Personal income tax policy in New York encompasses the state and city tax rates, revenue collections, and the impact of these levies on the economic competitiveness and affordability of the region. This page covers CBC’s work on tax rate trends, the fiscal reliance on high-income earners, the economic consequences of outmigration, structural budget gaps, and strategies for maintaining 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 New York City should hold the line on taxes and avoid any increases in the 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.
Legislators should not include State or City tax increases in the one-house or enacted budgets to avoid weakening New York’s competitiveness.
The State should not extend or increase personal income and business taxes.
The State should target 'affordability' programs such as middle-class tax cuts and child tax credit enhancements to have a greater impact, offset by savings elsewhere.
Key Data
In a September 2026 report, the CBC highlighted that New York State and its localities collected 94% more in personal income tax per $1,000 of income than the national average in 2024, which was more than all other states and their localities.
An August 2026 report estimated that if New York State and City had maintained their 2010 share of the nation's millionaires in 2023, they would have collected nearly $12 billion more in personal income tax revenue, with the State receiving an additional $9.5 billion and the City $2.2 billion.
A March 2026 budget analysis noted that after growing 17.6% between fiscal year 2024 and 2025, New York City's personal income tax collections were projected to grow by 10.1% in fiscal year 2026 and 4.7% in fiscal year 2027.
In February 2026, the CBC testified that New York City residents face the nation's highest tax rates, with a combined top marginal personal income tax rate of 14.776%, compared to California's second-place rate of 13.3%.
A June 2024 policy brief reported that the domestic outmigration of 52,600 households in 2022 cost New York City at least $259 million in personal income tax revenue that year.
In 2024, New York State and its localities collected $41 in personal income tax per $1,000 of personal income, which is 94% higher than the national average of $20 and more than any other state. This high level of collection contributes to New York ranking first in the nation for both overall taxes collected per capita and personal income tax collections per capita.
Key Data
$41
— State and local personal income tax collected per $1,000 of personal income in New York in 2024, compared to the national average of $20.
94%
— Percentage by which New York State and its localities' personal income tax collections per $1,000 of personal income exceeded the national average in 2024.
75%
— Percentage by which New York State and its localities' personal income tax collections per $1,000 of personal income exceeded those of New Jersey in 2024.
13%
— Percentage by which New York State and its localities' personal income tax collections per $1,000 of personal income exceeded those of California in 2024.
23%
— Percentage by which New York State and its localities' personal income tax collections per $1,000 of personal income exceeded those of Massachusetts in 2024.
42%
— Percentage by which New York State and its localities' personal income tax collections per $1,000 of personal income exceeded those of Connecticut in 2024.
Although New York State's share of the nation's millionaires ticked up slightly to 9.0% in 2023, the long-term decline since 2010 has cost the state and city an estimated $12 billion in lost personal income tax revenue. Millionaires remain critical to the tax base, representing less than 1% of resident filers but contributing 43% of state and 38% of city personal income taxes in 2023.
Key Data
$12 Billion
— The estimated amount of additional personal income tax revenue New York State and City would have received in 2023 if they had maintained their 2010 share of the nation's millionaires.
$9.5 Billion
— The additional personal income tax revenue New York State would have collected in 2023 if it had maintained its 2010 share of the nation's millionaires.
$2.2 Billion
— The additional personal income tax revenue New York City would have collected in 2023 if it had maintained its 2010 share of the nation's millionaires.
43%
— The share of New York State's personal income taxes paid by millionaires in 2023, despite making up less than 1% of resident filers.
38%
— The share of New York City's personal income taxes paid by millionaires in 2023, despite making up less than 1% of resident filers.
9.0%
— New York State's share of the nation's millionaires in 2023, which ticked up from 8.7% in 2022 but remained well below the 12.7% share in 2010.
The New York State fiscal year 2027 budget leaves a structural gap exceeding $17 billion while avoiding increases to personal income and corporate taxes. The state should maintain this fiscal restraint by continuing to resist future calls to increase these specific tax rates.
Recommendations related to Personal Income Tax Policy
The Governor should continue to resist calls to increase personal income and corporate taxes next year.
New York City currently imposes the nation's highest top combined personal income and business tax rates, contributing to an affordability crisis that drives residents and businesses away. To maintain competitiveness and economic stability, city leadership must prioritize fiscal efficiency and avoid further tax increases.
Recommendations related to Personal Income Tax Policy
The city should avoid raising already high taxes to prevent alienating residents who disproportionately fund services and businesses that create jobs.
The mayor and City Council should adopt a sound budget that improves services, expands effective programs, eliminates ineffective ones, enhances affordability, and holds the line on taxes.
Key Data
38%
— New York State and its localities collect this much more in taxes per person than New Jersey.
40%
— New York State and its localities collect this much more in taxes per person than California.
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New York City's fiscal plan relies on tax increases, including personal income tax hikes, which would reduce the city's competitiveness and attractiveness to residents. Instead of raising taxes, the city should focus on improving operational efficiency and reducing ineffective spending to close the $9.4 billion budget gap.
Recommendations related to Personal Income Tax Policy
The City should reject tax increases that would harm the City’s economic competitiveness and place additional burdens on residents and businesses.
The City should reduce ineffective spending and improve operational efficiency, including spending on education, procurement, and administrative operations.
The City should right-size spending in areas where demand has changed, such as adjusting school funding to reflect declining enrollment and managing the growth of the FHEPS housing voucher program.
The City should build and maintain adequate reserves by not drawing down the rainy day fund or RHBT and including $1 billion of in-year reserves to protect the City against economic downturns and unexpected fiscal shocks.
Key Data
17.6 percent
— Growth in personal income tax collections between fiscal year 2024 and 2025.
10.1 percent
— Projected growth in personal income tax collections in fiscal year 2026.
4.7 percent
— Projected growth in personal income tax collections in fiscal year 2027.
$21.2 billion
— Projected personal income tax revenue for fiscal year 2027.
$22.2 billion
— Projected personal income tax revenue for fiscal year 2030.
New York currently imposes the highest tax burden in the nation, with New York City residents facing a combined top marginal personal income tax rate of 14.776 percent. Rather than increasing taxes, which threatens economic competitiveness and the retention of high-income earners, the state and city should focus on maximizing the efficiency of existing multi-billion dollar budgets.
Recommendations related to Personal Income Tax Policy
The State and New York City should hold the line on taxes and avoid any increases in the 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.
Legislators should not include State or City tax increases in the one-house or enacted budgets to avoid weakening New York’s competitiveness.
Key Data
14.776 percent
— The combined top marginal personal income tax rate for New York City residents.
16.776 percent
— The projected top personal income tax rate for New York City residents following a 2-percentage point increase.
43 percent
— The share of New York State’s personal income taxes paid by filers with income over $1 million in 2023.
37 percent
— The share of New York City’s personal income taxes paid by filers with income over $1 million in 2023.
12.7 percent to 8.7 percent
— The decline in the State’s share of the nation’s millionaires between 2010 and 2022.
New York City faces a significant budget shortfall, but raising taxes on top earners and businesses risks weakening the local economy and driving away the residents and employers who fund critical services. Instead of increasing tax burdens, the city should focus on fiscal discipline by cutting unproductive spending, streamlining operations, and implementing performance management systems to improve government efficiency.
Recommendations related to Personal Income Tax Policy
The City should spend its $120 billion budget efficiently on effective programs before considering asking New Yorkers for more.
The Administration should implement a citywide performance management system to improve services and guide smarter budget decisions.
The City must update 20th Century labor relations, technology, and bureaucratic processes to meet 21st Century needs.
The Mayor should set ambitious minimum savings targets to generate options so he can make strategic choices that focus programs without harming New Yorkers.
The Mayor should request relief from Albany’s class size mandate that costs the City $1 billion.
Key Data
$8 billion
— Estimate of the budget gap facing New York City.
$2.3 billion
— Amount the City spent more than it received over the past three years.
17.44%
— New York City's combined corporate tax rate.
11.5%
— New Jersey's combined corporate tax rate.
$3 billion
— Annual cost to the City resulting from its shrinking share of the nation's millionaires.
$1 billion
— Cost to the City of Albany's class size mandate.
New York State and its localities lead the nation in tax collections, with personal income tax revenue per $1,000 of personal income reaching $46 in 2023. This figure is 112% higher than the national average, placing New York among the highest-taxing states in the country.
Key Data
112%
— New York State and its localities collected 112% more in personal income tax per $1,000 of income than the national average.
$46
— New York's personal income tax collection per $1,000 of personal income in 2023.
48
— Number of states that tax less than New York regarding personal income tax per capita.
New York City's reliance on high earners for a significant portion of personal income tax revenue is threatened by a shrinking share of millionaires, which has already resulted in billions of dollars in lost potential tax collections. Rather than increasing the nation-leading 14.776% top marginal tax rate, the city should focus on improving housing affordability, public services, and overall quality of life to maintain its economic competitiveness.
Recommendations related to Personal Income Tax Policy
Focusing on the fundamentals strengthens New York City’s value proposition.
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.
Key Data
14.776%
— New York State’s and City’s combined top marginal personal income tax rate for the highest earners, which currently tops the nation.
40%
— The share of New York’s personal income taxes paid by filers with adjusted gross income over $1 million in 2022.
$2.5 billion
— The amount of additional personal income tax revenue the City would have collected in 2022 if it had maintained its 2010 share of millionaires.
