Sales taxes in New York are consumption-based levies collected by the state and its localities on the purchase of goods and services. This page covers CBC’s work on sales tax revenue trends, the impact of tax exemptions and incentives, state-level intercepts of local tax receipts, and the role of sales taxes in funding infrastructure and public services.
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 should reject the NYC sales tax capture, as it should not foist its costs onto local governments, and the continuation of the sales tax capture unreasonably harms the City’s budget.
The State should lower or gradually eliminate the sales tax exemptions on fossil fuel-based residential energy sources to align with climate goals.
The State could limit the residential energy sales tax exemption to only zero-emission fuels and renewable energy sources.
The State could eliminate the sales tax cap on motor fuel, which would increase the price at the pump and reduce consumption.
The State could consider eliminating exemptions for fossil-fuel based energy used for non-residential purposes, such as research and development.
Key Data
In a September 2026 report, the CBCNY noted that New York State and its localities collected $3,081 per capita in sales taxes in 2024, ranking 6th in per capita collections and collecting 21% more than the national average of $2,547.
According to a December 2024 summary of city finances, New York City's sales and use tax revenues reached $10,620 million in FY 2024, showing steady growth from $10,585 million in FY 2023 and $9,988 million in FY 2022.
A June 2024 policy brief estimated that domestic outmigration of 52,617 households in 2022 cost New York City $50 million in foregone sales tax revenue, with the city earning 4.5 cents in revenue for every dollar spent on taxable goods and services.
In March 2024, the CBC noted that the State's sales tax intercept for distressed providers diverts $150 million annually from New York City, with proposals to extend this capture through fiscal year 2028.
A February 2023 analysis of economic development incentives highlighted that a sales tax exemption for Lower Manhattan commercial office space costs New York City $8 million annually in foregone revenue.
New York State and its localities collected $3,081 per capita in sales tax in 2024, ranking 6th highest in the nation and exceeding the national average of $2,547 by 21%. This sales tax collection is higher than all comparator states, including Texas, California, and Florida, and surpasses the collections of 44 other states.
Key Data
$3,081
— New York's state and local sales tax revenue per capita in 2024, which is higher than all comparator states.
6th
— New York's national rank for state and local sales tax collections per capita.
44
— The number of states that New York State and its localities collected more sales tax per capita than in 2024.
70%
— The percentage by which New York's state and local sales tax collections per capita exceeded those of Massachusetts, the lowest of the comparator states.
21%
— The percentage by which New York's state and local sales tax collections per capita exceeded the national average.
$2,547
— The national average for state and local sales tax revenue per capita in 2024.
New York State and its localities collected $2,890 in sales tax per capita in 2023, ranking higher than 42 other states. This figure represents a 15.7% higher collection rate than the national average and 57.3% more than in Massachusetts.
Key Data
$2,890
— New York State and localities collected this amount in sales tax per capita in 2023.
42
— New York State and localities collected more sales tax per capita than this many other states.
15.7%
— New York's sales tax per capita is this much higher than the U.S. average.
57.3%
— New York's sales tax per capita is this much higher than in Massachusetts.
New York City mayoral candidates were surveyed on their fiscal priorities, including their stance on city tax rates. Every candidate indicated they would keep the current sales tax rate unchanged.
The Metropolitan Transportation Authority faces a $33.4 billion funding gap in its $68.4 billion capital plan, requiring a balanced approach involving increased contributions from the City, State, and users. Potential revenue sources to address the remaining shortfall include regionalizing existing taxes, adjusting the payroll mobility tax, or implementing small increases in sales taxes.
New York State and its localities collected $2,730 in sales tax per capita in 2022, ranking higher than 42 other states. This collection level represents up to 55% more in sales tax revenue per person compared to other major states.
Key Data
$2,730
— New York State and localities' **sales tax revenue per capita** in 2022.
42
— Number of states that **tax less than New York** in sales tax.
55%
— Amount more New York and its localities collected in **sales taxes per capita** than comparator states.
$2,368
— National average for **sales tax revenue per capita** in 2022.
