High-income earners in New York State and City contribute a disproportionate share of personal income tax revenue, making them a central factor in the region's fiscal health and economic competitiveness. This page covers CBC’s work on tax policy, revenue volatility, the economic impact of tax rates, millionaire migration trends, and strategies for maintaining long-term fiscal stability.
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 State and City should hold the line on taxes to maintain competitiveness.
Legislators should 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 instead of raising taxes.
The new administration should signal that NYC is open for business by keeping corporate rates where they are and seeking additional regulatory reforms.
The administration should hold the line on taxes because increasing them makes the city less attractive to high-income residents and businesses.
The administration should avoid raising income taxes further, as it risks accelerating the trend of shrinking the tax base, straining remaining residents, and undermining the City’s long-term vitality.
Key Data
According to an August 2026 report, millionaires make up less than 1% of resident tax filers in New York State and New York City, but they paid 43% and 38% of the State's and City's personal income taxes in 2023, respectively.
A report from August 2026 highlights that New York's share of the nation's millionaires ticked up in 2023 to 9% for the State and 4.3% for the City, though both remain significantly below their 2010 shares of 12.7% and 6.5%, respectively.
As of February 2026, New York City residents face the nation's highest combined top marginal personal income tax rate of 14.776%, which exceeds California's second-place rate of 13.3%.
According to an August 2025 report, millionaires are critical to New York's tax base, contributing $34 billion in State and City personal income tax revenue in 2022.
In March 2021, the CBCNY noted that New Yorkers earning over $10 million annually pay an average of $1.2 million in taxes to both the State and City, highlighting the high concentration of revenue from a small group of taxpayers.
New York State's share of the nation's millionaires ticked up slightly to 9.0% in 2023, but remains well below its 12.7% share in 2010. This long-term decline has cost New York State and City an estimated $12 billion in lost personal income tax revenue in 2023 alone, highlighting the critical role these high-income earners play in funding public services.
Key Data
9.0%
— New York State's share of the nation's millionaires in 2023, up from 8.7% in 2022.
12.7%
— New York State's share of the nation's millionaires in 2010.
$12 Billion
— Estimated personal income tax revenue lost by New York State and City in 2023 due to the decline in their share of the nation's millionaires since 2010.
43%
— The portion of New York State's personal income taxes paid by millionaires in 2023, who comprised less than 1% of resident filers.
38%
— The portion of New York City's personal income taxes paid by millionaires in 2023.
1,900
— The increase in the number of millionaires living in New York State in 2023 compared to 2022.
New York relies heavily on high-income earners, with those making over $1 million contributing 43% of state personal income taxes, yet the state's share of the nation's millionaires has dropped significantly since 2010. To maintain competitiveness and avoid further erosion of the tax base, the state should avoid tax increases and instead focus on improving the efficiency of existing government spending.
Recommendations related to High-Income Earners
The State and City should hold the line on taxes to maintain competitiveness.
Legislators should 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 instead of raising taxes.
Key Data
43%
— Share of New York State’s personal income taxes paid by filers with income over $1 million in 2023.
37%
— Share of New York City’s personal income taxes paid by filers with income over $1 million in 2023.
12.7% to 8.7%
— Decline in the State’s share of the nation’s millionaires between 2010 and 2022.
$11 billion
— Additional personal income tax receipts the State would have had this year if it had maintained its previous share of millionaires.
14.776%
— Combined top marginal personal income tax rate for New York City residents.
New York faces significant fiscal challenges, including a structural budget gap and the nation's highest tax burden, which contributes to the slower growth of the millionaire population compared to other states. To maintain economic competitiveness and prevent further outmigration, state leaders should prioritize fiscal restraint and avoid increasing taxes on businesses and high-income earners.
Recommendations related to High-Income Earners
State leaders should hold the line on taxes to prevent further outmigration of high-income earners and maintain economic competitiveness.
The state should refrain from raising nation-leading personal income taxes, which already place a heavy burden on high-income earners and contribute to the state's slower growth in the millionaire population.