$10.7 billion
— The amount of additional personal income tax revenue the State would have collected in 2022 if it had maintained its 2010 share of millionaires.
$18 billion
— The projected personal income tax revenue for fiscal year 2026, representing 22% of total City tax revenue.
New York's share of the nation's millionaires has fallen from 12.7 percent in 2010 to 8.7 percent in 2022, resulting in billions of dollars of lost personal income tax revenue. With New York City residents now facing the nation's highest top marginal personal income tax rate, retaining and growing the millionaire population is essential to funding critical public services.
Key Data
$34 billion
— The amount of State and City personal income tax revenue contributed by millionaires in 2022.
$10.7 billion
— The additional personal income tax revenue New York State would have received in 2022 had its share of the nation's millionaires remained at 2010 levels.
$2.5 billion
— The additional personal income tax revenue New York City would have received in 2022 had its share of the nation's millionaires 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
— The share of New York State's personal income taxes paid by millionaires in 2022, despite them comprising less than 1 percent of resident filers.
40 percent
— The share of New York City's personal income taxes paid by millionaires in 2022, despite them comprising less than 1 percent of resident filers.
This document presents the responses of 2025 New York City mayoral candidates to a questionnaire regarding their fiscal and economic policy positions, including their specific stances on personal income tax rates. Candidates express varying views on whether to increase, decrease, or maintain current personal income tax levels to address the city's affordability and fiscal challenges.
New York State's fiscal year 2026 budget proposals threaten the state's financial stability by rapidly increasing spending and raising taxes, including personal income and business levies, while failing to address an $18.2 billion structural budget gap. To strengthen the state's long-term fiscal foundation, the state should restrain spending growth to 2.7 percent annually and avoid extending or increasing personal income and business taxes.
Recommendations related to Personal Income Tax Policy
The State should not extend or increase personal income and business taxes.
The State should target 'affordability' programs such as middle-class tax cuts and child tax credit enhancements to have a greater impact, offset by savings elsewhere.
Key Data
$18.2 billion
— The minimum structural budget gap the State faces in the fiscal year 2026 budget.
$3 billion
— The amount slated for 'Inflation Refund' checks that should be redirected to more impactful uses.
$3.5 billion
— The projected fiscal year 2025 surplus, of which at least $2 billion should be reserved as a contingency fund.
Mayor Adams has proposed eliminating the New York City personal income tax for certain low-income residents, a measure estimated to cost $63 million. This initiative is one of several new programs that must be supported by higher revenues or offsetting savings to avoid widening future budget gaps.
Key Data
$63 million
— The estimated cost of Mayor Adams’ proposal to eliminate the NYC Personal Income Tax for some low-income New Yorkers.
New York leads the nation in tax collections, with state and local governments collecting the highest amount per $1,000 of personal income at $169. Specifically, the state collects 26% more in personal income tax per $1,000 of personal income than California, which ranks second, and 49 states tax less than New York.
Key Data
$169
— Total state and local taxes collected per $1,000 of personal income in New York, the highest in the nation.
26%
— Amount more in personal income tax per $1,000 of personal income that New York and its localities collected compared to California, the second-highest state.
49
— Number of states that tax less than New York regarding personal income tax.
$59
— Personal income tax collected per $1,000 of personal income in New York.
79%
— Amount more in taxes per person that New York and its localities collected compared to the national average.
New York City generated $15,910 million in Personal Income Tax revenue during fiscal year 2024, while New York State collected $68,489 million in the same period. These figures reflect the tax revenue streams detailed in the city and state financial summaries for the 2024 fiscal year.
Key Data
$15,910 million
— New York City's Personal Income Tax revenue for fiscal year 2024.
$13,850 million
— New York City's Personal Income Tax revenue for fiscal year 2024 as reported in the Statement of Activities.
$68,489 million
— New York State's Personal Income Tax revenue for fiscal year 2024.
New York City's housing shortage has driven residents away, resulting in a net loss of 160,000 residents in 2022 and costing the city at least $259 million in personal income tax revenue. To address this fiscal and quality-of-life crisis, the city must urgently boost housing production through broad-based zoning reforms and state-level legislative action.
Recommendations related to Personal Income Tax Policy
The City must build more housing, everywhere, for everyone to address immediate needs and spur future growth.
The State should reform the State’s environmental review laws to increase production at the scale needed to improve affordability.
The State should repeal the Scaffold law, which drives up insurance costs.
The City should reform the City’s property tax policy to boost supply.
The State should pass laws to encourage development in the downstate suburbs.
Key Data
$259 million
— The negative outmigration of 52,600 households in 2022 cost New York City at least $259 million in personal income tax (PIT) revenue.
$309 million
— Based on the 2022 rate of domestic outmigration, population losses may have reduced the City’s tax revenue by approximately $309 million that year.
$1.4 billion to $1.9 billion
— Building enough housing to close the gap could boost City tax revenue by $1.4 billion to $1.9 billion annually.
160,000
— In 2022, New York City had a net loss of 160,000 residents from domestic outmigration, driven in part by the need for housing that meets households’ needs.
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 as of 2021. Since that time, the state has further increased the personal income tax rate and implemented additional business tax surcharges, contributing to a fiscal environment where spending and tax collections significantly exceed national averages.
Key Data
48
— Number of states that tax less than New York regarding personal income tax.
$46
— New York's total state and local personal income tax per $1,000 of personal income in 2021.
92%
— The amount by which New York State and its localities collected more in personal income taxes per $1,000 of personal income than comparator states.
151,700 is the net loss of New York personal income tax filers in 2020 and 2021. Was this primarily due to the pandemic? CBC is relaunching its podcast with a focus on policy discussions, starting with the podcast's founder and CBC alum Maria Doulis, Deputy New York State Comptroller for…
New York faces significant budget gaps that require spending restraint rather than tax increases or the depletion of reserves. Extending temporary tax measures would harm the state's economic competitiveness, necessitating a focus on reducing spending growth in major programs like Medicaid and education.
Recommendations related to Personal Income Tax Policy
Another round of tax increases or drawing down reserves should not be part of the package.
The state should avoid extending the temporary personal income and business taxes, as it would make the state even less economically competitive.
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
The enacted New York State Fiscal Year 2024 budget extends the "temporary" personal income tax and business tax surcharges for three years, a move that threatens the state's economic competitiveness. By maintaining the highest combined top personal income and business tax rates in the nation, the budget risks further straining the state's financial stability and attractiveness to residents and businesses.
Restraining annual state spending growth to 2 percent through fiscal year 2028 is necessary to close structural budget gaps and enable the expiration of the 2021 temporary personal income tax increase. This fiscal discipline would avoid the need for significant future budget cuts while maintaining state financial stability.
Recommendations related to Personal Income Tax Policy
Restraining average annual State Operating Funds spending growth to 2 percent through fiscal year 2028 would allow the 2021 temporary personal income tax increase to expire without requiring massive future budget cuts.
Maintaining New York's economic competitiveness requires avoiding further tax hikes and ensuring that the 2021 personal income tax increase expires as planned. Restraining state spending is essential to facilitate this sunset and prevent the need for future tax adjustments.
Recommendations related to Personal Income Tax Policy
New York’s competitiveness will be well served by restraining spending to ensure that the 2021 personal income tax increase sunsets on schedule.
The State should maintain its commitment to not raising the personal income tax this year.
New York State faces a $12 billion structural budget problem, exacerbated by a heavy reliance on volatile personal income tax revenue and the expiration of pandemic-era federal aid. To ensure long-term fiscal stability, the state must restrain spending growth and avoid relying on temporary tax increases that threaten economic competitiveness.
Recommendations related to Personal Income Tax Policy
The State should exercise spending restraint to accommodate the expiration of temporary tax resources beyond fiscal year 2027.
The State needs to bring the costs of major programs like Medicaid and education in line with available revenues to avoid future tax increases that damage economic competitiveness.
The State should avoid relying on volatile personal income tax revenue to balance the budget, as even a small economic disruption could open multi-billion-dollar gaps.
Key Data
$3.8 billion
— The amount of revenue the fiscal year 2027 budget relies on from the final year of the **personal income tax increase**.
$3.4 billion
— The amount by which the State reduced **tax receipts projections** annually for fiscal years 2025 and 2026 due to dimmed economic growth.
$6 billion
— The amount by which the State reduced **tax receipts projections** for fiscal year 2027.
New York faces significant future budget gaps, necessitating a focus on fiscal restraint and the maintenance of state reserves to navigate potential economic downturns. To ensure long-term stability and economic competitiveness, the state must avoid further increasing its already nation-leading personal income and business tax rates while prioritizing data-driven spending and performance management.
Recommendations related to Personal Income Tax Policy
The state should mind New York’s tax competitiveness, as it already has the nation’s highest combined business and top personal income tax rates.
New York currently maintains the highest combined top personal income and corporate tax rates in the nation, a policy that threatens economic competitiveness and increases the volatility of the state's tax base. To stabilize the fiscal foundation and improve long-term competitiveness, the state should restrain spending to facilitate the scheduled sunset of recent personal income tax increases.
Recommendations related to Personal Income Tax Policy
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
— New York’s share of the nation’s millionaires declined 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 fiscal plan is balanced, but the state should prioritize restraining recurring spending and rolling back recent tax increases that resulted in the nation's highest combined business and top personal income tax rates. Strengthening the state's financial position also requires increasing reserve fund deposits to meet national benchmarks for economic stability.