New York City generated $10,620 million in sales and use tax revenue during fiscal year 2024, while New York State recorded $21,944 million in consumption and use tax revenue for the same period. This financial summary provides historical revenue data for both the city and state across multiple fiscal years.
Key Data
$10,620 million
— New York City Sales and Use Taxes revenue in fiscal year 2024.
$10,585 million
— New York City Sales and Use Taxes revenue in fiscal year 2023.
$10,664 million
— New York City Sales and Use Taxes revenue in fiscal year 2024 as reported in the Statement of Activities.
$21,944 million
— New York State Consumption and Use Taxes revenue in fiscal year 2024.
New York City's housing shortage has led to significant domestic outmigration, which has reduced the city's tax base by causing losses in personal income and sales tax revenue. This decline in residents, particularly those in higher income brackets, shifts the tax burden onto remaining households and businesses while depressing overall economic activity.
Recommendations related to Sales Taxes
The City must build more housing to improve affordability and quality of life for all New Yorkers, bolster the tax base, and strengthen the city’s economy and competitiveness.
The City should modernize the City’s zoning ordinance to allow more housing everywhere to start to chip away at a housing shortage that has been years in the making.
The State should reform the State’s environmental review laws to increase production at the scale needed to improve affordability.
The State should pass laws to encourage development in the downstate suburbs to increase housing production.
The State should repeal the Scaffold law, which drives up insurance costs, to help boost housing supply.
The City should reform the City’s property tax policy to help increase housing production.
Key Data
$50 million
— Estimated sales tax revenue lost in 2022 due to the outmigration of households.
4.5 cents
— Revenue the City earns for every dollar spent on taxable goods and services.
23 percent
— Estimated share of income New York State households spent on goods and services subject to sales tax in 2021 and 2022.
78 percent
— Share of income spent on taxable items by the lowest quartile of income households.
17 percent
— Share of income spent on taxable items by the highest quartile of income households.
The state's practice of intercepting local sales tax revenue to fund the Distressed Provider Assistance Account unfairly burdens New York City's budget. The state should discontinue this practice rather than extending the intercept through fiscal year 2028.
Recommendations related to Sales Taxes
The State should reject the NYC sales tax capture, as it should not foist its costs onto local governments, and the continuation of the sales tax capture unreasonably harms the City’s budget.
Key Data
$250 million
— Annual amount New York State began intercepting from sales tax receipts of local governments as part of the Fiscal Year 2021 Enacted Budget.
$200 million
— Annual amount intercepted from New York City sales tax receipts.
$50 million
— Annual amount intercepted from all other counties' sales tax receipts.
$150 million
— Reduced annual amount intercepted from New York City sales tax receipts after the capture from other counties was discontinued.
New York State and its localities collected $2,324 in sales tax per capita in 2021, a figure that exceeds the collections of 41 other states. This high level of taxation contributes to New York's status as the state with the highest total tax collections per person in the nation.
Key Data
$2,324
— Total state and local sales tax revenue per capita collected in New York in 2021.
41
— Number of states that collect less in sales tax per capita than New York.
52%
— Amount more in sales taxes per capita that New York collects compared to Massachusetts.
The proposed five-year extension of New York City economic development tax incentives, which cost $44 million annually in foregone revenue, lacks the necessary rigorous evaluation of effectiveness and efficiency. Existing assessments indicate that certain programs, including those involving sales tax exemptions, have failed to improve office vacancy rates or employment, necessitating a more evidence-based approach to extending or sunsetting these tax breaks.
Recommendations related to Sales Taxes
Any extension or expansion of an existing tax expenditure should be supported by a prospective model of its impacts and justified by an evaluation that determines whether the tax expenditure achieved its purpose.
For programs like the Commercial Expansion Program and Commercial Revitalization Program, existing evaluations should inform the Legislature’s decision of whether to extend, amend, or sunset these programs.
An incentive should not be extended absent a rigorous evaluation of its effectiveness and efficiency and an analysis demonstrating it is needed to meet current and future goals.
Key Data
$8 million
— Annual foregone revenue from sales and use taxes due to the Lower Manhattan Sales and Use Tax Credit.