Key Data
$10 billion
— Annual revenue the state would be collecting if its share of the nation’s millionaires had held steady since 2010.
17.44%
— The combined corporate tax rate in New York City, which is significantly higher than in neighboring states.
11.5%
— The combined corporate tax rate in New Jersey, used as a comparison for New York City's tax burden on businesses.
New York City's high-income residents and businesses already face some of the highest tax rates in the nation, and further increases would likely reduce the city's attractiveness and economic competitiveness. Maintaining current tax levels is essential to preserving the tax base and ensuring the city's long-term fiscal vitality.
Recommendations related to High-Income Earners
The new administration should signal that NYC is open for business by keeping corporate rates where they are and seeking additional regulatory reforms.
The administration should hold the line on taxes because increasing them makes the city less attractive to high-income residents and businesses.
The administration should avoid raising income taxes further, as it risks accelerating the trend of shrinking the tax base, straining remaining residents, and undermining the City’s long-term vitality.
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, comprising the 8.85 percent City rate, 6.61 percent State effective rate, and 1.98 percent effective rate for the MTA surcharge.
New York City's reliance on high-income earners to fund essential services is threatened by a shrinking share of millionaires and a declining value proposition compared to other regions. To reverse this trend and secure long-term prosperity, the city must prioritize fundamental improvements in housing affordability, public safety, service efficiency, and fiscal stability rather than relying solely on tax increases.
Recommendations related to High-Income Earners
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.
New York must focus on the fundamentals to strengthen the city's value proposition and help retain, attract, and grow millionaires.
Key Data
40%
— Share of New York’s personal income taxes paid by filers with adjusted gross income over $1 million in 2022.
$18 billion
— Projected personal income tax revenue in fiscal year 2026.
35%
— Decline in the share of U.S. millionaires living in New York City between 2010 and 2022.
$2.5 billion
— Additional personal income tax revenue the City would have collected in 2022 if it had maintained its 2010 share of millionaires.
$10.7 billion
— Additional personal income tax revenue the State would have collected in 2022 if it had maintained its 2010 share of millionaires.
14.776%
— Combined top marginal tax rate for the highest earners in New York State and City.
New York's share of the nation's millionaires has significantly declined since 2010, resulting in billions of dollars of lost potential tax revenue for the state and city. To secure funding for essential services, the region must improve its value proposition—including quality of life and affordability—rather than relying on tax increases that may drive high-income earners away.
Recommendations related to High-Income Earners
New York must prioritize strategies to retain and grow the number of millionaires to effectively fund critically needed services.
Policymakers should avoid raising taxes, as doing so could accelerate the trend of losing high-income earners to other states.
The state and city must improve their value proposition by addressing factors like quality of life, social and cultural amenities, and the high cost of living to remain competitive.
Key Data
$34 billion
— Contribution of millionaires to State and City personal income tax revenue in 2022.
31 percent
— The amount by which New York's share of the nation's millionaires plummeted between 2010 and 2022.
$13 billion
— Additional personal income tax revenue the State and City would have collected in 2022 if millionaire shares had remained at 2010 levels.
12.7 percent to 8.7 percent
— The decline in New York's share of the nation's millionaires between 2010 and 2022.
14.776 percent
— The 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 paid by millionaires in 2022, despite them comprising less than 1 percent of resident filers.
The state budget relies on extending personal income tax increases for high-income earners to support unsustainable spending levels. This fiscal approach, combined with other budgetary decisions, fails to adequately prepare for potential federal funding cuts and economic downturns.
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's current tax structure, which includes the highest combined top personal income and corporate tax rates in the nation, threatens the state's economic competitiveness and ability to retain high-income residents. A declining share of the nation's millionaires and an increased reliance on volatile personal income tax receipts underscore the need to allow recent tax increases to expire to stabilize the state's fiscal foundation.
Recommendations related to High-Income Earners
The enacted State budget should allow the business tax increase to sunset.
The enacted State budget should restrain spending to allow the personal income tax increase to sunset sooner or at least as scheduled.
Key Data
22 percent
— Decline in New York's share of the nation's millionaires from 2010 to 2019.
