Foundation Aid formula.
$336 million
— The projected amount of STAR aid that would flow to the 203 wealthiest districts if funds were reallocated proportional to the Foundation Aid formula.
$447 million
— The total funding for Library, Textbook, Software, and High Tax Aid in the 2024-25 school year, which currently lacks a wealth or need factor for distribution.
$1,805
— The statewide student transportation expenditure per student in 2022, which is the highest of any state.
New York City's Industrial and Commercial Abatement Program (ICAP) has seen its costs grow six-fold to $506.3 million in fiscal year 2024, despite evidence that only 3.6 percent of projects actually required the tax breaks to be financially feasible. The program should not be renewed without a thorough evaluation, as current data suggests that many recipients receive 25-year abatements that are longer than necessary.
Recommendations related to City Tax Policy
The Governor should veto S9822/A10530 because it wrongly extends New York City’s Industrial and Commercial Abatement Program for four years without first assessing whether the program is necessary.
The Governor should sign a one-year extension, negotiated as a Chapter amendment, to allow time to objectively evaluate whether an extension would be cost-effective.
The State should identify eligibility and benefit changes to improve the cost-effectiveness of the Industrial and Commercial Abatement Program.
Key Data
3.6%
— Percentage of projects receiving ICAP benefits that required the tax breaks to be financially feasible.
$81.4 million
— ICAP cost in fiscal year 2017.
$506.3 million
— ICAP cost in fiscal year 2024.
$500 million
— Annual spending on the Industrial and Commercial Abatement Program.
Two-thirds
— Portion of ICAP recipients that receive 25-year abatements.
New York State and its localities maintain the highest tax burden in the nation, collecting $10,331 per capita and $135 per $1,000 of personal income. Additionally, the state's total per capita expenditure of $15,350 is 50% higher than the national average, ranking it second in spending among all states.
Key Data
$15,350
— Total state and local expenditure per capita in New York, which is 50% more than the national average.
$10,331
— Total state and local taxes collected per capita in New York, the highest of all states.
$135
— Total state and local taxes collected per $1,000 of personal income in New York.
50%
— Amount by which New York State and its localities' per capita spending exceeded the national average in 2021.
63%
— Amount by which New York State and its localities' per capita tax collection exceeded the national average.
76%
— Amount by which New York's local property tax collections per capita exceeded the national average.
New York City faces significant budget shortfalls, with projected gaps reaching up to $10.6 billion for fiscal year 2025, necessitating difficult management decisions rather than tax increases. To maintain fiscal health and competitiveness, the city must prioritize cost-effective services and negotiate structural changes to labor agreements instead of depleting reserves or raising taxes on residents and businesses.
Recommendations related to City Tax Policy
New York City’s leaders should make some tough choices to close the fast-approaching budget gaps and not take the easy but unwise route of raising taxes.
Reserves should be protected for when the city is faced with a recession, rather than being used to avoid solving problems caused by unaffordable spending and underbudgeting.
The city must engage in thoughtful prioritization of cost-effective services and spending to address budget challenges.
The city will not be able to deliver services efficiently without the input of labor and agreed-upon changes to work rules, job titles, health insurance and other benefit structures.
The clear focus for city leadership should be to maximize efficiency and minimize the impact on New Yorkers.
Key Data
5.3%
— The city’s population decline from 2020 to 2022.
$7.1 billion
— The projected budget gap for fiscal year 2025 in the city's financial plan.
$10.6 billion
— The potential budget gap for fiscal year 2025 when including fiscal cliffs and underbudgeted areas.
$5.8 billion
— The comptroller's estimate for the fiscal year 2025 budget gap.
$12.2 billion
— The projected budget gap for fiscal year 2027 as estimated by the comptroller.
20%
— The portion of savings measures in the most recent Program to Eliminate the Gap that will touch current services.
New York City faces a precarious fiscal situation with a projected $10.6 billion budget gap, driven by the expiration of temporary federal aid and the normalization of tax revenues. To maintain competitiveness and stability, the city must avoid raising taxes or depleting reserves, while instead prioritizing efficient service delivery and structural labor reforms.
Recommendations related to City Tax Policy
The City should avoid raising taxes, as doing so would weaken New York City’s competitiveness.
The City must engage labor to implement agreed-upon changes to work rules, job titles, health insurance, and other benefit administration structures to deliver services efficiently.
The administration should prioritize services with significant impact and increase efficiency rather than focusing on expanding services.
The City should avoid using precious reserves, as this would delay fixing underlying problems and recklessly deplete funds needed for future downturns.
The Council should focus on the data to help make hard budget choices and minimize the impact on New Yorkers.
Key Data
$16 billion
— Added costs through 2027 resulting from recent collective bargaining agreements.
$7.1 billion
— Projected budget gap for fiscal year 2025 according to the City's financial plan.
$10.6 billion
— More accurate budget gap estimate when accounting for fiscal cliffs and underbudgeted areas.
92 percent
— Portion of previous savings programs that did not directly affect program services.
20 percent
— Portion of the most recent savings program (PEG) that will affect current programs.
New York City faces substantial budget gaps, reaching over 12.5 percent of City-funded spending, which necessitates difficult decisions regarding service prioritization and government efficiency. While tax revenue collections are currently close to projections, the City may consider upward revisions to these forecasts to help address the projected fiscal shortfalls.
Key Data
$500 million
— Expected upward revision to tax revenues for the current fiscal year.
$1 billion
— Expected annual upward revision to tax revenues in fiscal years 2025 to 2027.
$500 million
— Tax revenue offset included in the fiscal year 2024 budget.
$900 million
— Tax revenue offset included in the fiscal year 2025 budget.
$1.2 billion
— Tax revenue offset included in the fiscal year 2026 budget.
$900 million
— Tax revenue offset included in the fiscal year 2027 budget.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
New York City's proposed extension of various economic development tax incentives, which cost the city $44 million annually, should be rejected without a rigorous evaluation of their effectiveness. Previous assessments have found programs like the Commercial Revitalization Program and Commercial Expansion Program to be ineffective at improving office vacancy rates or employment, suggesting they should be phased out rather than renewed.
Recommendations related to City Tax Policy
An incentive should not be extended absent a rigorous evaluation of its effectiveness and efficiency and an analysis demonstrating it is needed to meet current and future goals.
For programs like the Commercial Expansion Program and Commercial Revitalization Program, existing evaluations should inform the Legislature’s decision of whether to extend, amend, or sunset these programs.
Any extension or expansion of an existing tax expenditure should be supported by a prospective model of its impacts and justified by an evaluation that determines whether the tax expenditure achieved its purpose.
Key Data
$44 million
— Annual cost to New York City in foregone revenue from the package of economic development tax incentives.
$14 million
— Annual cost in foregone property tax revenue from the package of economic development tax incentives.
$15 million
— Annual cost in foregone utility tax revenue from the package of economic development tax incentives.
$8 million
— Annual cost in foregone sales tax revenue from the package of economic development tax incentives.
$7 million
— Annual cost in foregone commercial rent tax revenue from the package of economic development tax incentives.
$10 million
— Annual tax expenditure for the Commercial Expansion Program (CEP) related to property taxes.
New York City's property tax system is overly complex and inequitable, requiring comprehensive reform rather than piecemeal changes to address valuation issues and disparate tax burdens. The proposed creation of a new residential class and implementation of homestead exemptions must be considered holistically to ensure fairness across different property types and to avoid unintended consequences for rental and commercial sectors.
Recommendations related to City Tax Policy
The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures do not lead to equitable treatment within rental and commercial property classes.
The City should analyze the extent to which there may be intra-class inequities resulting from Department of Finance valuation methods.
Policymakers must resist pulling apart the recommendations, as implementing reforms piecemeal could lead to greater inequities and uncertainty.
There should be public discussion about the goals of these programs and whether the proposed designs would provide the necessary amount of tax relief to the appropriate set of property owners.
Key Data
$1.5 trillion
— Estimated total market value of the new residential class.
40 percent
— Increase in total market value from the current valuation.
0.81 percent
— Nominal tax rate for the new residential class before a homestead exemption and circuit breaker.
20.309 percent
— Current tax rate for Class 1 property.
12.267 percent
— Current tax rate for Class 2 property.
$0.83 per $100
— Median effective tax rate for one- to three-family homes.
New York City faces a potential $9 billion fiscal disaster by 2026 due to budget gaps, employee raises, and fiscal cliffs, necessitating disciplined spending and increased productivity. To avoid future service cuts or tax increases, the city must prioritize saving for a rainy day, address nonrecurring funding gaps, and leverage collective bargaining to improve efficiency.
Recommendations related to City Tax Policy
The mayor and council must resist the temptation to use additional tax revenue to expand services, instead depositing these funds into the Rainy Day Fund.
The city should schedule $500 million annual deposits to the Rainy Day Fund, which could come from the budgeted General and Capital Stabilization Reserves.
The executive budget should address the budget’s fiscal cliffs where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
The city must lower costs, ideally by improving efficiency or by reducing lower impact programs, such as through a 3% Program to Eliminate the Gap for Productivity.
The city should use the next round of collective bargaining contracts to further increase productivity, which would generate savings to fund raises and stabilize the budget.
Key Data
$9 Billion
— The combined total of the existing $3 billion budget gap, $4 billion or more in employee raises, and $2 billion fiscal cliff, creating a recipe for fiscal disaster by 2026.
$17 Billion
— The potential three-year revenue shortfall if another recession occurs, based on past performance.