Recommendations related to Personal Income Tax Policy
The State should start to roll back last year’s tax increases that made New York’s combined business and top personal income tax rates the highest in the nation.
New York's economic development programs, which cost $10 billion annually, lack rigorous evaluation and transparency, failing to demonstrate sufficient results or job creation. While these incentives are often used to offset the state's high business and personal income taxes, they are frequently ineffective and lack the necessary oversight to ensure public funds are used efficiently.
New York State currently imposes the highest top personal income and corporate tax rates in the nation, creating fiscal risks by increasing the incentive for high-income earners to relocate and introducing volatility into tax receipts. To improve economic competitiveness and fiscal stability, the state should lower, reverse, or allow the recent tax increases to sunset.
Recommendations related to Personal Income Tax Policy
The State should lower, reverse, or at least allow the latest personal income tax increases to sunset to foster economic competitiveness.
Key Data
$15 billion
— Projected annual tax receipt shortfalls due to the pandemic as of January 2021.
$19.6 billion
— Estimated two-year impact of a typical recession on state revenues.
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 next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
The New York State fiscal year 2022 budget agreement includes a $4.3 billion annual increase in personal income and corporate taxes, despite the state having $22 billion more in available funds than previously projected. These tax hikes, combined with increased spending, risk reducing economic competitiveness and may incentivize high-income earners to leave the state.
Recommendations related to Personal Income Tax Policy
New York State should avoid raising personal income and business taxes, as sufficient resources are already available to address substantial needs.
Policymakers should refrain from using temporary federal funds to support recurring spending, which sets the stage for future tax increases when federal aid is exhausted.
Key Data
$4.3 billion
— annual increase in personal income and corporate taxes agreed upon by lawmakers.
$22 billion
— more in funds available over the next two years than when the Governor proposed the budget in January.
0.75 percentage points
— increase in corporate taxes when combined with NYC and MTA taxes.
$212 billion
— total planned All Funds spending for the fiscal year 2022 budget.
$5 billion
— likely increase in school aid, representing the largest increase in recent history.
With a projected $9.6 billion surplus over fiscal years 2021 through 2023 driven by federal aid and stronger revenues, New York has sufficient resources to avoid proposed personal income tax increases. Instead of raising taxes, the state should utilize the next two years to restructure spending to ensure long-term fiscal sustainability.
Recommendations related to Personal Income Tax Policy
The State should omit the proposed personal income tax increases given that the projected $9.6 billion surplus is sufficient to cover budget needs.
The State should use the next two years to restructure spending to be more sustainable once federal funds are depleted.
Key Data
$9.6 billion
— Projected surplus over the fiscal years 2021 through 2023 that allows the state to avoid tax increases.
$7 billion
— Annual amount the Legislature's one-house budget proposals sought to raise in taxes.
$5.9 billion
— Amount available to fully reverse spending reductions and make additional investments after omitting tax increases.
$12.6 billion
— Direct federal funding provided to the State under the American Rescue Plan.
New York's proposed personal income tax increases are unnecessary and economically risky, as existing revenue strength and federal aid are sufficient to cover essential needs. These tax hikes threaten to make New York's combined state and city tax burden the highest in the nation, potentially accelerating the flight of high-income earners.
Recommendations related to Personal Income Tax Policy
The state should not raise income and business taxes to ensure New York remains an attractive place to live and conduct business.
Policymakers should rely on existing revenue strength and federal aid rather than implementing unnecessary personal income tax increases.
Key Data
$7 billion
— Annual new revenue that would be generated by the proposed tax increases on high income earners and businesses.
$3.7 billion
— Amount by which revenues for the current and next two fiscal years are projected to be higher than before the pandemic.
$9.6 billion
— Projected State surplus over the next 2 years if the Executive Budget is adopted as is.
$1.2 million
— Average amount paid to both the State and City by New Yorkers who earn over $10 million annually.
16.49 percent
— Current combined State, City, and MTA tax rate for New York City businesses, which is already the highest in the nation.
New York should avoid increasing personal income tax rates or delaying middle-class tax cuts, as these actions could harm economic competitiveness and are unnecessary given available federal aid and revenue projections. The state's reliance on high-income earners for tax receipts, combined with the potential for remote work-driven migration, makes tax hikes particularly risky in the current economic climate.
Recommendations related to Personal Income Tax Policy
The State should reject the proposed personal income tax surcharge to ensure New York remains an attractive place for residents and businesses.
The State should reject the delay in the middle class tax cut to provide relief to those who need it during the recession.
Key Data
40 percent
— of jobs within New York City could be fully remote.
1 percent
— of filers provide over 40 percent of personal income tax receipts.
40 percent
— of personal income tax receipts are provided by the top 1 percent of filers.
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New York State can balance its budget without raising personal income taxes, as updated tax projections and potential federal aid provide sufficient revenue. Increasing taxes on high earners risks driving them out of the state, so the government should instead focus on eliminating unproductive spending and targeting education aid to low-wealth districts.
Recommendations related to Personal Income Tax Policy
New York State should balance its budget without increasing personal income taxes or delaying the middle class tax cut.
The State should eliminate unproductive economic development spending to help balance the budget.
The State should appropriately finance capital investment as an alternative to tax increases.
The State should target education aid to low wealth school districts to improve fiscal management.
Key Data
$6 billion
— The amount of additional federal aid characterized as the 'worst case' scenario for New York State.
$1.6 billion
— The annual increase in tax receipt projections that offsets the cumulative value of proposed income tax changes.
20 percent
— The portion of the State Operating Funds budget financed by the top 1 percent of earners through income taxes.
New York State's fiscal plan proposes raising personal income taxes on high earners and delaying middle-class tax cuts to close budget gaps, but these measures risk driving away wealthy residents and businesses. Instead, the state could balance its budget by reducing economic development spending and utilizing debt financing for capital projects, which would generate sufficient savings to avoid these tax increases.
Recommendations related to Personal Income Tax Policy
The State should reduce its planned capital disbursements by 10 percent and finance up to 50 percent of the remaining paygo capital spending with debt to avoid raising personal income taxes.
The State should implement a 50 percent reduction in proposed economic development capital spending plus finance 50 percent of the remaining paygo spending with debt as an alternative to tax increases.
The State should avoid the proposed personal income tax surcharge on high-income earners to prevent the risk of high-income earner flight and ongoing fiscal and economic consequences.
Key Data
$1.5 billion
— Estimated tax revenue generated by the personal income tax high-income surcharge in fiscal year 2022.
14.7 percent
— New York's combined top marginal personal income tax rate, which would be the highest in the nation.
$1.2 million
— Average personal income tax liability for those with taxable income more than $10 million.
$1.6 billion
— Savings in fiscal year 2022 from reducing planned capital disbursements by 10 percent and financing 50 percent of remaining paygo capital spending with debt.
$713 million
— Yield from a 50 percent reduction in proposed economic development capital spending plus financing 50 percent of the remaining paygo spending with debt in fiscal year 2022.
$7.4 billion is how much NYS personal income tax was paid in 2018 by residents of other states. This revenue stream may be threatened if a lawsuit over taxation of out-of-state telecommuting residents prevails. Today's guest is E.J. McMahon, adjunct fellow of the Manhattan Institute and senior fellow of the…
New York can address its fiscal deficits by reallocating inefficient spending, such as the $1.6 billion in aid to wealthy school districts and $4.4 billion in ineffective economic development programs, rather than implementing a stock transfer tax. Alternative budget-balancing measures include utilizing $3.5 billion in rainy day funds, financing $3 billion in capital investments through bonds, and delaying the scheduled January 1, 2021 personal income tax cut.
Recommendations related to Personal Income Tax Policy
The state should consider delaying the Jan. 1, 2021 personal income tax cut as part of a sustainable, comprehensive, and balanced budget package.
The state should consider suspending the sales tax exemption on clothing to help balance the budget.
Key Data
$1.6 billion
— Aid provided to school districts with more than enough local resources to fund a sound, basic education.
$4.4 billion
— Spending on economic development that has demonstrated little impact, particularly in upstate communities.
$3.5 billion
— Amount available in rainy day funds that could be used to balance the budget.
$3 billion
— Amount of capital investments that could be financed through bonds instead of cash.
New York faces significant budget gaps, yet its combined state and city personal income tax rates are already the second highest in the nation, threatening economic competitiveness. Policymakers should prioritize controlling expenditures and seeking federal aid rather than increasing taxes, as the state is heavily reliant on revenue from millionaires who are increasingly establishing residency elsewhere.
Recommendations related to Personal Income Tax Policy
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
$8 billion
— Potential budget gap for New York State in fiscal year 2021.
$15 billion
— Potential budget gap for New York State in fiscal year 2022.
12.696 percent
— The top combined personal income tax rate imposed in New York City, which is the second highest in the country.
40 percent
— The share of personal income tax revenues coming from millionaires in New York State and New York City.
$1.4 billion
— The amount of additional tax revenue New York could have generated if its share of national millionaire capital gains had remained at 2010 levels.
8.82 percent
— The top personal income tax rate imposed by New York State on married couples filing jointly with incomes greater than $2.2 million annually.