NY1 “We have, with the tax increase of last year, the highest top marginal personal income tax in the country, and the highest corporate franchise tax in the country. And we were losing millionaires before the SALT cap. How big a threat are high taxes?” said Andrew Rein of the…
New York's current tax structure, which includes the nation's highest top personal income and corporate tax rates, creates significant financial incentives for high-income individuals and businesses to relocate or avoid the state. To improve economic competitiveness, the state should lower, reverse, or allow the most recent tax increases to sunset.
Recommendations related to High-Income Earners
The State should ensure that the latest tax increases are lowered, reversed, or at least allowed to sunset.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
The proposed New York State budget includes tax increases on high-income earners and businesses that are unnecessary given the state's improved revenue outlook and federal aid. These tax hikes risk driving away high earners and businesses, potentially destabilizing state revenues and harming New York's economic competitiveness.
Recommendations related to High-Income Earners
The State should avoid raising taxes on high-income earners and businesses, as these increases are unnecessary and economically risky.
Policymakers should prioritize long-term fiscal stability by not raising income and business taxes in the final budget.
The State should avoid increasing the capital gains tax, as it will increase the volatility of State revenues and lead to future fiscal instability.
Key Data
$7 billion
— The amount of new revenue the proposed tax increases on high-income earners and businesses would generate annually.
$1.2 million
— The average amount New Yorkers who earn over $10 million annually currently pay to both the State and City.
16.49 percent
— The current combined State, City, and MTA tax rate for New York City businesses, which is already the highest in the nation.
94 percent
— The portion of the original projected four-year revenue loss that has been offset by tax revenue strength and federal aid.
New York's high combined state and local tax rates on businesses and high-income earners risk driving away the wealthy taxpayers upon whom the city and state budgets heavily rely. With the state and city facing multi-billion dollar budget gaps, policymakers must consider the impact of tax increases on economic competitiveness to avoid further declines in their share of the nation's millionaires.
Recommendations related to High-Income Earners
Improving the fiscal outlook for both the State and the City primarily requires controlling expenditures and advocating for federal aid.
Any consideration of tax increases should include the impact on State and local economic competitiveness.
As New York’s leaders look to close budget gaps, they must be cognizant that combined State and City PIT rates are the second highest in the nation, while combined CFT rates are the highest.
Key Data
$1.4 billion
— Potential tax revenue that could have been generated if New York’s share of national millionaire capital gains had remained at 2010 levels.
40 percent
— Share of personal income tax revenues coming from millionaires in New York.
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.
$15 billion
— Potential budget gap for New York State in fiscal year 2022.
$6.9 billion
— Potential budget gap for New York City in fiscal year 2022.
New York's high tax burden, including the top marginal personal income tax rate, risks driving away high-income earners who currently contribute a significant portion of state operating funds. To maintain fiscal stability and competitiveness, the state should focus on restraining spending rather than enacting additional tax increases that could further burden these taxpayers.
Recommendations related to High-Income Earners
The State should avoid enacting additional tax increases, as doing so would make New York even more expensive for residents and businesses, decrease competitiveness, and increase the risk that high-income earners will move to lower tax states.
The State should focus on restraining spending rather than increasing taxes, as increasing taxes now would be counterproductive and would narrow options to balance the budget soundly in future recessions.
The State should hold the line on the current tax burden, as retention of the PIT surcharge and other recently enacted taxes already narrows options to balance the budget soundly in future recessions.
Key Data
$19.3 billion
— Personal income tax liability of taxpayers with incomes greater than $1 million.
1 of every 5 dollars
— Amount of state operating funds spending that comes from taxpayers earning more than $1 million annually.
8.82 percent
— New York State’s top marginal personal income tax (PIT) rate.
12.7 percent
— Top personal income tax rate for New York City residents.
The Opportunity Zone program provides significant tax benefits to investors by allowing them to defer or exclude capital gains taxes, potentially costing New York State and City millions in revenue. Because New York does not tax capital gains at a preferential rate, the state's decision to conform to federal Opportunity Zone rules disproportionately benefits high-income earners while lacking transparency and accountability measures.