$44 million
— Total annual foregone revenue from the package of New York City tax incentives proposed for extension.
$14 million
— Annual foregone revenue from property taxes included in the tax incentive package.
$15 million
— Annual foregone revenue from utility taxes included in the tax incentive package.
$7 million
— Annual foregone revenue from commercial rent taxes included in the tax incentive package.
The state should cease the practice of diverting $250 million in annual local sales tax revenue to its own coffers, a policy that disproportionately impacts New York City and other counties. This redirection of funds, which includes $200 million from New York City and $50 million from other counties, remains misguided given the ongoing fiscal burdens faced by these localities.
Recommendations related to Sales Taxes
The Legislature should reject the Executive Budget’s proposal to continue allowing the State to take $250 million annually in local sales tax revenue.
Key Data
$250 million
— Annual amount of local sales tax revenue the State takes from local governments.
$200 million
— Annual portion of local sales tax revenue taken from New York City.
$50 million
— Annual portion of local sales tax revenue taken from counties other than New York City.
The State should reverse the $500 million local government sales tax intercept enacted last year, which diverted $250 million from county collections in January 2021 and is scheduled to take another $250 million over the following year. This policy, which was erroneously linked to Medicaid budget issues, represents a step backward in financing and should be eliminated.
Recommendations related to Sales Taxes
The Legislature should reverse the $500 million local government sales tax intercept that was enacted last year.
Key Data
$500 million
— The total value of the local government sales tax intercept that the Legislature is urged to reverse.
$250 million
— The amount of county sales tax collections intercepted by the State in January 2021.
$250 million
— The amount of county sales tax collections the State is scheduled to intercept over the next year.
New York should approach potential recreational marijuana tax revenues with caution, as it typically takes three to four years for states to realize consistent income after legalization. Policymakers should ensure these revenues are kept on-budget and not committed to specific purposes, rather than relying on them to immediately close budget gaps.
Recommendations related to Sales Taxes
State leaders should be cautious and pragmatic when estimating potential recreational marijuana revenues, as implementing the necessary tax, licensing, and oversight structures takes approximately 12 to 18 months.
Any future recreational marijuana revenue should be received and spent on-budget, rather than through off-budget trusts or other fiscal gimmickry.
Recreational marijuana revenue should be free from capture and not committed to a specific purpose, allowing it to be used for recurring operating budget purposes.
Dedicating a portion of marijuana tax revenue to cover administrative costs and fund consequential public health and substance abuse programming may be reasonable.
State leaders should be cautious about relying on potential marijuana revenues to help close budget gaps.
Key Data
$764,000,000
— California's recreational marijuana tax revenue generated between July 2019 and June 2020.
$395,523,567
— Washington's recreational marijuana tax revenue generated between July 2018 and June 2019.
$341,691,001
— Colorado's recreational marijuana tax revenue generated between July 2019 and July 2020.
$225,543,653
— Alaska's recreational marijuana tax revenue generated between September 2019 and August 2020.
$142,517,466
— Oregon's recreational marijuana tax revenue generated between September 2019 and August 2020.
$68,750,000
— Massachusetts's recreational marijuana tax revenue generated between July 2019 and June 2020.
New York City taxable sales fell significantly during the COVID-19 pandemic, with a 23 percent decline to $34.2 billion between June and August 2020 compared to the previous year. This downturn, which saw City sales tax revenue drop to $1.5 billion, was driven by massive losses in the accommodation, recreation, and food service sectors.
Key Data
$34.2 billion
— New York City taxable sales in June to August 2020, representing a 23 percent decline compared to the same quarter in 2019.
37 percent
— The decline in New York City taxable sales from March to May 2020 compared to the prior year.
$1.5 billion
— City sales tax revenue in June to August 2020, which declined 23 percent compared to $2 billion in the same period the previous year.
90 percent
— The decline in the accommodation sector’s taxable sales in June to August 2020 compared to the prior year.
62 percent
— The decline in taxable food service sector sales in June to August 2020.