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 State faces significant fiscal stress due to revenue shortfalls, requiring a combination of expenditure reductions, asset sales, and temporary tax policy adjustments to balance the budget. Specifically, the state should consider freezing middle-class income tax cuts to generate necessary resources without resorting to deeper cuts in essential services.
Recommendations related to Personal Income Tax Policy
The State should freeze the implementation of middle class tax cuts at the calendar year 2020 rate to help manage fiscal stress.
Key Data
$88 Million
— Projected savings in fiscal year 2021 from freezing middle class income tax rates at 2020 levels.
$350 Million
— Projected savings in fiscal year 2022 from freezing middle class income tax rates at 2020 levels.
$700 Million
— Projected savings in fiscal year 2023 from freezing middle class income tax rates at 2020 levels.
$1.05 Billion
— Projected savings in fiscal year 2024 from freezing middle class income tax rates at 2020 levels.
New York's high tax burden, which is the highest in the nation, threatens the state's economic competitiveness and risks driving away high-income earners who contribute a significant portion of state revenue. To address the state's serious fiscal imbalance, policymakers should focus on restraining spending rather than increasing taxes, as further tax hikes would be counterproductive and hinder the ability to weather future economic downturns.
Recommendations related to Personal Income Tax Policy
The State should hold the line on the State’s already high tax burden rather than increasing taxes, which would be counterproductive.
Policymakers should avoid enacting additional tax increases, as retention of the PIT surcharge and other recently enacted taxes already narrows options to balance the budget soundly in future recessions.
The State should focus on identifying recurring savings to bring spending in line with revenues instead of increasing taxes, which would decrease competitiveness.
Key Data
8.82 percent
— New York State’s top marginal personal income tax (PIT) rate, which is the sixth highest in the nation.
12.7 percent
— The top personal income tax rate for New York City residents, including City PIT.
$19.3 billion
— The personal income tax liability of taxpayers with incomes greater than $1 million.
48 percent
— The amount by which New York State’s State and local tax burden exceeds the national average.
1 of every 5 dollars
— The portion of state operating funds spending that comes from taxpayers earning more than $1 million annually.
The Opportunity Zone program, while intended to spur investment in low-income areas, creates significant potential revenue losses for New York State and City by allowing capital gains tax deferrals and exclusions. To mitigate these costs and ensure accountability, the state should implement rigorous reporting requirements for funds or consider decoupling from the federal program entirely.
Recommendations related to Personal Income Tax Policy
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 limit the types of OZ projects that would qualify for state tax benefits, such as restricting them to residential projects with affordability thresholds.
The State could limit the number of OZs in which taxpayers could claim state benefits to those that meet poverty and income thresholds based on the most recent census data.
The State could decouple fully from the federal program to minimize the direct impact on state and local tax revenue.
Key Data
$63 million
— Potential annual revenue loss for New York State from the Opportunity Zone program.
$31 million
— Potential annual revenue loss for New York City from the Opportunity Zone program.
$9.4 billion
— Total cost of the Opportunity Zone program for federal tax years 2018 to 2022.
$866 million
— Estimated annual investment by New York State taxpayers in Qualified Opportunity Funds.
$284 million
— Potential fiscal impact on New York State in 2029 if investors realize gains that would otherwise be subject to taxation.
$140 million
— Potential fiscal impact on New York City in 2029 if investors realize gains that would otherwise be subject to taxation.
New York State and City rely heavily on personal income tax revenue, which is particularly volatile due to a significant dependence on high-income earners whose earnings are often tied to fluctuating capital gains. This concentration of tax liability among a small percentage of top earners creates substantial budgetary risks, as annual revenue can swing dramatically based on economic conditions.
Key Data
$47.1 billion
— New York State's personal income tax revenue raised in fiscal year 2015-2016.
37.0 percent
— Share of total New York State personal income tax liability accounted for by taxpayers with taxable income of $1 million or more in 2016.
$11.4 billion
— New York City's personal income tax revenue in fiscal year 2016.
38.9 percent
— Share of total New York City personal income tax liability accounted for by tax filers earning $1 million or more.
1.0 percent
— Percentage of all New York State tax filers who earned $1 million or more in 2016.
21.2 percent
— New York City's personal income tax revenue as a share of total city tax revenue in fiscal year 2016.
The state budget extends a temporary personal income tax surcharge on wealthy taxpayers, missing an opportunity to mitigate the effects of federal tax deduction caps and prepare for future economic downturns. Phasing out this surcharge would have provided relief to taxpayers and preserved the state's ability to raise revenue during a future recession.
Recommendations related to Personal Income Tax Policy
The State should phase out the 'temporary' personal income tax surcharge on wealthy taxpayers to soften the impact of the federal cap on state and local tax (SALT) deductions and preserve the option to raise revenues during a future recession.
New York State relies heavily on personal income tax revenues from high-income earners, which are highly volatile due to fluctuations in capital gains. To prepare for potential economic downturns, the state should limit spending growth and increase rainy day reserves rather than relying on tax increases that could be counterproductive.
Recommendations related to Personal Income Tax Policy
State leaders should reduce spending growth to at most 2 percent and increase reserves to prevent counterproductive tax increases in the midst of a recession.
The state should amend statute 92-CC of the state finance law to allow for larger deposits into rainy day funds, which would reduce the need for future tax hikes.
Final agreement on the Adopted Budget for Fiscal Year 2020 should constrain spending growth to avoid the need for tax increases during an economic downturn.
Key Data
$19 billion
— Annual personal income tax (PIT) revenues collected from the top 1 percent of personal income tax filers.
$7.0 billion
— The decline in personal income tax liability today if a recession similar to the Great Recession occurred.
$1.7 billion
— The reduction in PIT collections caused by the 2016 capital gains decrease.
$2.6 billion
— The amount by which current-year personal income tax collections were lower than projected.
$24.2 billion
— The increase in capital gains income in 2014.
$20.6 billion
— The decrease in capital gains income in 2016.
New York State faces a $2.3 billion shortfall in personal income tax collections, driven by federal tax law changes, stock market volatility, and an economic slowdown. To address this deficit, the state should prioritize spending restraint, repeal the expiring property tax relief credit, and bolster rainy day reserves rather than raising broad-based taxes.
Recommendations related to Personal Income Tax Policy
The State should resist increasing broad-based taxes which can be counterproductive, especially in some cases given the SALT cap.
The State should hold spending growth to 2 percent, which would save $1.45 billion in fiscal year 2020.
Increasing education aid only to those districts that need additional State resources to fund a sound basic education as defined by the Foundation Aid formula could save more than $500 million compared to the Governor’s proposed $956 million increase.
The property tax relief credit set to expire after calendar year 2019 should be repealed, which would reduce the fiscal year 2020 deficit by more than $1 billion.
The State should eliminate the appropriations connected to settlement funds, which total approximately $2.9 billion, and dedicate them to rainy day funds.
Key Data
$2.3 billion
— Shortfall in January personal income tax collections.
$1.45 billion
— Savings from holding spending growth to 2 percent in fiscal year 2020.
$1 billion
— Deficit reduction from repealing the property tax relief credit.
$2.9 billion
— Total of settlement funds that could be dedicated to rainy day reserves.
3.3 percent
— Forecasted decline for the Standard and Poor’s 500 Index for calendar year 2019.
5.2 percent
— Estimated decline in capital gains in 2019.
New York State relies heavily on high-income earners, with taxpayers making over $1 million accounting for 40 percent of personal income tax receipts. To maintain economic competitiveness, the state should consider lowering top marginal tax rates rather than relying on the expiration-prone millionaire's tax surcharge.
Recommendations related to Personal Income Tax Policy
The Governor should propose lower top marginal tax rates to improve New York’s competitiveness.
If the millionaire's tax is extended, the State should use the funds to prepare for uncertainty.
Key Data
0.6 percent
— Percentage of New York State tax filers who have incomes greater than $1 million.
40 percent
— Share of personal income tax receipts comprised by taxpayers with incomes greater than $1 million.
$20 billion
— Amount of personal income tax receipts generated by taxpayers with incomes greater than $1 million.
8.82 percent
— Current top marginal tax rate for millionaires before the surcharge expires.
6.85 percent
— Projected top marginal tax rate for millionaires after the surcharge expires.
$4.5 billion
— Annual revenue generated if the millionaire's tax surcharge is extended.
New York should implement an Unincorporated Business Tax to help residents and businesses mitigate the federal $10,000 cap on state and local tax deductions. This tax would be structured to provide relief while maintaining revenue neutrality for the state.
Recommendations related to Personal Income Tax Policy
Expanding the proposed UBT to include S-corporations and sole proprietors, and conforming the UBT income apportionment formula as closely as feasible to each business organizational form’s existing formula for sourcing revenues under the personal income tax.
Making the UBT optional by an election at the entity level.
Preserving the proposed 5 percent rate.
Preserving the proposed 93 percent personal income tax credit.
Expressly reflecting in law that the UBT is not added back for taxable State income purposes.
Making the UBT credit non-refundable.
Modifying statutory language to strengthen the case for deductibility.
Working with other states to align tax provisions.
Key Data
$10,000
— The federal cap on a taxpayer’s deduction of state and local taxes.
$500,000
— The suggested threshold for State taxable net income at which to impose the tax.
5 percent
— The proposed rate for the Unincorporated Business Tax.
93 percent
— The proposed personal income tax credit rate.