Recommendations related to High-Income Earners
The State can require Opportunity Funds operating in New York State to report on their activity in order to qualify for state tax benefits.
The State could require funds to report annually on the value of gains invested by New York State taxpayers in qualified opportunity funds.
The legislature could pass a bill that would limit benefits to residential projects that meet a minimum affordability threshold or to commercial projects that are consistent with an REDC strategic plan.
The State could limit benefits to zones that meet both the poverty and family income thresholds, or to those that meet the criteria based on the most recently available Census data.
New York State could decouple fully from the federal program to minimize the direct impact on state and local tax revenue.
Key Data
$63 million
— Estimated annual fiscal impact of the Opportunity Zone program on New York State.
$31 million
— Estimated annual fiscal impact of the Opportunity Zone program on New York City.
$93.5 billion
— Amount of realized capital gains in New York State in tax year 2014.
$49.2 billion
— Amount of realized capital gains in New York City in tax year 2014.
36.48 percent
— Top marginal tax rate on gains for individual taxpayers living in New York City.
$2 billion
— Estimated annual cost of the Opportunity Zone program to the federal government.
New York State and City tax revenues are heavily dependent on high-income earners, who represent a small fraction of filers but account for a disproportionate share of total tax liability. This reliance creates significant budgetary volatility, as the income of these top earners is largely driven by capital gains, which fluctuate substantially with economic conditions.
Key Data
1.0 percent
— New York taxpayers with taxable income of $1 million or more accounted for just 1.0 percent of all filers in tax year 2016.
37.0 percent
— High-income earners accounted for 37.0 percent of total PIT liability in New York State.
$15.7 billion
— High-income earners contributed a collective $15.7 billion in total PIT liability in New York State.
0.7 percent
— Tax filers earning $1 million or more represent 0.7 percent of all filers in New York City.
38.9 percent
— High-income earners account for 38.9 percent of total PIT liability in New York City.
$146,000
— The average filer in New York City who earned $1 million or more paid $146,000 of PIT in 2016.
The proposed New York Health Act would require significant tax increases on high-income earners, creating a substantial risk that these taxpayers might leave the state and reduce critical tax revenue. Because the top 1 percent of earners currently fund 20 percent of state operating spending, such a departure could result in a $33.5 billion annual loss in revenue.
Key Data
1 percent
— The top 1 percent of earners in New York support one out of every five dollars of State operating spending.
0.5 percent
— If just 0.5 percent of filers left New York and were from the top income bracket, the State would lose $33.5 billion in tax revenue annually.
The New York State Adopted Fiscal Year 2020 Budget introduced new revenue streams, including a progressive real estate transfer tax on high-value property sales, to fund the Metropolitan Transportation Authority's capital plan. These measures, alongside congestion pricing and sales tax intercepts, are projected to generate significant annual funding for transit infrastructure projects.
Key Data
$365 million
— annual revenue expected from the two newly enacted real estate transfer tax surcharges to support the MTA Capital Program.
$1 billion
— annual revenue expected from the congestion pricing program to support $15 billion in capital investment.
$25 billion
— total financing expected for MTA capital projects from the new revenue sources.
$60,000
— household income threshold for residents of the congestion pricing zone to qualify for a refundable personal income tax credit.
$2 million
— threshold for residential and commercial real estate sales in New York City subject to the new real estate transfer tax.
New York State relies heavily on the top 1 percent of personal income tax filers for nearly one-fifth of its operating budget, creating significant revenue volatility due to the sensitivity of capital gains income to economic downturns. To mitigate the fiscal risks posed by this dependence, the state should reduce operating spending growth and increase rainy day reserves to better prepare for inevitable economic contractions.
Recommendations related to High-Income Earners
State leaders should reduce spending growth to at most 2 percent to mitigate the fiscal risks associated with the state's reliance on volatile high-income earner tax revenues.
The state should make additional deposits to rainy day funds to protect the budget from the volatility inherent in relying on high-income earners for nearly one-fifth of the state operating budget.