$900 Million
— The amount of fiscal cliffs in the next year where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
$2 Billion
— The amount of fiscal cliffs by fiscal year 2026 where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
$1.5 Billion
— The annual savings that would be generated by a 3% Program to Eliminate the Gap for Productivity.
$4.3 Billion
— The cost of 3% annual raises for city employees in the third year.
New York City's 421-a property tax exemption is crucial for making rental housing development financially feasible, as construction and operating costs are significantly higher in the city than the national average. To ensure continued housing production, the proposed 485-w (ANNY) program should be modified to better reflect neighborhood market conditions, improve data transparency, and align with existing city housing initiatives.
Recommendations related to City Tax Policy
State lawmakers should better tailor affordability options to reflect different market conditions by creating new options for mid-rise projects outside the Prime Development Area or offering Option B to all projects outside that area.
The City should track and evaluate program usage to inform successor programs by creating a comprehensive database of project recipients and reporting on overall residential development trends.
Officials should work with the City to align the incentive with other housing programs by modifying the proposed ANNY program to be compatible with the Mandatory Inclusionary Housing program and clarifying rules for projects receiving bond financing.
Key Data
75 percent
— The amount rents would have to increase to generate a reasonable rate of return without the 421-a property tax exemption.
30 percent
— The portion of rental income that goes toward property taxes in New York City, compared to 13 percent elsewhere in the country.
50 percent
— The amount by which the cost to operate a multifamily building in New York City exceeds the national average.
8 percent
— The increase in construction costs in New York City between February 2021 and February 2022.
60 to 65 percent
— The share of gross rental income that fully taxed rental buildings in New York City spend on expenses.
New York City's property tax system is widely considered broken and inequitable, necessitating a comprehensive reform proposal that includes legislative cooperation and increased transparency. Additionally, the city should rationalize its economic development incentives by assessing the return on investment for existing programs and publishing a database of all benefits provided to ensure fiscal responsibility.
Recommendations related to City Tax Policy
The incoming Administration should reform the property tax system to increase equity.
The incoming Administration should finalize a property tax reform proposal, build a supporting coalition, develop legislative language in cooperation with the State legislature, advocate for passage, and implement the reforms.
The incoming Administration should clearly articulate economic development priorities and strategies and focus on how performance-based as-of-right incentives can help drive a broad, sustained recovery.
The Administration should assess the impact and return on investment of as-of-right economic development programs, including the Industrial and Commercial Abatement Program (ICAP), the Relocation and Employment Assistance Program (REAP), and Lower Manhattan incentives.
The incoming Administration should increase transparency by publishing a comprehensive database of economic development incentives, including benefits paid, jobs created, and economic impact.
New York City's property tax system requires comprehensive reform to address inequities among residential, rental, and commercial properties. The proposed changes should prioritize a transparent tax rate setting process, clearer valuation methods, and specific structures for homestead exemptions and circuit breakers to ensure fairness.
Recommendations related to City Tax Policy
Develop a simple and transparent tax rate setting process that eliminates the function of class shares and distributes the levy based on clearly articulated policy rationales for the differential levels of taxation.
Expand the scope to address disparities within the rental and commercial classes by improving valuation models and transparency.
Provide details on how the homestead exemption and circuit breaker should be structured to ensure they effectively address property tax affordability.
Clarify how assessed values for the new residential class will be set to resolve conflicts between market value assessments and phase-in periods.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
New York City and State face significant budget gaps, yet they must be cautious about raising taxes because they already impose some of the highest corporate and personal income tax rates in the country. Increasing these taxes further risks driving away high-income earners and businesses, which would ultimately reduce the tax revenue needed to close those budget gaps.
Recommendations related to City Tax Policy
Policymakers should prioritize controlling expenditures to improve the fiscal outlook for the State and the City.
Leaders should focus on advocating for federal aid as a primary method to address fiscal gaps.
Any consideration of tax increases must include the impact on State and local economic competitiveness.
Leaders looking to close budget gaps must be cognizant that combined State and City PIT rates are the second highest in the nation.
Leaders must recognize that combined CFT rates are the highest in the nation when evaluating potential tax policy changes.
Key Data
$8 billion
— Potential New York State budget gap in fiscal year 2021.
$15 billion
— Potential New York State budget gap in fiscal year 2022.
$1.6 billion
— Potential New York City budget gap in fiscal year 2021.
$6.9 billion
— Potential New York City budget gap in fiscal year 2022.
16.49 percent
— The sum of the State effective tax rate, City rate, and MTA taxes on businesses operating in New York City.
12.696 percent
— The top personal income tax rate imposed in New York City when combining state and local rates.
CBC hosted a special panel discussion of prominent fiscal experts who helped New York overcome some of the most dire crises of the past. They provided insights and lessons from past experiences to help us understand and navigate the looming crisis. Stephen Berger Chairman, Odyssey Investment Partners; Former Executive Director,…
New York City taxpayers provide 71 percent of the Metropolitan Transportation Authority's non-fare and non-federal revenue, a figure that is expected to grow as new state-created taxes and fees are implemented. Recognizing this substantial contribution is essential when evaluating calls for the City to increase its funding for the transit system.
Recommendations related to City Tax Policy
Whenever there is a call for the City to provide the MTA with funding, it is important to recognize that City taxpayers already provide the majority of the MTA’s subsidies, and will only pay more in future years.
Debates regarding MTA funding would be clearer if it were widely understood that New York City taxpayers provide 71 percent of the MTA’s non-fare and toll, nonfederal revenue through a combination of local, regional, and State taxes.
Key Data
71%
— Share of the MTA’s non-fare and toll, nonfederal revenue provided by New York City taxpayers.
$1.7 Billion
— Amount contributed by City taxpayers through the City budget to the MTA in 2018.
$5.5 Billion
— Total State-authorized taxes allocated to the MTA in 2018.
$3.9 Billion
— Total amount the City contributed of the $5.5 billion in State-authorized general and regional taxes provided to the MTA.
93%
— Share of new MTA funding sources that City taxpayers will pay in 2020.
74%
— Share of all operating subsidies that City taxpayers will pay in 2020.
New York City's property tax system generates nearly $30 billion annually, accounting for 32 percent of all city revenues, and has grown by an average of 6.2 percent each year since 1999. To improve equity and transparency, the system requires comprehensive reform, including moving cooperatives and condominiums to Class 1, adopting market-value assessments, and implementing income-based tax rebates.
Recommendations related to City Tax Policy
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Valuation for tax purposes should reflect actual real estate market value, using sales-based models for one-, two-, and three-family homes, cooperatives, and residential condominiums.
Full market value should be the starting point for assessing the tax base, with differential effective tax rates used to favor residential properties.
The existing class share system should be eliminated to improve the structure of the property tax.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels, while eliminating current caps and phase-ins.
Rebates of owner-occupied residential property taxes should be provided based on household income when tax bills exceed a set share of income to ease burdensome tax bills.
Transition to the new system should occur over a five-year period to ensure a smooth implementation.
Key Data
$30 billion
— Amount of revenue the property tax will generate in fiscal year 2020.
32 percent
— Portion of all City revenues generated by the property tax in fiscal year 2020.
$1 out of every $3 dollars
— Amount of the City's total spending funded by the property tax.
6.2 percent
— Average annual growth of property tax revenue since fiscal year 1999.
New York City's proposed rainy day fund would allow the city to save during prosperous times to avoid service cuts and tax increases during economic downturns. Approving Ballot Question 4 would amend the City Charter to establish this savings mechanism, helping to mitigate the impact of potential multi-year revenue shortfalls that could reach $15 billion during a recession.
Recommendations related to City Tax Policy
Voters should vote yes on Ballot Question 4 to create a rainy day fund.
Key Data
$15 billion
— The amount of potential multi-year revenue shortfalls that could result from a recession.
New York City's tax expenditures totaled $6,853 million in fiscal year 2019, with the majority of these funds allocated to housing programs. Additionally, property taxes accounted for 47% of the city's tax revenue in fiscal year 2020, while non-property taxes made up the remaining 53%.
Key Data
$6,853 million
— Total tax expenditures in New York City for fiscal year 2019.
$3,830 million
— Tax expenditures allocated to housing programs in fiscal year 2019.
$2,045 million
— Tax expenditures allocated to economic development programs in fiscal year 2019.
$978 million
— Other tax expenditures in fiscal year 2019.
$29.6 billion
— Property tax revenue for New York City in fiscal year 2020.
$33.8 billion
— Non-property tax revenue for New York City in fiscal year 2020.
New York City relies on personal income tax for over one-fifth of its tax revenue, yet this income stream is highly volatile due to a heavy dependence on high-income earners whose earnings are tied to fluctuating capital gains. Because filers earning $1 million or more account for nearly 39 percent of the city's total personal income tax liability, the city's budget remains sensitive to economic shifts that impact these top earners.
Key Data
$11.4 billion
— The amount of personal income tax revenue collected by New York City in fiscal year 2016.
21.2 percent
— The portion of total city tax revenue derived from personal income tax in fiscal year 2016.
38.9 percent
— The share of total personal income tax liability accounted for by New York City tax filers earning $1 million or more.
0.7 percent
— The percentage of all New York City tax filers who earned $1 million or more in 2016.
$146,000
— The average amount of personal income tax paid by New York City filers earning $1 million or more in 2016.
6.4 percent
— The share of City-funded spending in fiscal year 2016 that was covered by personal income tax revenue from high-income filers.