The provided document is a scorecard of various economic development bills in New York State, detailing programs, industries, and legislative actions. It does not contain specific policy recommendations or data regarding personal income tax policy.
New York City's personal income tax is already an outlier, with combined state and local rates significantly higher than in neighboring or competitor jurisdictions. Policymakers should be cautious about further tax increases, as the city's high tax burden and the ease of intraregional migration create significant uncertainty regarding the potential for tax-induced outmigration.
Recommendations related to Personal Income 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 regarding personal income tax and commercial property tax rates.
Key Data
3 times
— The combined state and local personal income tax in New York City was more than three times as high as in other large cities.
$5,000
— A 10 percent surcharge would raise taxes on a married couple earning approximately $1.9 million by just under $5,000.
41.2%
— A New York City household with $150,000 of income pays 41.2% more in taxes than the median city.
10.7%
— A New York City household with $25,000 of income pays 10.7% more in taxes than a similar household in the median city.
25%
— The 1.3 percentage point increase in taxes as a share of gross city product from 2002 represents a 25% increase in the level of taxation.
The New York State Fiscal Year 2019 Budget includes adjustments to the state tax code in response to federal changes, such as the cap on state and local deductions, while eliminating a $1 billion unplanned tax increase through decoupling. However, the budget continues to rely on short-term revenue measures and extends $1.3 billion in annual property tax relief credits without implementing broader fiscal reforms.
Recommendations related to Personal Income Tax Policy
State officials must vigilantly monitor and assess the effects of these changes to the State’s tax code on taxpayers and the economy.
State officials should work to design and adopt an Unincorporated Business Tax for pass-through entities during the Legislative Session.
Key Data
$1 billion
— The amount of an unplanned tax increase eliminated by the State’s decoupling from the federal tax code.
$1.3 billion
— The annual cost of property tax relief credits that will be extended.
New York State needs to adjust its tax code in response to the federal Tax Cuts and Jobs Act to prevent an unplanned $1 billion tax increase on residents. Proposed measures include decoupling state tax definitions from federal ones and implementing new business taxes to maintain economic competitiveness.
Recommendations related to Personal Income Tax Policy
Create charitable public education and health funds for the State and authorize localities to do the same, provided that a mechanism is included to ensure those funds are treated in a transparent and accountable manner.
Decouple the personal exemption, enhanced child tax credit, and the state and local tax deduction cap from the federal definitions to mitigate $740 million of the $1 billion unplanned tax increase.
Adopt the Governor's proposed technical business tax change clarifying that corporations may not reflect partial federal deduction on foreign income deemed repatriated on State tax returns.
Adopt an optional Employer Compensation Expense Tax (ECET) covering wages of high-salary employees.
Adopt an Unincorporated Business Tax (UBT) to preserve deductibility for pass-through entities.
Identify and adopt reforms for 2019 that allow continued conformity to the federal definitions for the standard deduction, miscellaneous deductions, medical expense deduction, and alimony changes that eliminate the unplanned tax increases.
Consider broader reforms to improve competitiveness and streamline the tax system.
Key Data
$740 million
— Amount of the $1 billion unplanned tax increase that could be mitigated by decoupling state tax definitions from federal ones.
$1 billion
— Total amount of the unplanned tax increase resulting from the federal Tax Cuts and Jobs Act.
$200,000
— Threshold for wages of high-salary employees to be covered under the proposed optional Employer Compensation Expense Tax.
6.65 percent
— Proposed rate for the optional Employer Compensation Expense Tax.
The federal Tax Cuts and Jobs Act creates significant challenges for New York by capping state and local tax deductions, which threatens to reduce the state's competitiveness and drive residents away. This federal policy change could also trigger unplanned state personal income and business tax increases, necessitating immediate state-level action to protect taxpayers and the economy.
Recommendations related to Personal Income Tax Policy
The State should respond with practical solutions to send a clear signal that New York will defend its economy by protecting its taxpayers and businesses.
New York should not allow counterproductive federal tax policy to drive unsound State and local tax policy.
While the State should move quickly with solutions to address immediate problems, it must also allow time for deeper analysis and experience for complex issues.
Key Data
$1 billion
— unplanned State personal income tax increases
The federal Tax Cuts and Jobs Act threatens to reduce New York City's competitiveness by capping state and local tax deductions, potentially driving residents and businesses away. This federal policy change risks triggering unplanned increases in local personal income and business taxes, necessitating a strategic response to protect the city's economic stability.
$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,…
The federal Tax Cuts and Jobs Act significantly impacts New York's tax landscape by capping state and local tax deductions and creating unplanned tax increases, necessitating strategic policy responses. To maintain competitiveness and protect residents, the state should consider decoupling from specific federal definitions, implementing an optional employer compensation expense tax, and reforming estate taxes.
Recommendations related to Personal Income Tax Policy
The State should selectively decouple from federal definitions and continue to conform to others for at least one year to allow evaluation and additional reform.
The State should create an optional Employer Compensation Expense Tax (ECET) to blunt the impact of the SALT cap and maintain competitiveness.
The State and localities should create the opportunity for taxpayers to receive tax credits for charitable contributions for public education and health purposes.
The State should create a business tax on pass-through entities, such as an Unincorporated Business Tax (UBT), to complement the ECET.
The State should consider reforming the estate tax to address New York’s attractiveness to high-income households.
The State and City should control spending to reduce the need for high State and local taxes.
Policymakers should consider broader reforms to simplify the tax system, such as broadening bases and lowering rates.
Key Data
$9.5 billion and $15.3 billion
— Estimated cost to New Yorkers in additional federal taxes due to the SALT cap.
$33,000
— The gap in cost of living between New York and Florida for a taxpayer earning $1 million.
$423,000
— The gap in cost of living between New York and Florida for a taxpayer earning $10 million.
$21.0 billion
— Amount of State personal income taxes paid by New York State taxpayers earning more than $500,000 annually.
$421 million
— Annual State income tax revenue reduction if 2 percent of high-income taxpayers leave.
$100 million
— City income tax revenue reduction if 2 percent of high-income taxpayers leave.
New York faces an unplanned $1 billion tax increase due to federal tax law changes, prompting proposals to adjust state-level deductions and credits. These measures include potential uncoupling from specific federal tax definitions and the introduction of a voluntary Employer Compensation Expense Tax to mitigate negative impacts on residents.
Recommendations related to Personal Income Tax Policy
New York should uncouple from specific federal changes that would have the most undesired effects, such as the personal exemptions and child tax credits, while allowing conformity with others.
The proposed legislation for charitable deductions and tax credits must assure the funds are governed by the same transparency, accountability, and legislative oversight requirements as apply to other governmental spending.
The proposed voluntary Employer Compensation Expense Tax will need to be fully analyzed and informed by the continued input of experts and stakeholders.
Caution is needed to ensure the proposed tax changes are the right version of the right solution to address the problems without adverse countervailing implications.
Since the proposed Employer Compensation Expense Tax would not go into effect until 2019, it is appropriate to continue refining it beyond and outside the budget adoption process.
Key Data
$1 billion
— The amount of the unplanned net state tax increase on New Yorkers resulting from the federal tax cut package without state-level action.
New York taxpayers could lose as much as $14.3 billion in federal tax deductions because of the capping of the state and local tax deduction in the new federal tax law. NYS Budget Director Robert Mujica and NYC First Deputy Mayor Dean Fuleihan discuss the potential impact and possible responses…
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 City taxpayers already contribute approximately 40% of the mass transit budget through existing taxes, making an increase in the personal income tax an inappropriate method for funding MTA capital needs. Instead, funding for transit improvements and low-income fare programs should be sourced from congestion pricing or existing city resources rather than new tax levies.
Recommendations related to Personal Income Tax Policy
New funding streams to support the transit system’s long-term capital needs should come from motorists through congestion pricing or other charges for motor vehicle use.
The program for half-price MetroCards for low-income riders does not require a new personal income tax and can be funded with existing City resources.
Key Data
40%
— The portion of the mass transit budget already provided by New York City taxpayers through the payroll mobility tax and other taxes.
The Mayor's proposal to increase the top personal income tax rate to fund MTA capital improvements is an inappropriate revenue source, as city taxpayers already contribute approximately 40% of the mass transit budget. Instead, funding for transit capital needs should be generated through congestion pricing or other charges for motor vehicle use, while programs like half-price MetroCards should be supported by existing city resources.
Recommendations related to Personal Income Tax Policy
The Mayor's proposal to raise the top rate on the personal income tax to help fund MTA capital spending is not an appropriate way to raise revenue for the MTA.
New funding streams to support the transit system’s long-term 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 can be funded with existing City resources rather than a new tax.
Key Data
40%
— Percentage of the mass transit budget already provided by taxpayers through the payroll mobility tax and other taxes.
The proposed extension of the Personal Income Tax surcharge on high earners should be reconsidered to evaluate the feasibility of lowering the top rate below 8.82 percent. Additionally, any extension of this tax should include a provision to revisit the policy if significant federal tax changes occur.
Recommendations related to Personal Income Tax Policy
Before extending the current rate, serious consideration should be given to the financial feasibility of imposing a top rate below 8.82 percent.
The extension of the surcharge should include a requirement to revisit the tax if substantial federal changes are adopted.