The state should amend statute 92-CC of the state finance law to allow for larger deposits into rainy day reserves, which are currently insufficient to cover potential revenue shortfalls from high-income earners during a recession.
State leaders should avoid counterproductive tax increases on high-income earners during a recession, as current tax rates are already noncompetitive and further increases would be damaging.
Key Data
$19 billion
— Annual personal income tax (PIT) revenues collected from the top 1 percent of personal income tax filers.
$118 billion
— Peak capital gains income reached in 2007 prior to the Great Recession.
$34 billion
— Capital gains income level in 2009 following the Great Recession.
$84 billion
— The decline in capital gains income from 2007 to 2009.
$7.0 billion
— The estimated decline in personal income tax liability today if a capital gains decline similar to the Great Recession occurred.
$24.2 billion
— The increase in capital gains income in 2014.
A proposed pied-à-terre tax on luxury homes owned by nonresidents is criticized for being a piecemeal approach that could harm the city's competitiveness and luxury housing market. Instead of implementing such taxes, the city should focus on comprehensive property tax reform and avoid additional levies like a city millionaires tax.
Recommendations related to High-Income Earners
The extensive disparities in the property tax system should be addressed through comprehensive reform, not another piecemeal approach like the pied-à-terre tax.
With few exceptions, revenues should not be dedicated to specific funds, but rather allocated through the budget process.
Lawmakers should seriously consider lower tax rates for the pied-à-terre tax to do less harm to the attractiveness of New York City.
The city should avoid a city millionaires tax, as it would be harmful to the city’s competitiveness.
Key Data
$5 million
— Threshold for homes subject to the 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.
$25 million
— Threshold for the top annual property tax surcharge rate.
$650 million
— Projected annual yield of the proposed pied-à-terre tax.
New York State faces a $2.3 billion revenue shortfall driven by federal tax changes, stock market volatility, and an economic slowdown that impacted personal income tax collections. To address this deficit and prepare for future uncertainty, the state should restrain spending growth, avoid short-term fiscal gimmicks, and bolster its rainy day funds rather than increasing broad-based taxes.
Recommendations related to High-Income Earners
The State should resist increasing broad-based taxes which can be counterproductive, especially in some cases given the SALT cap.
The State should perform additional analysis on future tax payments and potential high-income earner mobility to determine the relative magnitude of revenue shortfall causes.
Key Data
$2.3 billion
— Shortfall in January personal income tax collections.
$10,000
— Federal cap on state and local tax deductions.
5.2%
— Estimated decline in capital gains in 2019.
0.1%
— Estimated decline in capital gains in 2018.
9%
— Decline in the Dow Jones industrial average and other major indices in December.
New York City's tax burden is significantly higher than other large cities, particularly for high-income earners who are more likely to migrate out of the region than similar individuals elsewhere. Policymakers should exercise caution when considering tax increases, as the city's already high rates and the ease of intraregional migration make the potential economic impact uncertain.
Recommendations related to High-Income Earners
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.
The implications of these studies for New York City tax policy must be considered carefully because of the limited parallels between state and local circumstances.
It is important to remember that New York City’s income tax already is an outlier.
Key Data
4.0%
— Percentage of New York City adults with income of $100,000 - $400,000 who outmigrated.
50.6%
— Percentage of workers earning $250,000 - $400,000 who were commuters.
12.2%
— Percentage of workers earning less than $50,000 who were commuters.
10.7%
— Amount more in taxes paid by a New York City household with $25,000 of income compared to a similar household in the median city.
41.2%
— Amount more in taxes paid by a New York City household with $150,000 of income compared to the median city.
162%
— Amount higher the commercial property tax is in New York City compared to Hoboken.
The Tax Cuts and Jobs Act's cap on state and local tax deductions threatens to make New York less competitive, potentially driving high-income earners to relocate and reducing state tax revenue. This federal policy change risks triggering $1 billion in unplanned personal income tax increases and $109 million in business tax hikes for the state.
Key Data
$1 Billion
— Unplanned State personal income tax increase resulting from the Tax Cuts and Jobs Act.