Implementing a 5-cent fee on paper carryout bags is recommended to reduce the 71,000 tons of plastic waste that currently cost the city $12.1 million annually to landfill. This policy, which mirrors successful efforts in other cities like Los Angeles, would generate revenue to be split between local reusable bag distribution and the State Environmental Protection Fund.
Recommendations related to City Tax Policy
The City should adopt the paper carryout bag fee to realize the fiscal and environmental benefits of sharply reducing the number of single-use bags from the waste stream.
The City should support legislation to authorize the paper carryout bag fee, which would take effect on March 1, 2020, concurrent with the statewide plastic bag ban.
Key Data
71,000 tons
— Amount of plastic bags that make up the City’s residential waste stream.
$12.1 million
— Annual cost to landfill plastic bags.
94 percent
— Reduction in single-use bags achieved by a similar effort in Los Angeles.
40 percent
— Portion of revenue collected in New York City that will be returned to the City to buy and distribute reusable bags.
60 percent
— Portion of revenue to be deposited in the State Environmental Protection Fund.
7-cent
— Tax rate on bags in Chicago that replaced a failed ban.
The proposed pied-à-terre tax on homes worth over $5 million is projected to generate $650 million annually, but it risks depressing luxury housing values and reducing the city's attractiveness to nonresidents. Instead of implementing this piecemeal tax, the city should pursue comprehensive property tax reform and avoid dedicating specific revenues to single purposes like the MTA.
Recommendations related to City Tax Policy
The extensive disparities in the property tax system should be addressed through comprehensive reform, not another piecemeal approach.
With few exceptions, revenues should not be dedicated, but rather allocated through the budget process.
Lawmakers should seriously consider lower tax rates that will do less harm to the attractiveness of NYC.
It is crucial for the Legislature to pass congestion pricing in order to raise revenue, decrease congestion, and improve service.
Key Data
$5 million
— Threshold for nonresident owners of New York City homes to face an annual property tax surcharge.
0.5 percent
— Starting annual property tax surcharge rate for homes worth more than $5 million.
4.0 percent
— Top annual property tax surcharge rate for the value of homes greater than $25 million.
$650 million
— Projected annual yield from the proposed pied-à-terre tax.
$25 million
— Threshold for the value of homes subject to the top 4.0 percent tax rate.
New York City faces a potential tax revenue shortfall of up to $20 billion over three years if a recession occurs, necessitating immediate action to reduce spending growth and increase reserves. Relying on current fiscal strategies would leave a $16.7 billion gap, requiring significant measures to avoid service cuts and counterproductive tax increases.
Recommendations related to City Tax Policy
The Executive Budget for Fiscal Year 2020 should reflect constrained spending growth, greater budget reserves, and a substantial increase in recurring savings.
The City should take immediate action to reduce spending growth and increase reserves to prepare for an inevitable economic downturn.
The City must ensure savings are substantially larger to forestall drastic service cuts and counterproductive tax increases in the midst of a recession.
Key Data
$15 billion to $20 billion
— The potential tax revenue shortfall over three years if a recession occurs.
$12 billion
— The potential outyear budget gap in the second year of a recession.
$1.25 billion
— The amount of existing annual budget reserves.
$5.3 billion
— The amount City tax revenues would fall below the financial plan in the first year of a recession.
$16.7 billion
— The portion of the budget gap that would need to be closed by actions other than using existing reserves.
$750 million
— The amount of recurring savings included in the Executive Budget.
Congestion pricing in Manhattan's central business district aims to reduce traffic and air pollution while generating revenue for mass transit improvements. Effective implementation requires variable toll rates to manage peak traffic, limited exemptions, and clear legislative support to ensure the system is established efficiently.
Recommendations related to City Tax Policy
Toll rates should serve the dual goals of raising revenue and reducing peak hour vehicle entries to the central business district.
Exemptions or discounts to toll rates should be granted to emergency vehicles, vehicles already subject to a congestion charge, and mass transit providers, but broader exemptions should be avoided.
Toll revenues should be used primarily to support the Metropolitan Transportation Authority (MTA) capital program, and a share of toll revenues should support City-owned bridges.
Installing and operating equipment required for the system should be the responsibility of the MTA and be implemented in collaboration with the City of New York.
Authorizing legislation should include provisions to facilitate speedy creation of the system.
New York City's rent regulation system should be reformed to better target protections toward low-income, rent-burdened households rather than subsidizing upper-income tenants. Eliminating rent stabilization for households earning over $200,000 annually would restore thousands of units to market-rate status, thereby increasing property tax revenue and allowing for more effective housing assistance programs.
Recommendations related to City Tax Policy
Any reforms included with the renewal of rent regulation should focus on better targeting its protections to the most rent burdened.
One way to serve this goal would be to eliminate rent stabilization for upper-income households who earn more than $200,000 per year, restoring as many as 28,000 units to market-rate status, which would boost property values and increase property tax revenue.
Any reforms to capital improvement allowances should provide some incentive for owners of stabilized buildings to maintain the condition of their units.
Key Data
28,000
— Number of rent-stabilized units that could be restored to market-rate status if rent stabilization were eliminated for households earning more than $200,000 per year.
$271 million
— Total annual savings for the 28,377 households earning more than $200,000 living in rent-stabilized units.
$13,764
— Average annual savings per household for those earning more than $200,000 living in rent-stabilized units.
45 percent
— Portion of the city's rental housing stock comprised of rent-stabilized and rent-controlled units in 2017.
$2,774.76
— Current legal rent threshold for high-rent vacancy decontrol.
80 percent
— Amount by which rent-stabilized units report more maintenance deficiencies on average than market-rate units.
New York City's property tax system is widely considered opaque and inequitable, necessitating a comprehensive redesign that simplifies classification, improves valuation transparency, and eliminates distortive assessment caps. A new system should transition over five years, utilizing a circuit breaker to protect lower-income homeowners while ensuring tax burdens are more fairly distributed across property types.
Recommendations related to City Tax Policy
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Class 1 should face the lowest tax burden, as measured by the effective tax rate (ETR), with increasing ETR’s for residential rental buildings, utilities, and commercial properties.
Valuation for tax purposes should reflect actual real estate market value, using more transparent methods that take advantage of the substantial data available to the Department of Finance.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates should be provided of owner-occupied residential property taxes based on household income through a circuit breaker that replaces certain existing tax reduction programs.
Transition to the new system should occur over a five-year period.
Key Data
4 to 5 times
— The current effective tax rates (ETRs) of commercial and rental properties compared to those of owner-occupied homes.
2.25 times
— The maximum ratio of effective tax rates on commercial properties compared to owner-occupied homes found in 46 of 53 cities studied.
10 percent
— The Constitutional debt limit for New York City based on the five-year average of market value.
2.5 percent
— The maximum property tax revenue that can be raised and used for operating expenses, excluding long-term debt, based on the five-year average of market value.
5 percent
— The threshold of household income that property taxes on residential properties could exceed to qualify for a circuit breaker rebate.
$100,000
— The household income limit for eligibility under the proposed circuit breaker property tax relief program.
The $2.8 billion incentive package offered to Amazon for its Long Island City headquarters highlights significant flaws in current economic development strategies, including the use of uncapped tax benefits and discretionary grants. Future policy should prioritize reevaluating city tax expenditures, capping wage credits, and ensuring capital investments are subject to the regular budgetary process rather than benefiting individual companies.
Recommendations related to City Tax Policy
The Legislature should closely scrutinize an increase in the cap for the Excelsior Jobs Program.
A cap to the level of wages eligible for the Excelsior credit should be considered.
State capital funding is best invested in general infrastructure, not for the direct benefit of an individual company.
City tax expenditures should be narrowed or eliminated to ensure benefits are only spent to induce job creation that would not otherwise occur.
Capital investment should go through the regular budgetary process.
Key Data
$2.5 Billion
— Amazon's announced investment in Long Island City.
25,000
— New full-time jobs expected over the next 10 years.
$150,000
— Average salary for the new jobs created by Amazon.
$2.8 Billion
— Total state and city tax breaks and grants offered to Amazon.
$3.5 Billion
— Potential combined state and city incentives if Amazon creates 40,000 jobs.
8 Million
— Square feet of office space Amazon could build within 15 years.
The Amazon HQ2 deal in Long Island City involves significant tax incentives and grants from New York State and City, totaling between $2.8 billion and $3.5 billion depending on job creation targets. This arrangement highlights the need to reform economic development programs, specifically by capping wage credits, prioritizing general infrastructure over individual corporate subsidies, and reevaluating outdated as-of-right tax abatement programs.
Recommendations related to City Tax Policy
The state should avoid setting a concerning precedent by expanding the Excelsior Jobs Program to accommodate the needs of a single company, as programs should not be broadened to become too generous, insufficiently targeted, and costly to taxpayers.
The state should implement caps on the level of wages eligible for reimbursement under the Excelsior jobs program, as capping eligible wages would minimize the State’s financial exposure.
State capital funding should be invested in general infrastructure rather than for the direct benefit of an individual company.
Amazon should pay the full value of the PILOT directly to the City rather than diverting some funds to the surrounding neighborhood, as capital investment in growing areas should go through the regular budgetary process.
New York City’s as-of-right tax incentives, such as REAP and ICAP, should be evaluated and potentially narrowed or eliminated to ensure benefits are only spent to induce job creation that would not otherwise occur.
Key Data
$2.8 billion
— Total benefits available to Amazon from New York State and City if 25,000 jobs are created.
$3.5 billion
— Total benefits available to Amazon from New York State and City if 40,000 jobs are created.