21.5 percent
— The share of retail taxable sales comprised by electronic retailers during the pandemic, up from 8.5 percent the prior year.
New York State should align its fiscal policies with the Climate Leadership and Community Protection Act by limiting sales tax exemptions on residential energy to zero-emission fuels and renewable sources. These adjustments to tax policy and spending could potentially save the state more than $800 Million annually while supporting the transition to a clean energy future.
Recommendations related to Sales Taxes
New York should limit its sales tax exemptions on residential energy, which currently apply to fossil fuels, to zero-emission fuels and renewable energy sources.
Key Data
$800 Million
— Potential annual state savings from adjusting fiscal policies, including limiting sales tax exemptions on residential energy.
New York State provides various sales tax exemptions on fossil fuels and gasoline that contradict the state's climate goals by incentivizing consumption. Eliminating or reforming these tax expenditures could generate significant revenue while aligning state policy with the Climate Leadership and Community Protection Act.
Recommendations related to Sales Taxes
The State should lower or gradually eliminate the sales tax exemptions on fossil fuel-based residential energy sources to align with climate goals.
The State could limit the residential energy sales tax exemption to only zero-emission fuels and renewable energy sources.
The State could eliminate the sales tax cap on motor fuel, which would increase the price at the pump and reduce consumption.
The State could consider eliminating exemptions for fossil-fuel based energy used for non-residential purposes, such as research and development.
Key Data
$369 million
— Fiscal impact of a partial repeal of the sales tax on residential energy, leaving exemptions for electricity, wood, and renewables.
$85 million
— Fiscal impact of repealing the sales tax exemption on automotive fuel receipts exceeding two dollars per gallon.
$89 million
— Fiscal impact of a partial repeal of the sales tax on fuel, gas, electricity, refrigeration, and steam used in research, development, and production.
$211 million
— Current program cost of the sales tax exemption for property sold to contractors for capital improvements or repairs for exempt organizations.
The fiscal year 2021 budget faced significant challenges due to a pandemic-induced decline in tax revenues, with a substantial portion of the 2020 shortfall attributed to a drop in sales tax revenue. Furthermore, the City faces ongoing fiscal pressure as the State intercepts hundreds of millions of dollars in sales tax revenue to cover its own budget gaps.
Key Data
$250 million
— Amount of sales tax revenue intercepted by the State in fiscal year 2021.
$150 million
— Amount of sales tax revenue the State will intercept in fiscal year 2022.
New York can improve its fiscal outlook without a stock transfer tax by reducing inefficient spending, such as $1.6 billion in aid to school districts and $4.4 billion in economic development, while utilizing $3.5 billion in rainy day funds and $3 billion in bond-financed capital investments. Additional revenue options include delaying personal income tax cuts and suspending the sales tax exemption on clothing.
Recommendations related to Sales Taxes
The state should consider suspending the sales tax exemption on clothing as part of a sustainable, comprehensive, and balanced budget package.
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 can generate significant revenue by temporarily suspending the sales tax exemption on clothing items costing less than $110, which would provide $774 million in fiscal year 2021. Alternatively, the state could expand the sales tax base to include services like cosmetology, entertainment, and professional services to better align with modern consumption patterns.
Recommendations related to Sales Taxes
The State should temporarily suspend the sales tax exemption on clothing items costing less than $110 to generate additional resources.
The State could expand the sales tax base to include services largely enjoyed by middle- and high income households, such as cosmetology services, entertainment, and/or professional services.
Key Data
$774 million
— Additional resources generated in fiscal year 2021 by temporarily suspending the sales tax exemption on clothing items costing less than $110.
$2.0 billion
— Additional resources generated in fiscal year 2024 by temporarily suspending the sales tax exemption on clothing items costing less than $110.
New York City taxpayers provide 71 percent of the Metropolitan Transportation Authority's non-fare and non-federal revenue through a combination of local, regional, and state taxes. This significant financial burden, which includes substantial portions of sales and mortgage taxes, is expected to grow as new funding sources are implemented.
Key Data
62%
— The City's share of taxable sales and purchases within the MTA region.