$109 Million
— State business tax increase resulting from the Tax Cuts and Jobs Act.
The Tax Cuts and Jobs Act's cap on state and local tax deductions threatens to reduce New York's competitiveness by widening the tax cost differential for high-income residents, potentially driving them to relocate. This federal policy shift risks triggering unplanned local tax increases, necessitating immediate, practical state and city responses to protect the local economy and tax base.
The federal Tax Cuts and Jobs Act's $10,000 cap on state and local tax deductions significantly increases the tax burden on high-income New Yorkers, threatening the state's competitiveness and potentially driving residents to lower-tax jurisdictions. To mitigate these impacts, New York should consider implementing an optional Employer Compensation Expense Tax, reforming the estate tax, and controlling government spending to reduce the overall tax burden.
Recommendations related to High-Income Earners
The State should adopt a phased-in Employer Compensation Expense Tax (ECET), which would be optional for employers, to help mitigate the impact of the SALT cap on high-income earners.
New York should reform the estate tax to address the state's attractiveness to high-income households, as it is one of only 12 states that currently impose such a tax.
The State and localities should create charitable education and health funds to which taxpayers can make deductible contributions and receive partial tax credits, helping to offset the SALT cap impact.
New York should create a business tax on pass-through entities, such as an Unincorporated Business Tax (UBT), to complement the ECET and alleviate the SALT cap impact on partnership and S-corporation income.
Both New York State and New York City should control spending to reduce the need for high taxes, as current spending growth occurs without increasing productivity or effectiveness.
Key Data
$33,000
— The amount by which the SALT cap widens the gap between the cost of living in New York and Florida for a taxpayer earning $1 million.
$423,000
— The amount by which the SALT cap widens the gap between the cost of living in New York and Florida for a taxpayer earning $10 million.
49%
— The share of State personal income taxes paid by New York State taxpayers earning more than $500,000 annually.
$21.0 Billion
— The total amount of State personal income taxes paid by New York State taxpayers earning more than $500,000 annually.
$300,000
— The potential savings for a filer earning $10 million who contributes $1.15 million to State and local health and education funds.
19%
— The portion of income for those with AGI more than $1 million that comes from partnership and S-corporation income.
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…
New York State's current practice of reimbursing Medicare Part B premiums for high-income retirees contributes to a massive $78 billion liability for other post-employment benefits. Eliminating these specific reimbursements for high earners is a proposed fiscal measure projected to save $8 million annually and reduce the state's long-term liability by $450 million.
Recommendations related to High-Income Earners
The State should eliminate additional Medicare Part B premium reimbursements for high earners to reduce the State’s OPEB liability.
Key Data
$8 million
— Annual savings projected from eliminating Medicare Part B premium reimbursements for high-income earners.
$450 million
— Reduction in the State’s OPEB liability resulting from the elimination of Medicare Part B premium reimbursements for high-income earners.
The state budget proposal includes measures to reduce benefits for high-income retirees and re-evaluate the extension of the personal income tax surcharge on individuals earning over $1 million. These adjustments aim to address fiscal inequities and ensure tax policies remain feasible in light of potential federal changes.
Recommendations related to High-Income Earners
Under the Governor’s proposal, the State should cap the amount retirees are reimbursed at current levels and discontinue IRMAA reimbursements for those most able to afford the costs of health insurance.
Before extending the current rate of the Personal Income Tax surcharge on taxpayers with incomes in excess of $1 million, serious consideration should be given to the financial feasibility of imposing a top rate below 8.82 percent.
The extension of the Personal Income Tax surcharge on taxpayers with incomes in excess of $1 million should include a requirement to revisit the tax if substantial federal changes are adopted.
While STAR should be repealed, freezing the benefit will stem the growth of this poorly targeted program that drives excessive benefits to wealthy taxpayers.
Key Data
$170,000
— Income threshold for couples considered high-income retirees subject to IRMAA reimbursements.
$1 million
— Income threshold for taxpayers subject to the Personal Income Tax surcharge.