$1.2 billion
— Maximum amount of Excelsior tax credits Amazon could receive over the 2019-2028 period.
$505 million
— Maximum amount of the Empire State Development capital grant.
$386 million
— Estimated total of the ICAP property tax abatement for the Amazon project.
$900 million
— Potential total REAP credit by 2039 assuming the creation of 25,000 jobs.
New York City's property tax system creates significant inequities for Class 1 homeowners because statutory caps on assessed value growth shift the tax burden onto properties with stable values rather than those experiencing rapid appreciation. To address these disparities, the newly appointed Advisory Commission on Property Tax Reform should prioritize restructuring or eliminating these assessment growth caps to ensure a fairer tax system.
Recommendations related to City Tax Policy
One of the items at the top of the Commission’s agenda should be addressing the inequities in the Class 1 property tax by restructuring or eliminating caps on assessment growth.
Key Data
$1.25 trillion
— Full market value of taxable properties across all tax classes in fiscal year 2019.
47 percent
— Share of total market value accounted for by Class 1 properties.
$683,000
— Citywide median market value of a Class 1 home.
0.89 percent
— Citywide median effective tax rate for Class 1 properties.
$5,822
— Median annual property tax bill for a Class 1 homeowner.
21.861 percent
— Tax rate for Class 1 properties in fiscal year 2019.
5.8% - the increase in city-funded spending in the New York City Executive Budget for Fiscal Year 2019. Ana Champeny joins Ben and Maria to discuss increased spending, new initiatives, taxes, reserves, and more.
New York City should implement a ban on single-use plastic bags combined with a fee on alternative bags to effectively reduce waste, as current disposal costs the city $12.1 million annually. While previous attempts to institute a bag fee were blocked by state intervention, adopting a hybrid policy of bans and fees has proven successful in other jurisdictions by incentivizing the use of reusable bags.
Recommendations related to City Tax Policy
The City should act again on this issue and a local ban on plastic bags, coupled with a fee on alternatives, should be adopted.
A hybrid ban on plastic bags along with a fee on alternatives would be more effective than a simple ban.
The State should authorize the City to assess a tax and direct revenue to environmental efforts.
Key Data
2 percent
— Plastic bags make up about 2 percent of the City’s residential waste stream.
71,000 tons
— There were about 71,000 tons of plastic bags in the waste stream.
$12.1 million
— Plastic bags are landfilled with the rest of the City’s waste at a cost of $12.1 million each year.
500 years
— Plastic bags take well over 500 years to decompose once landfilled.
94 percent
— A similar effort in Los Angeles led to a 94 percent reduction in single-use bags.
$4
— A similar effort in Los Angeles cost less than $4 per resident per year.
New York City's tax burden is significantly higher than other large cities, with personal income and commercial property taxes acting as outliers that negatively impact the city's competitive position. Policymakers should exercise caution when considering further tax increases, as these could exacerbate existing disparities and potentially drive high-income residents and businesses to relocate.
Recommendations related to City Tax Policy
Policymakers considering raising the personal income tax or the commercial property tax need to be aware that both taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities.
The policy implication is that these conditions should be considered in any initiatives to raise more revenue from the property tax.
Key Data
46%
— New York City's state and local taxes were 46% higher than the average for other large cities in 2004.
90%
— New York City's local taxes were 90% higher than the average for other large cities in 2004.
$800 Million
— A 10% across-the-board surcharge on the personal income tax would raise more than $800 Million annually at current income levels.
$750 Million
— A 0.75% increase in the top personal income tax rate would raise more than $750 Million annually.
51%
— New York City's commercial property tax was 51% higher than the average for the other 14 of the 15 largest cities in 2012.
30%
— New York City's commercial property tax was 30% higher than the average for nearby jurisdictions in 2012.
A state budget proposal to capture up to 75 percent of increased property tax revenue for the Metropolitan Transportation Authority threatens to undermine local control over city finances. Instead of broad, state-imposed mandates, decisions regarding the dedication of tax revenue to capital projects should be made by city officials on a case-by-case basis to ensure transparency and accountability.
Recommendations related to City Tax Policy
Any value capture arrangement should be tailored to specific projects and circumstances rather than applied broadly.
The mayor and city council, rather than the governor and state legislature, should determine how the city’s property tax revenue is spent.
Decisions to dedicate future tax revenue to mass transit projects should be made by the city on a case-by-case basis to ensure transparency and accountability.
Key Data
up to 50 percent
— Share of increased New York City property taxes within transportation improvement districts that the state proposal would capture.
up to 75 percent
— Share of increased property taxes that could be captured for future transportation improvement districts.
18 million square feet
— Amount of new office, residential, and retail space planned or built in the Hudson Yards area.
The Tax Cuts and Jobs Act creates challenges for New York City by capping state and local tax deductions, potentially reducing competitiveness and causing unplanned tax increases. The City and State must implement practical solutions to protect the local economy and taxpayers while avoiding the adoption of unsound tax policies in response to federal changes.
$9.5 billion is CBC’s estimate of the extra taxes New Yorkers will pay due to the cap on the state and local tax deduction, known as the SALT cap, enacted in the Tax Cuts and Jobs Act of 2017. Andrew Rein, director of CBC's Special Committee on Federal Tax Changes,…
A proposed state budget provision would allow the Metropolitan Transportation Authority to create tax increment financing districts in New York City without local approval, potentially undermining the city's control over its own tax revenue. This approach deviates from standard value capture practices by allowing districts to exist in perpetuity, failing to restrict revenue usage to specific projects, and setting overly broad geographic boundaries.
Recommendations related to City Tax Policy
The State and the MTA should use the powers granted to them under the existing TIF law to partner with New York City when considering the use of value capture for future projects.
TIF districts should sunset after a period of time, after which the incremental revenue flowing to the district reverts to a city’s general fund.
Incremental revenue should be segregated to repay the costs of the projects that created the value rather than flowing directly to the MTA without restriction.
The bar for identifying capital projects should be raised, as the current $100 million threshold is too low and could include projects that do not generate significant increases in property values.
The size of transportation improvement subdistricts should be limited to no more than a one-half mile buffer surrounding individual stations to prevent the diversion of revenue growth unrelated to specific capital improvements.
Key Data
75 percent
— The maximum portion of the tax increment that the City would be required to remit to the MTA under the proposed legislation.
$100 million
— The minimum estimated cost for an MTA capital project to be eligible for the creation of a transportation improvement subdistrict.
one mile
— The distance from an MTA capital project within which the MTA would be allowed to capture property tax revenue.
one-half mile
— The industry-standard size for transit zones, which is significantly smaller than the one-mile radius proposed in the legislation.
The federal tax overhaul passed last month may have enormous impacts in New York and could upend the relationship between the federal government and the states. CBC and the CUNY Graduate School of Journalism gathered experts to assess the impact and potential city and state responses in a special half-day…
The federal "Tax Cuts and Jobs Act" is expected to significantly impact New York City's economy, property values, and tax revenues. A special committee has been formed to evaluate these changes and identify appropriate state and local government responses to mitigate potential harm.
$26 billion is the amount of property taxes the City will collect this fiscal year-- it is the largest single source of revenue that funds NYC government. Special guest Martha Stark is a former Commissioner of the Department of Finance. She joined the podcast to discuss the complexities of the…
The Mayor's proposal to increase the personal income tax to fund MTA capital needs is inappropriate, as city taxpayers already contribute 40% of the mass transit budget. Instead, funding for transit capital needs should be derived from congestion pricing or motor vehicle charges, while programs like half-price MetroCards should be supported through existing city resources.
Recommendations related to City Tax Policy
New funding streams to support transit capital needs should come from motorists through congestion pricing or other charges for motor vehicle use.
The program for city-funded half-price MetroCards for low-income riders should be funded with existing City resources.
Key Data
40%
— of the mass transit budget is already provided by New York City taxpayers through the payroll mobility tax and other taxes.
Vice President Maria Doulis discusses issues such as New York State and local tax deductions, New York City’s $85 billion fiscal plan for 2018, and the inequity of New York City’s real estate property tax system. Original video can be found here .
The FY2018 budget reflects a $4.2 Billion surplus used to prepay expenses, alongside increased property tax forecasts and expanded exemptions for veterans and seniors. To address fiscal uncertainty, the City is encouraged to prioritize savings and operational efficiencies that could facilitate a reduction in the Commercial Rent Tax.
Recommendations related to City Tax Policy
The City should limit new spending and achieve more savings, tax reductions, and reserves.
The City should use savings to enable a reduction in the Commercial Rent Tax to benefit small businesses.
Key Data
$4.2 Billion
— The City expects to end fiscal year 2017 with a surplus to be used to prepay fiscal year 2018 expenses.
$183 Million
— Increase in the property tax revenue forecast following the release of the final assessment roll.
$87 Million
— Expanded tax exemptions for veterans and low-income senior citizens.
$442 Million
— Increase in the surplus roll used to fund additional spending in fiscal year 2018.
$340 Million
— Additional revenue used to fund additional spending in fiscal year 2018.
$103 Million
— Citywide Savings used to fund additional spending in fiscal year 2018.
The city should prioritize fiscal prudence by redirecting savings from the Citywide Savings Program toward tax reductions, specifically supporting the reform of the Commercial Rent Tax. This reform would eliminate the tax for nearly 4,000 Manhattan businesses, providing relief while the city navigates economic uncertainty.
Recommendations related to City Tax Policy
The Administration and Council should redirect some of the savings from the Citywide Savings Program to tax reductions.