$3.4 billion
— The amount New York City residents and businesses paid toward the $4.5 billion in total MTA regional taxes.
76.5%
— The percentage of the total $4.5 billion in MTA regional taxes paid by New York City residents and businesses.
45%
— The portion of statewide revenues dedicated to the MTA that is contributed by New York City taxpayers.
$439 million
— The amount of statewide revenues dedicated to the MTA contributed by New York City taxpayers.
76%
— The City's share of collections for mortgage taxes, including taxes dedicated to the MTA.
New York's high tax burden, which includes the nation's 10th highest combined state and local sales tax rate, threatens the state's competitiveness and risks driving high-income earners to lower-tax states. To address the state's serious fiscal imbalance, policymakers should focus on restraining spending rather than increasing taxes, which would further exacerbate the state's economic challenges.
Recommendations related to Sales Taxes
Increasing taxes now would be counterproductive, as it would make New York even more expensive for residents and business, decrease competitiveness, and reduce options to weather the next recession.
The State should hold the line on the State’s already high tax burden, which includes the nation’s 10th highest combined State and local sales tax rate, to avoid further threatening the state's competitiveness.
Key Data
8.49 percent
— New York’s average combined State and local sales tax rate.
10th
— New York’s rank for combined State and local sales tax rate in the nation.
48 percent
— The amount by which New York’s State and local tax burden exceeds the national average.
12.7 percent
— The top personal income tax rate for New York City residents.
The 2019 Economic Development Sweetener Scorecard tracks 69 legislative proposals, including several bills that would alter sales tax rates or provide exemptions for specific businesses and projects. These proposals range from lowering sales tax for small businesses to providing sales and use tax exemptions for goods and services in specific construction zones.
The 2019 Economic Development Sweetener Scorecard tracks 67 legislative bills aimed at providing various tax incentives, grants, and loans to businesses across New York State. Among these proposals is a measure to lower the sales tax rate to 2% for businesses with fewer than 20 employees.
Key Data
2%
— Proposed reduction of the sales tax rate to 2% for businesses with fewer than 20 employees.
The New York State Adopted Fiscal Year 2020 Budget directs a portion of State and City sales tax revenue to the Metropolitan Transportation Authority to support its capital plan. This funding mechanism involves the State Comptroller intercepting these tax revenues and depositing them into a dedicated Central Business District Trust Fund and the CBD Tolling Capital Lockbox.
Key Data
$112.5 million
— State sales tax revenue deposit in State fiscal year 2020.
$150 million
— State sales tax revenue deposit in State fiscal year 2021.
$127.5 million
— City sales tax revenue deposit in State fiscal year 2020.
$170 million
— City sales tax revenue deposit in State fiscal year 2021.
1 percent
— Annual increase rate for sales tax deposits starting in State fiscal year 2022.
New York State's budget agreement includes positive measures to modernize tax collection, such as broadening the sales tax base to include online sellers and eliminating exemptions for energy service companies. These changes, alongside new dedicated revenue streams for the Metropolitan Transportation Authority, represent steps toward fiscal modernization despite broader concerns about the state's preparedness for a potential economic downturn.
Recommendations related to Sales Taxes
The state should broaden the sales tax base to require online sellers to collect sales tax.
The state should end sales tax exemptions for energy service companies.
The MTA's 10-Point Plan proposes using revenue from new internet sales taxes and marijuana excise taxes to fund transportation needs. These potential revenue sources are currently uncertain and should be integrated into the standard budget process rather than being statutorily earmarked.
Recommendations related to Sales Taxes
Ideally, new internet sales taxes should be allocated in the budget process and not earmarked in statute.
The FY 2020 Executive Budget includes a proposal to expand the sales tax base to include all online retailers, which is expected to generate $250 million annually for the state. This measure aims to create a more equitable competitive environment for traditional brick-and-mortar businesses.
Recommendations related to Sales Taxes
The State should expand the sales tax base to include all online retailers, which will level the playing field for brick and mortar retailers.
Key Data
$250 million
— Annual revenue yield for the State from expanding the sales tax base to include all online retailers.