8.82 percent
— Current top rate of the Personal Income Tax surcharge on high-income earners.
New York State's tax revenue is increasingly volatile due to a heavy reliance on personal income taxes from high-income earners, whose capital gains fluctuate significantly during economic downturns. To mitigate the fiscal risks posed by this dependency, the state must prioritize building financial reserves to prepare for potential revenue shortfalls during future recessions.
Recommendations related to High-Income Earners
In order to counter the potential impacts of an economic downturn, the State should build its reserves now.
Key Data
41.5%
— The contribution from the top 1 percent of taxpayers to personal income tax revenues in 2015, which increased from 32.2 percent in 2002.
40.2%
— The share of personal income tax liability accounted for by taxpayers with adjusted gross incomes in excess of $1 million in 2016.
46.2%
— The percentage of total income derived from net capital gains for taxpayers with more than $10 million in adjusted gross income in 2011.
$116.4 billion
— The amount of net capital gains in New York State in 2007, which decreased to $29.7 billion by 2009.
$3 billion
— The approximate annual revenue provided by the personal income tax surcharge on high-income earners, which is set to expire on December 31, 2017.
New York City's property tax system contains significant inequities, as assessment caps and phase-ins disproportionately benefit the most valuable properties and neighborhoods with the highest median incomes. Reforming these policies to eliminate such disparities would improve transparency and fairness, while ensuring that tax relief is targeted only to those with limited cash incomes rather than to high-income property owners.
Recommendations related to High-Income Earners
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.
The city should eliminate the caps and phase-in provisions for all properties to address the inequities that currently benefit the most valuable properties and neighborhoods with the highest incomes.
The city should assess and tax all categories of property in the same way to eliminate disparities among homeowners, rather than providing tax preferences that disproportionately benefit high-income neighborhoods.
Key Data
$4.5 billion
— Estimated revenue foregone in fiscal year 2015 due to the cap and phase-in rules.
64 percent
— Share of the increase in the tax levy that would come from the top 20 percent most valuable properties.
76.7 percent
— Degree of undervaluation of Upper East Side co-ops reported by the Independent Budget Office in 2006.
80 percent
— IBO-estimated citywide average undervaluation of condos and co-ops.
New York City's tax burden is significantly higher than other large cities, particularly for high-income earners who are more likely to migrate out of the city or commute from suburban areas. Policymakers should be cautious about further tax increases, as the city's tax rates are already outliers compared to its competitors.
Recommendations related to High-Income Earners
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
4.0%
— Percentage of New York City adults with income of $100,000 - $400,000 who outmigrated.
50.6%
— Percentage of workers earning $250,000 - $400,000 who were commuters.
46%
— Amount by which New York City's state and local taxes were higher than the average for other large cities.
10%
— Amount by which New York City's commercial property tax was higher than third-highest Philadelphia.
75%
— Portion of the difference between tax burdens in New York City and other large cities accounted for by the personal income tax.
New York City's economy remains overly dependent on Wall Street and a small percentage of top income-generators, making it vulnerable to the mobility of highly skilled talent. To maintain its competitive edge, the city must implement policies that attract and retain this talent, including support for emerging industries, improved mass transit, and immigration reform.
Recommendations related to High-Income Earners
New Yorkers should encourage candidates to address their approaches to ensuring the city's appeal to mobile talent.
Candidates should provide their views on supporting higher education and training in emerging industries.
The city should focus on expanding the entrepreneurship fund and other support services for tech companies.
Policymakers should prioritize stimulating development and improving mass transit.
The city should pursue reforming immigration laws to retain foreign talent.
Key Data
120
— Number of global cities ranked based on the ability to attract capital, businesses, and talent.
14
— Number of large domestic metro areas used for comparison in the competitiveness scorecard.
Six
— Number of U.S. metropolitan areas that have higher rates of business creation than the NYC metro area.
three times
— Amount by which Silicon Valley has outperformed the NYC metro area in the number of IPOs over the last 15 years.