The City should reform the Commercial Rent Tax, which would end this tax for nearly 4,000 businesses in Manhattan.
Key Data
$52 million
— Annual revenue cost of the Commercial Rent Tax that the Council proposes to reform.
4,000
— Number of businesses in Manhattan that would no longer be subject to the Commercial Rent Tax under the proposed reform.
The Mayor's proposal to increase the personal income tax to fund MTA capital spending is inappropriate, as city taxpayers already contribute 40% of the mass transit budget. Instead, the city should pursue funding from motorists through congestion pricing and utilize existing resources to support programs like half-price MetroCards.
Recommendations related to City Tax Policy
New funding streams for the MTA's long-term capital needs should come from motorists through congestion pricing or other charges for motor vehicle use.
Programs like city-funded half-price MetroCards should be funded with existing City resources rather than a new tax.
Key Data
40%
— New York City taxpayers already provide approximately 40% of the mass transit budget through the payroll mobility tax and other taxes.
New York City's property tax system is riddled with inequities caused by assessment caps, phase-ins, and flawed valuation methodologies that create disparate effective tax rates across property types and neighborhoods. To address these issues while raising $2 billion in additional revenue, the report proposes options ranging from proportional rate increases to comprehensive reforms that eliminate caps and align assessments with true market values.
Recommendations related to City Tax Policy
The City should raise revenue proportionally from all classes to maintain the current class shares while generating additional funds.
The City should address inequities affecting homeowners by consolidating all homeowners into a single category and assessing them at the same rate.
The City should eliminate the caps and phase-in provisions for all properties to reduce intra-class inequities and improve transparency.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes, caps on increases in assessments should be means-tested.
The City should value condos and co-ops based on market values using sales prices to correct the current undervaluation methodology.
Key Data
$2 billion
— The target amount of additional property tax revenue the City aims to raise through the proposed reform options.
$4.5 billion
— The estimated revenue foregone in fiscal year 2015 due to existing assessment cap and phase-in rules.
$1.6 billion
— The amount of lost revenue attributed specifically to assessment caps applied to smaller rental properties.
$846 million
— The revenue raised in fiscal year 2015 from the revaluation of condos and co-ops and the application of a 6 percent assessment ratio.
$936 million
— The revenue raised in fiscal year 2015 from eliminating assessment growth caps on 1-3 family homes.
$109 million
— The revenue raised by increasing the nominal tax rate on 1-3 family homes and condos and co-ops.
New York City's property tax system creates significant inequities by imposing widely varying effective tax rates on different property types, with small residential properties paying much lower rates than commercial and large rental buildings. These disparities, exacerbated by complex tax laws and exemption programs, make rental housing and commercial space more expensive while impeding the city's economic competitiveness.
Key Data
$24 billion
— Projected revenue from property taxes in fiscal year 2017, representing 44 percent of all City tax revenues.
$3 billion
— Total cost of housing and economic development tax exemptions granted in 2016.
4.8 percent
— Highest effective tax rate (ETR) applied to utility properties in fiscal year 2017.
0.74 percent
— Lowest effective tax rate (ETR) applied to small homes in fiscal year 2017.
$1.47 trillion
— Total value of property in New York City in 2017, which more than tripled from $382 billion in 2000.
$350 million
— Total cost of personal property tax exemptions granted in 2016.
The MTA's Access-A-Ride paratransit program is highly expensive, with costs projected to reach $646 million by 2020, and is currently financed through a mix of fares, city taxes, and a heavy internal cross-subsidy from regular transit riders. To improve efficiency and reduce the financial burden on the transit system, the MTA should implement strategies such as shifting ambulatory trips to lower-cost providers, better managing demand, and securing Medicaid reimbursement for non-emergency medical transportation.
Recommendations related to City Tax Policy
The MTA should shift ambulatory trips to its broker car service (BCS) program, which uses for-hire vehicles, to lower the average cost per ride.
The MTA should offer a subsidy program that allows paratransit users to use the City’s taxicab fleet and Transportation Network Companies (TNC) like Uber and Lyft for same-day reservations.
The MTA should offer feeder service in a greater number of appropriate situations to reduce the number of trips taken and lower the unit cost of those trips completed.
The MTA should discourage excessive use of paratransit by charging a higher fare to match the fare of several peer systems.
The MTA should reform federal and state policies to allow Medicaid reimbursement for non-emergency medical transportation to help defray the cost of paratransit service for eligible trips.
Key Data
$461 million
— The cost of the Access-A-Ride program in 2015.
$71
— The cost per trip for Access-A-Ride in 2014, the highest among 29 cities with paratransit programs providing at least one-half million rides annually.
17
— The number of people registered to use the service per 1,000 residents in New York City, the highest among peer systems.
$126 million
— The potential annual savings for the MTA if all ambulatory customers were moved to the broker car service (BCS) program.
$184 million
— The potential annual savings from doubling the paratransit fare.
$256 million
— The amount of the internal MTA cross-subsidy used to fund Access-A-Ride in 2015.
New York City's property tax system is riddled with inequities, including assessment caps and the undervaluation of co-ops and condos, which create disparate effective tax rates across different property types. Reforming this system to raise $2 billion in revenue requires addressing these structural flaws, such as eliminating assessment caps and aligning property valuations with market realities.
Recommendations related to City Tax Policy
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
This option eliminates these disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The third option would raise $2 billion in revenue and addresses the inequities among properties by eliminating the caps and phase-in provisions for all properties.
The first is to value condos and co-ops based on market values using sales prices (as is currently the case for Class 1).
The second is to assess co-ops and condos with 1-3 family homes at an assessment ratio of 6 percent.
Key Data
$2 billion
— The target amount of additional revenue to be raised by the proposed property tax reforms.
$4.5 billion
— The estimated revenue foregone in fiscal year 2015 due to existing cap and phase-in rules.
6 percent
— The target assessment ratio for a Class 1 property.
45 percent
— The target assessment ratio for all property classes other than Class 1.
17.5 percent
— The tax abatement offset for co-ops and condos.
2.8%
— The assumed annual percentage increase in market values for all properties in the city.
NY1 Thanks to the surge of car services like uber, fewer and fewer people are taking yellow cabs—and it's just not cabbies who are feeling the pinch. The decline has real implications for the city's transit system, which received fifty cents for every cab ride.
New York City faces a $2.6 billion funding gap in the Metropolitan Transportation Authority's capital plan, which could be addressed by expanding and reforming taxes on services regulated by the Taxi and Limousine Commission. By applying a per-ride tax to all black car and dispatch service provider trips, or reforming the transportation sales tax, the city could generate significant revenue to help close this capital funding shortfall.
Recommendations related to City Tax Policy
The city should apply the per-ride tax to all black car, including Dispatch Service Provider (DSP), trips to help close the MTA capital funding gap.
Policymakers should set the per-ride tax for black cars and DSPs at a rate equal to that applied to taxicabs, which would be 3.95 percent of the fare.
The city should lower the burden on black cars and dedicate the entire transportation sales tax to the MTA to help close the funding gap.
The city could set a reformed transportation sales tax rate at approximately 5.75 percent or 7.75 percent to generate sufficient revenue to close the MTA funding gap.
Key Data
$2.6 billion
— The remaining MTA capital funding gap that needs to be filled.
$250 million
— Total estimated tax receipts from the TLC services industry in 2015.
74 percent
— The increase in tax collections from the TLC industry from 2011 to 2015.
$33 million
— Additional revenue that would have been raised in 2015 by applying the per-ride tax to all black car and DSP trips.
$225 million
— The potential increase in MTA revenues in 2019 from a reformed transportation sales tax.
The Metropolitan Transportation Authority's capital plan funding gap should be addressed by shifting the burden toward motor vehicle cross-subsidies rather than relying on traditional tax subsidies or fares. Implementing a vehicle-miles-traveled tax, congestion pricing, and increased tolling policies would better align funding sources with the benefits provided to drivers.
Recommendations related to City Tax Policy
Drivers should cover more than twice the current proportion of costs for mass transit, which is currently 12 percent.
Policymakers should implement a vehicle-miles-traveled (VMT) tax over the long term to fund transportation infrastructure state-wide.
The city should pursue enhanced tolling policies, including East River bridge tolls and other congestion pricing mechanisms, for more immediate funding.
Authorities should consider higher vehicle registration fees as a means to generate more immediate funding for the transit system.
Key Data
$29.8 billion
— Total cost of the MTA's five-year capital plan.
$9.8 billion
— The reduced funding gap for the MTA capital plan.
$1.0 billion
— Annual operating and capital support provided to the MTA by New York City taxpayers.
73 percent
— The portion of the MTA's $1.3 billion regional payroll tax paid by New York City employers.
12 percent
— The current proportion of MTA transit services funding derived from motor vehicle cross-subsidies.
48 percent
— The proportion of MTA transit services funding derived from fares.
New York City taxpayers currently provide $4.5 billion annually to the Metropolitan Transportation Authority through a combination of direct city budget allocations and regional and statewide taxes. To address funding needs, the city should shift toward user charges on motor vehicles, such as a vehicle-miles traveled tax, rather than relying on increased local tax contributions.
Recommendations related to City Tax Policy
The MTA should implement user charges on motor vehicles to raise the money it needs.
New York should implement a vehicle-miles traveled (VMT) tax, which collects revenue from vehicle owners based on the distance they travel, the weight of the vehicle, or the route used.
More money can and should come from motorists to fund the MTA.