New York should implement legislation requiring all online retailers to collect sales tax, following a Supreme Court ruling that allows states to mandate this for out-of-state sellers. This measure would level the playing field for brick-and-mortar businesses and generate significant revenue for both the state and local governments.
Recommendations related to Sales Taxes
The Governor should include legislation to require all online sellers to collect sales tax to level the playing field for brick and mortar retailers and capture this revenue.
Key Data
$159 million
— Estimated annual revenue yield for the State from requiring third-party sellers to collect sales tax.
$159 million
— Estimated annual revenue yield for localities from requiring third-party sellers to collect sales tax.
Legalizing recreational marijuana offers potential tax revenue, but states often face significant implementation delays and market volatility that make early revenue projections unreliable. New York should approach potential marijuana tax income with caution, ensuring that any funds are budgeted transparently and used for general state operating purposes rather than specific, earmarked projects.
Recommendations related to Sales Taxes
Recreational marijuana revenues should not be included in the State financial plan until the very complicated steps of crafting the statute and regulations have been completed; budgeting should not rely upon best guesses or optimistic assumptions.
Any future revenue should be received and spent on-budget, not through off-budget trusts or other fiscal gimmickry.
The revenue should not be committed to a specific purpose, as it will be recurring and reliable when the market is mature and should be used for recurring operating budget purposes.
If New York does implement such a program, the associated revenue must be cautiously forecast, transparently disbursed, and utilized for general state operating purposes.
Key Data
$430 million
— Amount collected in Washington State in fiscal year 2017 from marijuana sales tax.
37 percent
— Marijuana sales tax rate levied in Washington State.
6.5 percent
— General sales tax rate in Washington State.
$82 million
— Tax revenue received by California in the first six months of sales.
$185 million
— Projected tax revenue for California in the first six months of sales.
$700 million
— Potential annual tax revenue from marijuana legalization in New York State.
New York State's unique requirement for local governments to fund a portion of Medicaid costs creates an inequitable burden, particularly for lower-income counties. To address this, the state could finance a full takeover of these costs by adjusting revenue sources, such as increasing the state sales tax or intercepting a portion of local sales tax collections.
Recommendations related to Sales Taxes
New York should adopt measures that will completely eliminate the required local share of Medicaid.
The State could increase the state sales tax rate to finance the takeover of the local Medicaid share.
The State could intercept a portion of the sales tax receipts that local districts currently use as revenue for their budgets to fund the takeover.
A combination of options using state efficiencies, elimination of STAR, and some sales tax intercept might yield a design that can gain widespread support.
Key Data
$7 billion
— Annual cost burden on local governments for Medicaid.
$15.1 billion
— Revenue generated by the current 4% state sales tax.
5.8%
— Sales tax rate required to raise $7 billion in additional revenue.
$16 billion
— Reported sales tax receipts by 58 local districts in 2016.
43%
— Percentage of local sales tax collections that would need to be intercepted for a statewide takeover.
27%
— Percentage of local sales tax collections that would need to be intercepted if implemented only outside of New York City.
The City of New York faces nearly $1.0 billion in additional expenditures due to state-mandated programs and prior budget actions, including the state's intercept of $600 million in sales tax revenue. These fiscal pressures, combined with revenue shortfalls and other spending needs, require the city to exercise significant budgetary restraint.
Key Data
$600 million
— Total amount of sales tax revenue intercepted by the State following the refunding of STARC bonds in 2016.
$450 million
— Amount of sales tax revenue intercepted by the State to date, including $50 million in fiscal year 2016, $200 million in fiscal year 2017, and $200 million in fiscal year 2018.
$150 million
— Remaining amount of sales tax revenue to be intercepted by the State in City fiscal year 2019.
The New York State Fiscal Year 2019 Budget relies on short-term measures to close budget gaps, including $1 billion in school aid and $600 million in economic development spending, while failing to address sales tax policy. The budget also mandates that New York City provide $418 million for the Subway Action Plan or face the withholding of sales tax revenues.
Key Data
$418 million
— The amount the City of New York is forced to provide for the Subway Action Plan or have its sales tax revenues withheld.