New York's decision to extend a temporary personal income tax surcharge on high earners undermines the state's competitiveness and ignores the need for broader tax structure reform. This policy choice risks the state's fiscal stability by committing revenue to new tax credits despite a projected $2 billion budget gap in fiscal year 2015-16.
Recommendations related to High-Income Earners
Before the tax changes take effect in fiscal year 2014-15, the tax commission should be allowed to do its work and state leaders should reconsider this hastily crafted plan to extend the temporary personal income tax surcharge.
Key Data
12.7%
— In New York City high earners will be paying a state and local income tax rate of 12.7%, second only to California.
$2 billion
— The budget gap in fiscal year 2015-16 still would be close to $2 billion.
3 years
— State leaders have agreed to extend the temporary personal income tax surcharge for 3 years.
The state should eliminate the 'spousal refusal' Medicaid eligibility loophole that allows affluent individuals to access long-term care services at the expense of taxpayers. Additionally, the state should stop reimbursing Medicare Part B premiums for high-income retirees to reduce health insurance costs and state liabilities.
Recommendations related to High-Income Earners
The MRT proposal to close the Medicaid eligibility loophole of “spousal refusal” should be adopted, as relatively affluent New Yorkers should not be able to exploit this loophole to benefit from costly long-term care services at the expense of less well-off taxpayers.
The state should eliminate reimbursement for the additional Medicare Part B premium for high-income participants, as this change will help bring down the cost of providing health insurance for retirees and reduce the State’s accrued Other Post-Employment Benefits liability.
Key Data
5
— Number of states, including New York, that reimburse most or all Medicare Part B premiums for retirees.
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 state and local tax burden as a share of their income. To improve the system's overall progressivity, the state should focus on reducing the tax burden for moderate-income households rather than solely relying on high-income earners.
Recommendations related to High-Income Earners
To complete the model of progressivity, New York needs to focus on lowering the tax burden on households with moderate incomes.
Key Data
$633,000
— Annual income threshold for the top 1 percent of earners in New York.
7.2%
— Share of income paid by the top 1 percent of New York earners for state and local taxes.
6.7%
— Share of income paid by the top 1 percent of New York earners for state and local personal income taxes.
3.9%
— National average share of income paid by the top 1 percent of earners for state and local personal income taxes.
8.97%
— Temporary top state tax rate for individual New Yorkers with taxable income greater than $500,000.
In New York, the poorest 20 percent of households lose 4 percent of their income to property taxes, while the richest 1 percent pay only 0.7 percent. Reforming the current property tax relief system into a circuit breaker model could more effectively target assistance to those with the highest tax burdens relative to their income.
Recommendations related to High-Income Earners
New York should implement an improved circuit breaker program that refunds property taxes exceeding 5 percent of income for homeowners earning less than $20,000 and above 7 percent for all others, as this would better target property tax relief to those with the highest burdens relative to their income.
The state should replace the current STAR homestead exemption program with a circuit breaker model, as the current program is fraught with problems and fails to provide adequate relief to those who need it most.
Policymakers should update the income and wealth criteria for the circuit breaker program, which have not been modified since 1985, to ensure the program does not continue to shrink and provide relief to fewer residents each year.
Key Data
0.7 percent
— The share of income paid in property taxes by the richest 1 percent of households in New York.
4 percent
— The share of income lost to property taxes by the poorest 20 percent of households in New York.
$2.6 billion
— The estimated cost of a circuit breaker program for homeowners that refunds property taxes above 5 percent of income for those 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.
New York's graduated personal income tax ranges from 4% to 6.85% across five brackets, with 37% of taxpayers subject to the top rate because the highest bracket begins at $40,000 for joint filers. Legislative proposals to address local tax burdens have included restoring a previous tax structure that added two high-income tax brackets and raised the top marginal rate to 7.7%.
Key Data
37%
— Percentage of state taxpayers subject to the top income tax rate because the top bracket begins at $40,000 for joint filers.
7.7%
— Highest marginal income tax rate proposed in the 'Medicaid Reform and Tax Equity Act of 2007' to fund increased state expenditures.
4% to 6.85%
— Range of New York's graduated personal income tax rates across five different brackets.
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