Key Data
$1 million
— The Executive Budget extends the Personal Income Tax (PIT) surcharge on taxpayers with incomes in excess of $1 million.
six
— Outside of New York City, only six states impose PIT rates higher than New York State.
8.82 percent
— Serious consideration should be given to the financial feasibility of imposing a top Personal Income Tax rate below 8.82 percent.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York State's budget plan utilizes fiscal gimmicks to adhere to a 2 percent spending cap, including the conversion of School Tax Relief (STAR) property tax exemptions into Personal Income Tax credits. This accounting shift reduces reported state spending by hundreds of millions of dollars annually by reclassifying disbursements as revenue reductions, thereby obscuring the true nature of the budget.
Key Data
$277 million
— FY2018 savings generated by converting New York City STAR benefits into Personal Income Tax credits.
$352 million
— FY2019 savings generated by converting New York City STAR benefits into Personal Income Tax credits.
$367 million
— FY2020 savings generated by converting New York City STAR benefits into Personal Income Tax credits.
$382 million
— FY2021 savings generated by converting New York City STAR benefits into Personal Income Tax credits.
The FY2018 Executive Budget converts $277 million in School Tax Relief (STAR) benefits into personal income tax credits, a maneuver used to mask state operating fund spending growth. Additionally, the budget proposes making the temporary 'Millionaires Tax' surcharge permanent, a policy that should be replaced by a restructuring of standing tax brackets and the preservation of the surcharge for future economic downturns.
Recommendations related to Personal Income Tax Policy
The State should consider restructuring the standing tax brackets and reserving the option of a temporary surcharge for future economic downturns rather than making the 'Millionaires Tax' permanent.
Key Data
$277 million
— The amount of School Tax Relief (STAR) benefits converted to personal income tax credits in the FY2018 Executive Budget.
New York State's fiscal year 2017 personal income tax revenue projections have declined by $775 million since the first quarter update and $1.4 billion from the adopted budget. Despite this decrease, the state still anticipates an annual growth of 2.2% in personal income tax revenues compared to fiscal year 2016.
Key Data
$775 million
— The amount by which fiscal year 2017 personal income tax revenue estimates are down from the first quarter update.
$1.4 billion
— The amount by which fiscal year 2017 personal income tax revenue estimates are down from the adopted budget.
2.2%
— The expected annual growth rate for fiscal year 2017 personal income tax revenues over fiscal year 2016.
New York State's tax revenue is increasingly dependent on the volatile personal income tax, with the top 1 percent of earners contributing a significant and growing share of total liability. To mitigate the severe revenue shortfalls projected during a potential economic downturn, the state must prioritize building its financial reserves.
Recommendations related to Personal Income Tax Policy
The State should build its reserves now to counter the potential impacts of an economic downturn.
The State should prepare for the necessity of tax increases and/or spending cuts to address revenue shortfalls caused by a recession.
Key Data
$74.7 billion
— Total New York State tax revenues in 2016.
63 percent
— Share of total tax revenues derived from the personal income tax in 2016.
41.5 percent
— Contribution of the top 1 percent of taxpayers to personal income tax revenues in 2015.
40.2 percent
— Share of personal income tax liability accounted for by taxpayers with adjusted gross incomes in excess of $1 million in 2016.
$59 billion
— Potential four-year revenue shortfall for the state in the event of a recession.
$3 billion
— Annual revenue generated by the personal income tax surcharge on high-income earners.
The state should convert the School Tax Relief (STAR) property tax exemption into a personal income tax credit to improve administrative oversight and prevent benefit abuse. Additionally, proposed tax credits for education scholarships and Thruway tolls should be rejected as they represent unnecessary subsidies or encourage inefficient infrastructure use.
Recommendations related to Personal Income Tax Policy
The state should convert the STAR property tax exemption into a personal income tax (PIT) credit to allow taxpayers to see changes in their school district’s tax levy more clearly and prevent benefit abuse.
The Education Scholarship and Program Tax Credit (ESPTC) should be rejected as it is an inappropriate and unnecessary subsidy to private and parochial schools.
The Thruway Toll Tax Credit (TTTC) should be rejected because it would encourage additional driving, putting further stress on the Thruway’s infrastructure.
The extension of the Excelsior Jobs Tax Credits should be rejected because private investment and the associated jobs frequently lag behind promised levels.
Key Data
$3.4 billion
— Annual cost to state taxpayers for the STAR program.
$1 million
— Maximum amount provided per taxpayer under the Education Scholarship and Program Tax Credit.
75 percent
— Percentage of a donation to a public or private school that the Education Scholarship and Program Tax Credit would cover.
$70 million
— Total program cap for the Education Scholarship and Program Tax Credit.
$340 million
— Cost of the proposed Thruway Toll Tax Credit.
The Governor's proposed budget for fiscal year 2016-2017 includes provisions regarding the expiration of current personal income tax rates for middle and high-income brackets at the end of 2017. It remains to be seen whether the state's financial plan will accurately account for the sunsetting of these tax provisions.
New York's recent legislative package includes new tax rebate programs and spending obligations totaling $1.5 billion annually, which are predicated on projected budget surpluses that may not materialize. These rebate programs, including those distributed through personal income tax filings, are criticized for being skewed toward wealthier households and failing to address the state's growing out-year budget gaps.
Recommendations related to Personal Income Tax Policy
Lawmakers must be prepared to enact cost-saving measures to produce the surpluses they just spent on new tax rebates.
Key Data
$410 million
— Annual cost of the Family Tax Relief Rebate, which provides $350 to households with children under age 17 and annual income between $40,000 and $300,000.
$783 million
— Annual cost of the Property Tax Freeze Rebate for homeowners earning less than $500,000 in tax cap-compliant local governments and school districts.
$1.3 billion
— Annual cost of the new property tax relief rebate program when fully implemented.
$1.5 billion
— Total annual cost of new state obligations included in the legislative package.
$2.0 billion
— Projected out-year budget gap for New York State in the upcoming year.
$4.2 billion
— Projected out-year budget gap for New York State in fiscal year 2018-2019.
The fiscal year 2016 Executive Budget introduces a new "circuit breaker" income tax credit for taxpayers with high property tax burdens and proposes replacing the existing income tax deduction for school donations with a new tax credit. These changes, alongside modifications to the School Tax Relief (STAR) program that disqualify high-income earners, represent significant shifts in state personal income tax policy.
Recommendations related to Personal Income Tax Policy
The Executive Budget improves the School Tax Relief (STAR) program by providing a tax credit for new homeowners and disqualifying taxpayers in New York City making more than $500,000.
A better alternative to the proposed 'circuit breaker' income tax credit is to repurpose existing resources to provide more targeted relief, such as additional reforms to the School Tax Relief (STAR) program to shrink and convert it to a circuit breaker program.
The proposed education tax credit, which converts the value of a contribution from a deduction from income to a subtraction from tax liability, should be rejected because benefactors of education charities should continue to enjoy the same benefits available for other charitable contributions.
Key Data
$3.4 billion
— Annual cost of the School Tax Relief (STAR) program.
$500,000
— Income threshold for New York City taxpayers to be disqualified from the School Tax Relief (STAR) program.
$1.7 billion
— Cost of the proposed 'circuit breaker' income tax credit when fully phased in.
75 percent
— Value of the proposed tax credit for donations to public and private schools relative to the contribution.
$1 million
— Cap per taxpayer for the proposed education tax credit.
$100 million
— Total state cap for the proposed education tax credit.
The fiscal year 2016 executive budget assumes that current lower personal income tax brackets for middle-income earners and higher brackets for high-income earners will expire on December 31, 2017. Extending the middle-income tax relief without also extending the higher-income tax brackets would result in growing budget gaps in future years.
The FY2016 New York State budget features the scheduled expiration of lower tax rates for middle-income brackets in 2017. This development raises critical questions regarding whether the Governor will propose an extension and how the state intends to fund such a policy.
The administration should prioritize alternative revenue sources like property and sales tax reform over the proposed personal income tax on millionaires, which some taxpayers could avoid by spending more than 183 days in other residences. While a higher income tax would generate revenue, it risks encouraging some taxpayers to relocate.
Recommendations related to Personal Income Tax Policy
The administration should prioritize alternative revenue sources because a higher personal income tax on 'millionaires' is less preferable than property or sales tax reforms.
Key Data
183 days
— The amount of time a taxpayer can spend in their second or third residences to avoid the proposed personal income tax.
New York City's tax burden is significantly higher than other large cities, with the personal income tax being a primary driver of this disparity. Policymakers should exercise caution regarding further tax increases, as the city's already high rates and the potential for intraregional migration create significant uncertainty about the economic impact of such policies.
Recommendations related to Personal Income 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 when considering tax policy changes.
The city should consider that the combined city and state tax rate is far higher than in neighboring or competitor states when evaluating potential tax increases.
Key Data
46.4%
— The amount by which New York City's state and local taxes exceeded the average for other large cities in 2004.
82.6%
— The percentage by which New York City's personal income tax burden exceeded the median for 51 cities in 2011.
$800 Million
— The estimated annual revenue raised by a 10 percent across-the-board surcharge on the personal income tax.
$750 Million
— The estimated annual revenue raised by a 0.75 percent increase in the top personal income tax rate.
3.12
— The personal income tax per $100 of taxable resources in New York City, compared to the 0.95 average of other large cities.