Key Data
$4.5 billion
— Total annual MTA funding provided by New York City taxpayers.
$922 million
— Total 2014 annual contribution from the City of New York to the MTA.
$5.4 billion
— MTA annual revenue derived from state-authorized taxes.
74%
— Estimated share of regional taxes paid by residents and firms within New York City.
$587 million
— Revenue generated by tolls that helps pay for mass transit services.
New York City's reliance on a small number of taxpayers for volatile revenue sources makes accurate forecasting difficult, creating significant risks if optimistic projections fail during an economic downturn. Maintaining fiscal discipline through cautious revenue estimates is essential to ensure the city can withstand potential recessions without facing severe budget shortfalls.
Recommendations related to City Tax Policy
Fiscal discipline requires that tax revenue forecasts be rigorous and cautious to provide a margin of error in the event of revenue shortfalls.
The City should avoid estimating tax revenue optimistically, as this can lead to unsustainable spending that may not be sustainable when there is an economic downturn.
Key Data
$7.2 billion
— Forecasted tax revenue growth over the fiscal years 2015-2019.
$15.8 billion
— Cumulative tax revenue shortfall relative to the OMB forecast if a recession were to start in 2016.
$24.1 billion
— Cumulative tax revenue shortfall relative to the IBO forecast if a recession were to start in 2016.
$750 million
— The amount currently held in the city's general reserve.
70 percent
— Peak-to-trough decline in real estate transaction taxes during the past decade.
1 percent
— Percentage of tax filers who pay half of personal income taxes.
New York City could generate significant revenue by reforming its property tax system, which currently sacrifices $4 billion annually due to inequitable caps and phase-ins. Additionally, broadening the sales tax base to include more non-essential items could raise over $1 billion annually, offering a more stable alternative to increasing income taxes on high earners.
Recommendations related to City Tax Policy
Wasteful subsidies should be ended, but they will not immediately solve the funding problem.
The biggest source of new revenue should be the property tax: reforms to its structure can redress inequities without raising tax rates across the board.
The next administration should take the lead in fixing a broken, inequitable and often inscrutable property tax system.
A third source of new revenue could be found by broadening the base of the sales tax.
The city should subject more non-essential items to the sales tax to generate revenue.
Key Data
$930 million
— The cost of business property tax expenditures in the last fiscal year.
$30 million
— The estimated annual savings in the short term from cutting corporate tax breaks.
$4 billion
— The amount of annual revenue sacrificed by the current property tax system.
$3.1 billion
— The annual value of the 2004 property tax hike due to appreciation in property values.
$440 million
— The annual revenue generated by the 2009 sales tax increase.
$1 billion
— The potential annual revenue from broadening the sales tax base to include more non-essential items.
This discussion took place as part of the CBC's Conference, The Most Important Economic and Fiscal Decisions Facing the Next Mayor, held on December 6, 2013 in New York City. Presenters: Donald Boyd; Andrew Hayashi Moderator: Alair Townsend Panelists: Andrew Haughwout, James Parrott, and Martha Stark
New York City's tax burden is significantly higher than other large U.S. cities, with personal income and commercial property taxes acting as major outliers. Policymakers should exercise caution when considering further tax increases, as these existing high rates already create competitive disadvantages and uncertainty regarding potential outmigration.
Recommendations related to City Tax Policy
Policymakers considering raising the personal income tax or the commercial property tax need to be aware that both taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities.
The policy implication is that these conditions should be considered in any initiatives to raise more revenue from the property tax.
Key Data
46%
— New York City's state and local taxes were 46% higher than the average for other large cities.
51%
— New York City's commercial property tax was 51% higher than the average for the other 14 of the 15 largest cities, representing an annual difference of $327,000 for a $25 million property.
$800 Million
— A 10 percent across-the-board surcharge on the personal income tax would raise more than $800 Million annually at current income levels.
$750 Million
— Increasing the top personal income tax rate to 4.626 percent would likely raise more than $750 Million annually.
154%
— New York City's commercial property tax was 154% higher than Los Angeles.
9%
— New York City's ratio of commercial property tax rate to homestead tax rate is 9% higher than second-ranking Boston's.
New York City's economic development programs, which include significant tax expenditures and capital investments, have grown substantially over the past decade but require better management and clearer evaluation standards. Future policy should prioritize cost-effective reforms to tax incentive programs and improved transparency in how discretionary benefits are awarded to ensure they effectively drive job growth.
Recommendations related to City Tax Policy
The next administration should continue reform of as-of-right tax expenditure programs to make them more cost-effective.
The city should establish clearer standards for awarding discretionary tax expenditure benefits to reduce excessive variation in support levels.
The city should use capital investments to enhance infrastructure in neighborhoods with job growth potential.
The city should encourage growth in the cultural, medical and educational sectors by enhancing access to capital through conduit financing.
The city should continue rezoning and expand special mixed use districts to facilitate diversified job growth in areas currently limited to industrial use.
The city should better manage the Economic Development Corporation by focusing on job creation and enhancing transparency.
Key Data
$1.6 billion
— Annual tax expenditures in 2012.
$751 million
— Capital spending on economic development in 2012.
$9.7 billion
— Total conduit debt outstanding in 2012.
$368 million
— Relevant operating expenditures in 2012.
$722 million
— As-of-right property tax expenditures in 2012.
$265.3 million
— Net value of annual real estate tax benefits in 2012.
New York City's property tax system is riddled with inequities, such as assessment caps and the undervaluation of co-ops and condos, which create significant disparities in effective tax rates across different property types. To address these issues while raising $2 billion in revenue, the city should consider reforms like eliminating assessment caps and revaluing properties to ensure a more transparent and equitable tax burden.
Recommendations related to City Tax Policy
This option eliminates all disparities among homeowners by assessing and taxing both categories of property in the same way.
The third option would raise $2 billion in revenue and addresses the inequities among properties by eliminating the caps and phase-in provisions for all properties.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
This option eliminates these disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The first step is to value condos and co-ops based on market values using sales prices (as is currently the case for Class 1).
Key Data
$2 billion
— The target amount of additional revenue to be raised by the proposed property tax reforms in fiscal year 2015.
$4.5 billion
— The estimated revenue foregone in fiscal year 2015 due to existing property tax cap and phase-in rules.
1.21 percent
— The assessment ratio for a two-family home in Park Slope/Carroll Gardens in fiscal year 2013.
45 percent
— The assessment ratio for a commercial property in East New York/Starrett City in fiscal year 2013.
17.5 percent
— The tax abatement that offsets the tax otherwise due for most co-op and condo units.
2.8 percent
— The assumed annual percentage increase in market values for all properties in the city used for forecasting.
New York City is facing a new fiscal reality where the era of large, unanticipated tax revenue surpluses has ended, forcing the city to rely on temporary one-shot resources to balance its budget. Without these historical surpluses, the city must now consider fundamental changes, such as raising taxes, cutting services, or reforming expensive municipal health insurance policies.
Recommendations related to City Tax Policy
The Mayor and City Council can raise taxes again to balance the budget if revenue surpluses disappear.
The City can impose additional cuts on services and personnel to address budget deficits.
The City should tackle spending arrangements that drive budget growth and out-year deficits.
The City must tackle the City's generous health insurance policies for municipal employees and retirees, as this may be unavoidable if revenue surpluses disappear.
Key Data
$5.3 billion
— The peak of unanticipated tax revenues reached in fiscal year 2007.
$114 million
— The amount fiscal year 2012 tax collections are running above the initially budgeted sum.
$42.2 billion
— The total tax revenues for the city.
$1 billion
— The amount of annual tax revenue surplus consistently seen between 2003 and 2011.
$1.6 billion
— The total higher-than-initially-anticipated tax revenues at the end of fiscal year 2011.
$7 billion
— The amount Wall Street profits are running below what was assumed when the budget was adopted.
The current rental payment method for New York City's water and sewer system is arbitrary and has contributed to rapidly rising water prices, necessitating a shift toward a more logical, service-based or tax-based payment structure. While alternative methods like implementing utility-style property or business income taxes would provide a more justifiable basis for these payments, they would likely result in higher costs for water customers.
Recommendations related to City Tax Policy
The City should replace the arbitrary 15 percent formula with a more appropriate method for setting the rental payment that is rooted in the actual value of services received.
The Water Board could implement a payment of City-funded GO debt service plus payment for services rendered by the City to the water and sewer system.
The Water Board could make a rental payment equivalent to what it would pay in City property taxes under the rate charged to utilities.
The Water Board could make a rental payment equivalent to what it would pay under the utilities business income tax.
The Water Board could make a rental payment equivalent to what it would pay for property and utilities business income taxes combined, as other utilities do.
Key Data
$102 million
— The low point of the rental payment made by the water system to the City treasury in 2003.
$234 million
— The rental payment amount in the current fiscal year (2011/2012).
$73.8 million
— The amount the Water Board paid the City in fiscal year 2011 for judgments, claims, and street cleaning services.
$115 million
— The total property tax payments made by the DEP to localities outside New York City in fiscal year 2010.
$2.96 billion
— The total revenues of the water system in fiscal year 2011.
$229.7 million
— The estimated increase in rent for fiscal year 2011 if the property tax approach were implemented.
New York City's rent regulation system fails to effectively target low- and moderate-income households, with significant benefits accruing to higher-income residents while simultaneously reducing property tax revenue by $283 million annually. Rather than expanding these regulations, policymakers should focus on phasing out benefits for higher-income households and pursuing more effective, targeted affordable housing solutions.