New York State should reform its existing tax relief programs, such as STAR and the Family Tax Relief rebate, to better target low and moderate-income households rather than providing broad, inefficient benefits. Additionally, reducing the combined tax burden could be achieved by lowering personal income tax rates for middle-income households and shifting more local funding mandates, such as Medicaid, to the state level.
Recommendations related to Personal Income Tax Policy
The Commission should further reduce personal income tax rates for middle income households to help lower the combined tax burden.
The Commission should better target STAR aid and the Family Tax Relief rebate to provide deeper relief for low and moderate income households.
The Commission should expand the Real Property Tax Credit to provide deeper relief for low and moderate income households.
The Commission should re-examine and reform the local tax relief programs on which the State already spends $4 billion annually.
Key Data
$4 billion
— Annual state spending on local tax relief programs.
$3.4 billion
— Cost of the STAR tax relief program in fiscal year 2014.
$410 million
— Amount allocated for Family Tax Relief rebates.
$20.2 million
— Total Real Property Tax Credit provided in 2010.
The State Tax Reform and Fairness Commission report proposes significant changes to state tax policy, including reducing sales tax exemptions and reforming business tax incentives to improve fairness and efficiency. These reforms, which include potential offsets through the personal income tax, aim to modernize the tax code and should be considered for inclusion in the upcoming state budget.
Recommendations related to Personal Income Tax Policy
The Commission offers several options for tax offsets through the personal income tax to mitigate the regressive nature of the sales tax.
New York's decision to extend the temporary personal income tax surcharge for 3 years to fund business tax credits and rebates ignores the need for comprehensive reform of the state's regressive tax structure. This policy risks reducing the state's economic competitiveness and exacerbates fiscal instability, as the state faces a projected $2 billion budget gap for fiscal year 2015-16.
Recommendations related to Personal Income Tax Policy
State leaders should allow the tax commission to complete its work and reconsider the hastily crafted plan to extend the personal income tax surcharge.
Policymakers should prioritize reforming the combined high and regressive set of state and local taxes, including sales and property taxes, rather than focusing solely on the personal income tax.
The state should avoid extending the higher personal income tax rate for the highest income level to maintain New York's competitiveness.
State leaders should refrain from spending significant sums on newly created rebate and credit programs given the persistent out-year budget gaps.
Key Data
12.7%
— The state and local income tax rate for high earners in New York City.
$2 billion
— The projected budget gap in fiscal year 2015-16 even if the tax surcharge is extended.
2%
— The limit on state-funded spending growth for the third consecutive year.
New York State's personal income tax is the largest nonfederal revenue source, with high-income earners in the downstate region contributing a disproportionate share of the total. The report analyzes how these tax revenues are distributed across different regions of the state, highlighting the significant gap between the taxes paid by downstate residents and the state-funded expenditures they receive in return.
Key Data
$29.4 billion
— Total personal income tax revenue when allocated by taxpayer residence.
$34.8 billion
— Total personal income tax revenue when allocated by taxpayer place of work.
$5 billion
— Tax payments from out-of-state residents that are excluded when allocating revenue by residence.
$311,000
— Average salary of securities-sector employees in New York City during 2009.
$80 billion
— Total amount sent to the state government by residents, workers, and businesses each year.
$26.1 billion
— Total state-funded education spending in fiscal year 2010.
New York's temporary personal income tax hike is acceptable only if paired with long-term structural reforms, including pension system changes and strict budget growth limits. While the new tax brackets generate $1.9 billion in annual revenue, they increase reliance on high earners and reduce the state's competitiveness.
Recommendations related to Personal Income Tax Policy
The state should ensure that new personal income tax brackets are accompanied by positive long-term reforms such as infrastructure improvements and tax structure re-examination.
The state should ensure that new personal income tax brackets are accompanied by long-term measures to curb expenditures.
Next year’s budget should not be allowed to grow more than 2 percent, and additional actions should be taken to slow future growth.
The state should pursue reform of the state and local pension system along the lines of the Governor’s “Tier 6” proposal to save over $120 billion in the next 30 years.
Key Data
$1.9 billion
— Net gain in annual revenue from the new personal income tax brackets over letting the “millionaire tax” expire.
12.7 percent
— State and local income tax rate for high earners in New York City, which is higher than anywhere else in the nation.
2 percent
— Maximum growth limit recommended for next year’s budget.
$120 billion
— Projected savings from pension system reforms over the next 30 years.
New York State should avoid using unexpected revenue surpluses for new spending or tax cuts, as economic indicators suggest these revenues are volatile and fiscal challenges remain. Instead, any potential surplus should be prioritized to address existing budget gaps, labor savings targets, and reliance on fiscal gimmicks.
Recommendations related to Personal Income Tax Policy
The Governor and the Legislature should avoid using unexpected revenue for new initiatives, including tax cuts, because the likelihood of a surplus is remote and existing fiscal problems must be prioritized.
New York should prioritize using any potential surplus to reduce reliance on existing fiscal gimmicks rather than committing to new spending or tax reductions.
Any surprise surplus should be used in ways that help lower the budget gap, such as paying down debt or reversing deferrals, rather than in ways that make the gap grow, such as tax cuts.
Key Data
$174 billion
— Amount New Yorkers pay in federal income taxes, the second highest of all the states.
22 percent
— Predicted increase in estimated income tax payments at the beginning of the year.
35 percent
— Increase in estimated income tax payments through the first four months of the year.
29 percent
— Decline in estimated income tax payments in fiscal year 2010.
$799 million
— Amount tax collections for the first quarter of the fiscal year came in higher than original projections.
$2.4 billion
— Budget gap projected for the start of the next fiscal year.
New York faces a significant budget gap driven by decreased tax collections and rising spending, necessitating a shift away from temporary revenue measures like the income tax surcharge on high earners. Instead of relying on one-time fixes, the state must align long-term spending growth with sustainable revenue streams to ensure fiscal stability.
Recommendations related to Personal Income Tax Policy
The State should allow temporary revenue measures, such as the income tax surcharge, to phase out as the economy recovers.
The State must begin to restructure spending commitments rather than relying on temporary revenue enhancements.
State spending growth must be more closely aligned with long-term revenue growth to avoid perpetual reliance on tax increases.
Key Data
$5.0 billion
— Projected revenue from the temporary income tax surcharge on individuals earning more than $200,000.
$8.5 billion
— Reduction in base tax collections in the current fiscal year due to the national recession.
$21.2 billion
— The projected budget gap for the upcoming fiscal year without the inclusion of revenue measures.
$11.7 billion
— Total enhanced and temporary revenues available for the next fiscal year.
$1.4 billion
— Yield from the new payroll tax imposed in 2009 in the region served by the Metropolitan Transportation Authority.
$9.5 billion
— The budget gap addressed in the Governor’s plan caused by decreased revenues and growing spending.
The 2010-11 budget proposal aims to achieve structural balance by avoiding reliance on nonrecurring measures, such as assuming the continuation of temporary personal income tax surcharges. By focusing on spending controls rather than extending these tax measures, the proposal seeks to address the state's $6.7 billion budget deficit.
New York's tax system is progressive in its treatment of low-income residents through credits like the Earned Income Tax Credit, yet middle-income families face the highest state and local 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 Personal Income 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%
— The poorest fifth of New Yorkers pay 9.6% of their income for state and local taxes.
11.6%
— The middle quintile of New York families pay 11.6% of their income to state and local taxes.
7.2%
— The top 1 percent of earners in New York pay 7.2% of their income for state and local taxes.
$1,447
— A family earning less than $42,000 can receive a maximum State EITC of $1,447.
$1,733
— Low-income New York City residents are eligible for a child care credit of up to $1,733.
New York State's 2009-10 budget addressed a $17.9 billion deficit by relying heavily on tax increases, including a personal income tax hike estimated to raise $3.9 billion. This approach exacerbated the state's reliance on a small group of high-income earners and increased the volatility of the tax system, while failing to implement necessary long-term spending reforms.
Key Data
$3.9 billion
— Estimated revenue generated from the increase in rates for higher income brackets under the personal income tax.
$200,000
— Income threshold for single filers to reach the new 7.85 percent personal income tax rate.
$500,000
— Income threshold for single filers to reach the new 8.97 percent personal income tax rate.
New York's personal income tax is progressive, but the overall tax structure is regressive due to a heavy reliance on sales and consumption taxes. To address budget gaps and maintain economic competitiveness, any tax increases should be temporary and paired with significant spending reductions, while long-term reform should focus on creating a more stable and equitable tax system.
Recommendations related to Personal Income Tax Policy
Any income tax increase should be temporary only to ensure it responds to cyclical downturns rather than structural deficits.
Any tax increase must be accompanied by serious, sustained reductions in government spending to address the state's structural budget problems.
Policymakers should form a bipartisan commission to examine tax reform from the dual perspective of fairness and competitiveness.
Proposals for tax reform should include a rearrangement of the state and local tax systems to balance equity and stability in their design.
Tax increases should run in tandem with contractual changes with public employee unions that support improved productivity and a spirit of shared sacrifice.
Key Data
$1,688
— The maximum combined State and City refundable credit for a taxpayer with 2 or more children and less than $40,000 income.
6.0 percent
— The share of family income paid in state and local income taxes by the wealthiest 1 percent of New York taxpayers.
12.6 percent
— The share of income consumed by state and local taxes for the poorest fifth of New York residents.