Recommendations related to City Tax Policy
The protections now available to low- and moderate-income households should be retained.
The legislature should reduce the inequities and social costs of regulation by phasing out benefits for higher-income households.
State leaders must acknowledge that rent regulation is not the answer to the city's affordable housing problems and shift their focus to better targeted and more effective solutions.
Key Data
$283 million
— annual reduction in property tax liability caused by lower rents in the regulated sector
$175,000
— annual income threshold for high-income, high-rent vacancy decontrol
6.7 percent
— percentage of all city residents with an annual income of $175,000
60 percent
— of rent regulation benefits that accrue to households with incomes below $50,000
14 percent
— of rent regulation benefits that go to households with incomes of $100,000 or more
35.8 percent
— of private-sector renters with incomes below $50,000 who are in unregulated units
New York City's environmental initiatives, such as property tax abatements for solar panels and green roofs, should be evaluated for their cost-effectiveness to ensure they provide genuine economic and environmental benefits. Rather than relying on potentially wasteful tax subsidies, the city should prioritize policies that encourage consumer responsibility and align with broader economic competitiveness.
Recommendations related to City Tax Policy
The city should rethink existing subsidies and regulations with an aim of revising or eliminating those financial incentives which are too generous and changing those regulations which are too burdensome.
The Mayor and City Council should collaborate to define cost-effectiveness standards for policy options in each dimension of green policy to ensure they are worthy of adoption.
The property tax abatement for solar panels is a prime candidate for expiration, as the additional local tax subsidy may be more than is necessary to induce private investment.
The pilot program for green roof tax abatements warrants reconsideration because it may be excessive and its cost-effectiveness deserves further study.
Key Data
$38,000
— Cost of a commercial firm investing in a five-kilowatt solar panel.
$8,633
— Federal tax credit available for a commercial firm investing in a five-kilowatt solar panel.
$5,000
— New York State income tax credit for a commercial firm investing in a five-kilowatt solar panel.
$9,056
— Rebate from NYSERDA for a commercial firm investing in a five-kilowatt solar panel.
$7,600
— Total 20 percent property tax abatement for a commercial firm investing in a five-kilowatt solar panel.
$4.50
— New York City’s green roof tax abatement per square foot for qualified buildings.
New York City implemented various revenue-raising measures, including increased parking rates and enhanced tax audit enforcement, to generate $593 million in funds during the fiscal years 2009 and 2010. These efforts, which also included proposed but unrealized initiatives like a plastic bag tax, served as a key component of the city's strategy to balance its budget alongside expenditure reductions.
Key Data
$593 million
— Amount identified in PEG documents as revenue raising measures.
$84 million
— Anticipated revenues from the proposed but never implemented plastic bag tax.
$34 million
— Revenue generated from increasing parking and parking meter rates.
$24 million
— Revenue generated from a Department of Finance initiative to increase tax audit revenue.
Rent regulation in New York City is poorly targeted, failing to provide adequate relief to the neediest residents while imposing significant costs on unregulated renters and reducing city property tax revenue. The current system results in lost tax revenue of $283 million annually and forces many low- and moderate-income households in unregulated units to pay higher rents.
Key Data
$2,800
— Average amount more per year that tenants in the unregulated rental market pay for their apartments compared to what they would pay without rent regulation.
$1.9 billion
— Total amount per year that more than 669,000 unregulated renters pay as a consequence of rent regulation.
500,000
— Number of households in unregulated units that have incomes below $75,000.
$283 million
— Amount by which the city's property tax revenue would grow annually without rent regulation.
31%
— Average discount provided by rent regulation based on 2008 data.
The fiscal year 2011 budget plan avoids tax increases to maintain economic competitiveness while addressing a significant deficit through expenditure savings and benefit reforms. By implementing employee contributions to health insurance and reforming pension packages, the City can achieve substantial savings to avert layoffs and reduce long-term liabilities.
Recommendations related to City Tax Policy
The City should maintain its current tax structure and include no new taxes, as increasing taxes on already burdened New Yorkers will put the City at a competitive disadvantage.
Key Data
$3.8 billion
— The deficit in fiscal year 2012 that could be cut by over 30 percent through employee health insurance contributions.
$1.3 billion
— The amount of recurring expenditure savings in the fiscal year 2011 budget plan.
$65 billion
— The total accrued future liability associated with retiree health benefits.
The city's preliminary budget plan for fiscal years 2010 through 2014 addresses a $4.1 billion deficit by avoiding broad tax increases in favor of targeted measures, such as applying the mortgage recording tax to co-op transactions and expanding the sales tax base to include aviation fuel. The plan also focuses on curbing expenditure growth through agency savings and renegotiating public employee union contracts to secure long-term fiscal stability.
Key Data
$241 million
— The total amount of new tax revenue generated in the fiscal year 2010-11 budget plan.
$50 million
— The projected revenue from applying the mortgage recording tax to co-op transactions in fiscal year 2011.
$169 million
— The estimated revenue from including aviation fuel in the sales tax base in fiscal year 2011.
New York's tax system is progressive in that it eases the burden on low-income residents, but middle-income families currently face the highest tax burden at 11.6% of their income. To improve the system's overall progressivity, policy efforts should prioritize reducing the tax burden on moderate-income households.
Recommendations related to City Tax Policy
New York needs to focus on lowering the tax burden on households with moderate incomes to complete the model of progressivity.
Key Data
9.6%
— Share of income the poorest fifth of New Yorkers pay for state and local taxes.
11.6%
— Share of income the middle quintile of New York families pay to state and local taxes.
7.2%
— Share of income the top 1% of earners in New York pay for state and local taxes.
$1,447
— Maximum State EITC a family earning less than $42,000 can receive.
$1,733
— Maximum child care credit available to low-income New York City residents.
New York City faces significant budget gaps and should avoid further tax increases, as residents already pay more than double the national average. Instead of raising taxes, the city should focus on reducing operating expenditures through measures like pension reform, wage freezes, and productivity improvements.
Recommendations related to City Tax Policy
The City should implement no new or higher taxes that harm prospects for economic recovery and growth.
The City should avoid the recently announced sales tax increases to prevent further discouraging economic recovery.
The City should focus on cutting costs rather than additional tax hikes to address the structural imbalance in the budget.
Key Data
$887 million
— The amount of new taxes included in the recently announced revenue agreement.
0.5 percent
— The increase in the sales tax rate included in the revenue agreement.
$1.5 billion
— The cost to taxpayers of the new regional payroll tax for the Metropolitan Transportation Authority.
7 percent
— The mid-year increase in City property taxes.
$1.5 billion
— The combined new burden on taxpayers from the property tax increase and the elimination of homeowner rebates.
$4 billion
— The amount of income tax increases adopted in the State budget.
New York's local tax burden is 79% above the national average, a problem exacerbated by state mandates that force local governments to fund retiree health insurance without local control. Governor Paterson is urged to veto legislation that would further restrict local officials' ability to manage these rising costs, which include billions in unfunded liabilities.
Recommendations related to City Tax Policy
Governor David Paterson should veto the legislation (A9393A/S6457A) to prevent an unfunded mandate that forces local governments to raise taxes.
Local governments should have the flexibility to negotiate retiree health benefits with local unions rather than having them decreed by state officials.
The state should stop the practice of requiring local governments to assume costly obligations without providing the funding needed to meet them.
Key Data
79%
— New York's high local taxes are this percentage above the national average statewide.
$49.7 Billion
— The estimated state liability for government retiree health insurance.
$57.8 Billion
— The estimated New York City liability for government retiree health insurance.
New York's current property tax relief program is outdated, with eligibility criteria unchanged since 1985, leaving many residents without necessary support as housing costs rise. Replacing the flawed STAR program with an expanded circuit breaker model could provide more effective, targeted relief to millions of homeowners and renters.
Recommendations related to City Tax Policy
New York should reform its circuit breaker program because the current income ceiling of $18,000 and maximum home and rent values of $85,000 and $450 have been unmodified since 1985, causing the program to erode and provide relief to fewer residents.
The state should replace the poorly crafted STAR homestead exemption program with an improved circuit breaker that would work more effectively to provide targeted relief.
Policymakers should implement a circuit breaker model that refunds property taxes above 5 percent of income for homeowners earning less than $20,000 and above 7 percent for all others.
The state should adopt a circuit breaker program for renters that refunds property taxes in excess of 6 percent of income.
Key Data
$18,000
— The current income ceiling for New York's circuit breaker program, which has remained unchanged since 1985.
$51,384
— The median household income in New York in 2006, which is far above the program's income ceiling.
$303,400
— The median home value in New York in 2006, which is well above the program's value ceiling of $85,000.
$875
— The median rent in New York in 2006, which is well above the program's rent ceiling of $450.
$2.6 billion
— The estimated cost of a circuit breaker program that refunds property taxes above 5 percent of income for homeowners earning less than $20,000 and above 7 percent for all others.
$2.7 billion
— The estimated cost of a circuit breaker program for renters that refunds property taxes in excess of 6 percent of income.
In order to promote fiscal reform, the Citizens Budget Commission (CBC) convened three separate agenda-setting conferences for key stakeholders in the state budget process in 2007. Each session focused on one aspect of fiscal reform with a goal of identifying specific changes for the coming budget cycle. The expectation is…
New York State's high local tax burden, driven by heavy reliance on property taxes and high labor costs, creates significant inequities and fiscal stress for local governments. To address this, the state should consider implementing property tax caps, expanding circuit breaker programs, and reforming collective bargaining and Medicaid mandates to reduce local cost drivers.
Recommendations related to City Tax Policy
The State should implement a full state takeover of Medicaid to shift the burden from local property taxes to more progressive state revenue sources.
The State should reform pension benefits by converting to a defined contribution system or making the current defined benefit system more reasonable.
The State should revise the framework for collective bargaining to make the dispute resolution process more timely and encourage bargaining rather than relying on arbitration.
The State should implement a property tax cap to keep property tax increases at a reasonable pace and force local governments to control spending.
The State should expand the circuit breaker program by increasing income and home value ceilings to provide relief to more residents.
The State should consolidate small school districts to reduce administrative and transportation costs.
Key Data
$111 Billion
— New Yorkers pay about $111 billion annually in state and local taxes.
$61 Billion
— Local jurisdictions in New York collect $61 billion in taxes.
56 percent
— Property taxes account for 56 percent of local tax collections.
$2.2 Billion
— In fiscal year 2005, Medicaid mandates required $2.2 billion from the counties (excluding New York City).
$4.7 Billion
— School property tax relief spending increased from $600 million to $4.7 billion between fiscal year 1998-99 and 2007-08.
3,421
— The U.S. Census counts 3,421 units of local government in New York State.
New York City's business tax burden is significantly higher than that of its competitors, with an average effective tax rate of 7.5% compared to 4.5% elsewhere, and a property tax structure that heavily favors homeowners over commercial property owners. To improve economic competitiveness, the city should establish a blue-ribbon commission to develop a comprehensive, multi-year strategy for reforming the tax system and incentives.
Recommendations related to City Tax Policy
Mr. Bloomberg and the City Council should appoint a blue-ribbon commission to map a multi-year strategy relating to the whole range of taxes and tax incentives.
The commission should have estimates of the fiscal impact in time for the mayor's January 2008 financial plan and specific recommendations for his executive budget in April 2008.
The city should continue efforts to reform the city's business taxes beyond the initial budget cuts made by the Mayor and City Council.
Key Data
7.5%
— The average effective state and local tax rate on businesses in New York City is significantly higher than the comparable rate of 4.5% in eight other locations.
$2.3 billion
— The commercial rent tax, real property transfer tax, and mortgage recording tax cost the city's businesses $2.3 billion annually.
$41
— An owner of an office building pays about $41 per thousand dollars of property value, compared to about $6 for the average homeowner.
$240 million
— The city struck a $240 million deal with JPMorgan Chase for the construction of a new office tower downtown.
7%
— Property tax rates were lowered for all types of property by 7% in the most recent budget.
$42 million
— Only $42 million of the $77 million in sought corporate income tax cuts have been passed in Albany.
New York City maintains the highest business tax burden among the locations studied, with combined federal, state, and local taxes reducing the rate of return on new business investment by 36% to 50%. While recent state budget changes are projected to lower the average effective tax rate in the city from 42.1% to 40.9%, the city is expected to retain its overall ranking as the highest-tax location.
Key Data
42.1%
— Average combined federal-state-local effective tax rate for representative firms in New York City in 2006.
36-50%
— Range of the effective tax rate reduction on the rate of return for new business investment across different locations and industries in 2006.
40.9%
— Projected average combined federal-state-local effective tax rate in New York City following the corporate tax changes adopted in the 2007-08 state budget.
The paper examines the complex relationship between local tax burdens and economic growth, noting that while higher taxes can discourage growth, the magnitude of this effect is subject to significant debate among economists. It advises policymakers to prioritize broad-based tax reform over ad hoc incentives and to focus on efficient public service delivery, as the evidence for precise tax-impact estimates remains inconclusive.
Recommendations related to City Tax Policy
Policymakers should prioritize broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
New York City must be ever more diligent in promoting agglomeration benefits through non-tax policies and providing public services efficiently.
Policymakers should avoid relying on supposedly precise estimates of the impact of any particular change in taxes because empirical studies vary in so many dimensions.
The City should focus on rationalizing the assignment of governmental responsibilities to address high costs.
Policymakers should treat effective property tax rates based on data gathered prior to the implementation of S7000A in fiscal year 1983 with some skepticism.
Key Data
$8
— New York City's local taxes absorbed nearly $8 of every $100 of taxable resources in 1997.
90,000
— Tax increases in 2003 were estimated to cost the city economy in excess of 90,000 jobs.
18.5%
— The city implemented an 18.5% increase in the real property tax during calendar year 2003.
0.3%
— From 1986 to 2001, the city’s private sector employment grew at an average rate of just 0.3%.
2.7%
— Real gross city product grew by 2.7% annually from 1986 to 2001.
$11.6 Billion
— FY2005 property tax revenues were $11.6 Billion.
New York City's pension benefits for municipal workers are significantly more generous than those in the private sector, contributing to rising costs for taxpayers. Implementing reforms for newly hired employees, such as adjusting benefit formulas and retirement ages, is necessary to ensure fiscal sustainability and prevent tax increases.
Recommendations related to City Tax Policy
The city should implement the mayor's proposal to trim pension benefits for newly hired workers to reduce the spiraling cost to taxpayers.
New York should adjust the benefit formula to exclude overtime earnings, a practice that is rare in other systems.
The city should raise the retirement age for new employees to align with the age for full Social Security benefits.
Key Data
$4 billion
— Amount taxpayers will contribute to the pension funds of municipal workers in the current fiscal year.
$900 million
— Amount taxpayers will pay for retiree health insurance in the current fiscal year.
$5.7 billion
— Projected pension contributions in 2010.
15%
— Amount by which average hourly wages for public employees exceeded those of private firms in 2004.
30%
— Wage advantage for blue collar public employees over private firms in 2004.
New York City and State face rapidly growing fiscal burdens from generous public employee retirement benefits that exceed those provided by most private and public employers. Redesigning these benefits, including shifting to defined contribution plans and increasing retiree health insurance contributions, could significantly reduce the tax burden on residents and businesses.
Recommendations related to City Tax Policy
The City and State should seek to place all new workers in defined contribution plans to facilitate worker mobility and reduce long-term fiscal risk.
The City and State should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City and State should stop reimbursing retirees for Medicare Part B premiums, as this practice is out-of-line with benefits provided by other large employers.
The New York systems should increase required employee contributions and not limit them to ten years.
The New York system should raise the minimum age requirement for retirement to reflect increased life spans and working lives.
Key Data
$4.7 billion
— Projected City pension fund contributions for fiscal year 2008.
43%
— Percentage of retired firefighters receiving additional benefits due to a disability deemed to be job related.
$12,000
— Annual variable supplement payment, or 'Christmas bonus,' for some retired New York City uniformed workers.
$131 million
— Cost to the City in 2004 for reimbursing retired workers for their Medicare Part B premiums.
New York City's high local tax burden, which is 171% of the national average, is driven by state mandates for Medicaid and education funding. To meet the constitutional mandate for a sound basic education, the state should provide additional funding through statewide revenues rather than imposing further local tax burdens that threaten the city's economic viability.
Recommendations related to City Tax Policy
All additional resources necessary to ensure that New York's students receive a sound basic education should be provided through statewide revenues.
Local mandates for additional education spending should not be a part of a court-approved remedy because they are likely to force tax increases that harm the City’s economic viability.
The state should increase its share of education funding to reduce the disparity in spending among districts and alleviate the burden on local taxpayers.
Key Data
171 percent
— New Yorkers pay 171 percent of the national average in local taxes.
48 percent
— New York provides only 48 percent of its schools’ non-federal revenue.
57 percent
— The national median state share of non-federal primary and secondary education funding is 57 percent.
$68
— In fiscal year 2000, New Yorkers paid $68 for every $1,000 in personal income in state-level taxes.
$73
— New York State residents pay their local governments $73 for every $1,000 of personal income.
24th
— New York ranks 24th among the states in the degree of disparity in per pupil spending among districts.
The City of New York faced an $8.8 billion budget gap for fiscal year 2004, driven more by rising expenditures of $3.1 billion than by a $2.4 billion decline in tax revenues. To close this gap, the city relied heavily on $4.8 billion in revenue increases, including a $1.7 billion property tax hike and reforms to the personal income tax.
Key Data
$8.8 billion
— The projected fiscal year 2004 budget gap without offsetting actions.
$3.1 billion
— The amount by which expenses have risen, contributing to the budget gap.
$2.4 billion
— The decline in tax revenue projected for fiscal year 2004.
$4.8 billion
— The amount of the gap-closing plan accounted for by revenue increases.
$1.7 billion
— The yield from the recently enacted property tax increase in fiscal year 2004.
$962 million
— The expected yield from reform of the personal income tax, including a new tax on commuters.
New York City's tax structure places an unusually high burden on commercial property compared to residential property, which discourages economic growth and drives away jobs. To improve competitiveness, the city should restructure its property tax system, as current tax burdens remain high compared to other major cities despite previous cuts.
Recommendations related to City Tax Policy
The City should change the structure of its property tax to avoid disproportionate burdens on commercial property that drive away jobs.
The City should raise the tax on small homes as it would still be in line with neighboring jurisdictions.
Budget balancing strategies should take New York's competitive position into account when considering tax policy.
Key Data
$1,079
— The reduction in tax burden for a family of four with a $50,000 income between 1990 and 2000.
46 percent
— The share of the value of property in the City comprised by small homes.
14 percent
— The share of total taxes paid by small homes.
28 percent
— The share of property value comprised by commercial property.
44 percent
— The share of total taxes paid by commercial property.
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