56.5 percent
— The portion of total State tax collections comprised by the personal income tax in 2006.
28 percent
— The share of total private sector wages in the State comprised by the financial services sector.
$18.7 billion
— The projected budget gap in year three of the financial plan.
New York's tax burden is significantly higher than the national average, driven largely by high local property and income taxes that vary significantly between New York City and the rest of the state. To address these inequities, the state should consider reforms such as converting the School Tax Relief (STAR) program into a more targeted circuit breaker and implementing a full state takeover of Medicaid costs to reduce the reliance on local property taxes.
Recommendations related to Personal Income Tax Policy
The state should convert the STAR rebate program into a circuit breaker that bases a household’s rebate on property taxes as a share of income to better target relief to lower-income residents.
New York should implement a full state takeover of local Medicaid expenses to shift the financing burden to the state level, where revenue sources like the personal income tax are more progressive.
The state should reform the pension benefit system by either converting to a defined contribution plan or making the current defined benefit system more reasonable for new hires.
The state should revise the framework for collective bargaining by mandating that the Public Employment Relations Board (PERB) weigh the employer's ability to pay more heavily in settlement awards.
The state should consolidate small school districts to reduce administrative and transportation costs, as potential savings are greatest for smaller districts.
Key Data
$150
— New York collected $150 for every $1,000 of personal income in fiscal year 2005, which is 33 percent higher than the national average.
$28,100 million
— The state government derives more than half (56 percent) its tax revenue from its personal income tax, which generated $28,100 million in fiscal year 2005.
37 percent
— Because New Yorkers reach the top income bracket at $40,000 for joint filers, 37 percent of state taxpayers are subject to the top income rate.
$6,732 million
— New York City's personal income tax generated $6,732 million in fiscal year 2005.
56 percent
— From fiscal year 1995 to 2005, state personal income tax collections grew 56 percent.
New York City's high tax burden is a subject of significant debate, with research suggesting that while taxes can influence economic growth, the magnitude of these effects is often overstated or difficult to isolate from other factors. Policymakers should prioritize broad-based tax reform and efficient service delivery over ad hoc incentives, as tax cuts funded by service reductions may not yield the intended economic benefits.
Recommendations related to Personal Income Tax Policy
Policymakers and the public must understand that a tax cut that leads to service reductions will not lead to the same economic result as a tax cut with no change in services.
It would be irresponsible to present policymakers with supposedly precise estimates of the impact of any particular change in taxes, given that empirical studies vary in so many dimensions.
The city should support broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
To compensate for the tax wedge, New York City must be diligent in promoting agglomeration benefits through non-tax policies and providing public services efficiently.
There is ample opportunity to lower Medicaid costs through programmatic reforms and reductions in fraud.
Key Data
90,000
— Estimated number of jobs the city economy would lose due to tax increases.
18.5%
— The increase in the real property tax implemented during calendar year 2003.
0.3%
— Average annual growth rate of the city's private sector employment from 1986 to 2001.
1.8%
— Average annual national employment growth rate from 1986 to 2001.
2.7%
— Average annual growth rate of the city's real gross product from 1986 to 2001.
2.8%
— Average annual national output growth rate from 1986 to 2001.
New York faces the challenge of financing education reform while maintaining its status as the most heavily taxed state in the nation. To generate necessary revenues without compromising competitiveness, the state should focus on eliminating system inefficiencies, expanding gambling activities, and broadening the tax base, which may include a small increase in the personal income tax.
Recommendations related to Personal Income Tax Policy
Broadening the tax base through increased enforcement of sales tax on remote purchases, extending the sales tax to professional services, and revising the corporate income tax could raise up to $2.6 billion a year, though a statewide solution would also require a small increase in the personal income tax.
New revenues for education finance reform should be generated in a way that does not compromise the competitiveness of New York State.
The State should prioritize eliminating inefficiencies in the system, which could generate at least $1.2 billion annually.
The State should consider expanding gambling activities, which could generate an additional $2 billion and is preferable to a tax increase.
The State, rather than local school districts, should be the source of new funding to alleviate inequities in spending.
Key Data
$1.2 billion
— Annual savings potential from eliminating educational inefficiencies.
$2.0 billion
— Potential revenue generation from expanding gambling activities.
$2.6 billion
— Potential annual revenue from broadening the tax base.
$4.7 billion
— Minimum operating aid ordered by the New York State Appellate Division of the State Supreme Court.
$9.2 billion
— Capital improvements ordered by the New York State Appellate Division of the State Supreme Court.
$10,665
— Average spending per pupil in New York State after adjusting for regional cost differences.
New York faces a significant court-ordered mandate to increase school funding, requiring billions in new revenue that could be raised through adjustments to the personal income tax, sales tax, or property taxes. While increasing broad-based taxes like the personal income tax could generate necessary funds, such measures risk harming the state's economic competitiveness and placing an undue burden on taxpayers.
Recommendations related to Personal Income Tax Policy
The state could raise the billions needed for school funding by increasing rates for the existing broad-based personal income tax.
Policymakers should consider that each 0.2 percent increase in the effective personal income tax rate would yield $1 billion in annual revenue.
The state should avoid relying on broad-based personal income tax rate increases as the primary source of new revenue because such hikes would put New York at a competitive disadvantage.
Key Data
$64
— Amount collected by New York State for every $1,000 in personal income in fiscal year 2001-02.
4.9%
— Average effective rate of the State personal income tax.
6.85%
— State personal income tax rate at the top bracket for those earning over $40,000 annually.
$1 Billion
— Estimated annual revenue yield from a 0.2 percent increase in the effective personal income tax rate.
New York State's high local tax burden, driven by state mandates, makes raising additional education funds through local property taxes unsustainable, necessitating a shift toward statewide revenue sources. If necessary, the state should prioritize broad-based tax restructuring, with personal income tax increases serving as a last-resort measure to meet court-mandated school funding requirements.
Recommendations related to Personal Income Tax Policy
If annual revenue beyond the $4.7 billion to $5.8 billion range is needed to meet the Court mandate, the personal income tax should be the source for these last resort revenues.
A reasonably accurate rule of thumb is that each 0.2 percent increase in the effective personal income tax rate will yield $1 billion annually.
At a maximum, the average effective personal income tax rate would increase .78 percent to about 5.68 percent to meet the court mandate.
Key Data
$68
— Amount collected by the State of New York for every $1,000 in personal income in fiscal year 2000.
$73
— Amount paid by New York State residents and businesses to local governments for every $1,000 of personal income.
6.85 percent
— The State personal income tax rate at the top bracket (over $40,000 annually).
4.9 percent
— The average effective rate of the State personal income tax.
0.2 percent
— The increase in the effective personal income tax rate required to yield $1 billion annually.
.78 percent
— The maximum average effective personal income tax rate increase required to meet the court mandate.
New York State faces the challenge of funding court-ordered education reforms, with options including broadening the tax base for sales and corporate income taxes or raising rates on existing personal income and sales taxes. While raising rates on broad-based taxes is administratively simple, these options must be weighed against their impact on economic competitiveness and the regressivity of the tax burden.
Key Data
$24.1 billion
— Amount raised by the personal income tax in state fiscal year 2003-2004, representing 58% of total State tax revenue.
6.85%
— New York's top personal income tax rate as of January 1, 2002, ranking the state 18th in the magnitude of its top income tax rate.
3.16
— The average progressivity index for the New York State personal income tax, indicating the tax is progressive.
0.2 percentage points
— The required increase in the effective personal income tax rate needed to raise $1 billion in additional revenue.
1st
— New York's rank in personal income tax revenue per $1,000 of personal income in a 50-state comparison.
New York City addressed its fiscal year 2004 budget gap by implementing significant tax changes, including a 14 percent surcharge on the personal income tax and a broader reform that introduced a new commuter tax. These measures were projected to generate $370 million and $962 million in revenue, respectively, to help balance the city's finances.
Key Data
$962 million
— Projected revenue yield in fiscal year 2004 from the reform of the personal income tax, including a new tax on commuters.
$370 million
— Projected revenue yield in fiscal year 2004 from the re-implementation of the 14 percent surcharge on the personal income tax.
New York City's budget balancing strategies should prioritize structural expenditure reductions and efficiency improvements rather than relying on borrowing or temporary economic rebounds. While past tax cuts were implemented, the city's tax burden remains high compared to other major cities, and future fiscal stability requires long-term planning rather than one-time gimmicks.
Recommendations related to Personal Income Tax Policy
Budget balancing strategies should take New York's competitive position regarding tax burdens into account.
The State should assist the City by re-authorizing a commuter tax to help close the budget gap.
Key Data
$1,079
— The reduction in the tax burden for a family of four with a $50,000 income in New York City between 1990 and 2000.
$50,000
— The annual income level for a family of four used to compare tax burdens across major cities in 1990.
$100,000
— The annual income level for a family of four used to compare tax burdens across major cities in 2000.
New York City reduced its personal income tax surcharge and commercial rent tax in fiscal year 2002, though some tax reduction initiatives were criticized as low-priority or inequitable. Meanwhile, state leaders are urged to address high local taxes by replacing poorly designed programs like STAR with more targeted alternatives.
Recommendations related to Personal Income Tax Policy
State leaders should address the State's high local taxes, but they should do so with better programs than STAR, which is poorly designed because it does not target reductions in local tax burdens where they are most needed.
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