Online retailers operating as marketplaces should be required to collect sales tax on all transactions to ensure parity with brick-and-mortar businesses. This policy would eliminate the current loophole where online sales avoid the same tax obligations as traditional retail stores.
Recommendations related to Sales Taxes
Online sales should be subject to the same taxes as brick and mortar retailers, regardless of the intricacies of how those sales are arranged.
The New York State Executive Budget for Fiscal Year 2019 includes a proposal to extend the sales tax to all internet purchases, which is viewed as a fair and appropriate way to broaden the tax base. This initiative is highlighted as a worthwhile component of the broader budget proposal.
Recommendations related to Sales Taxes
The state should implement the extension of sales tax to all internet purchases as a fair and appropriate broadening of the sales tax base.
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.
Proposed legislation A8019C/S5984-C would impose costly procurement restrictions on New York City school bus contracts and grant an unnecessary sales tax exemption for related equipment. This bill threatens the flexibility to negotiate contracts and undermines the savings achieved by competitive bidding, which previously saved $400 million over five years.
Recommendations related to Sales Taxes
Governor Cuomo should veto bill A8019C/S5984-C, which includes an unnecessary and unjustified sales tax exemption for school buses, parts, fuel, and other equipment.
Key Data
$1.4 billion
— Annual expense of pupil transportation in New York City.
8.1 percent
— Growth in the Employment Cost Index (ECI) between the end of 2011 and 2015.
4.7 percent
— Growth in the Consumer Price Index (CPI) between the end of 2011 and 2015.
$400 million
— Savings achieved over five years by opening school bus contracts to competition.
The Metropolitan Transportation Authority's 2017 preliminary budget relies on dedicated taxes, including sales and corporate income taxes, to fund operations and capital investments, with these receipts expected to grow by 4.5 percent. However, the agency faces significant financial risks from potential declines in these tax receipts, which make up 95 percent of PMT and MMTOA revenue, alongside expiring labor contracts and $14 billion in unfunded postemployment benefit liabilities.
Key Data
4.5 percent
— The expected growth rate for the Metropolitan Mass Transportation Operating Assistance (MMTOA) and the Payroll Mobility Tax (PMT), which consist largely of dedicated sales and corporate income taxes.
95 percent
— The portion of PMT and MMTOA receipts that are derived from taxes on payrolls and sales and surcharges on corporate taxes in the MTA region.
This document provides technical notes detailing the scope of various tax expenditures, credits, and exemptions, including those related to sales taxes for industries such as manufacturing, agriculture, and research and development. It clarifies the methodology and specific programs included in the analysis of state tax benefits and expenditures.
New York State's tax revenue projections indicate that consumption taxes, which include sales and use taxes, are expected to grow at a compounded average growth rate of 3.4 percent through fiscal year 2020. While the state's overall tax base is increasingly reliant on volatile personal income taxes, consumption taxes remain a key component of the state's revenue stream amidst potential economic downturns.
Key Data
3.4%
— The compounded average growth rate (CAGR) for consumption taxes, including sales and use taxes, projected through fiscal year 2020.
$15,725 million
— The amount of revenue generated from consumption taxes in fiscal year 2016.
$18,005 million
— The projected amount of revenue generated from consumption taxes in fiscal year 2020.
The State’s Enacted Budget for Fiscal Year 2016-2017 withholds $600 Million in City sales tax revenue, amounting to $200 Million annually, due to a debt refinancing for the Sales Tax Asset Receivable Corporation. This fiscal action impacts the city's revenue projections within the broader context of the Mayor's Executive Budget.
Key Data
$600 Million
— Total amount of City sales tax revenue withheld by the State's Enacted Budget for Fiscal Year 2016-2017.
$200 Million
— Annual amount of City sales tax revenue withheld by the State's Enacted Budget.
The dispute over $600 million in New York City sales tax revenue, stemming from the Sales Tax Asset Receivable Corporation (STARC) bond refunding, should be resolved by using the funds to pay off long-term debt rather than favoring either the City or State. This approach would provide lasting relief to taxpayers by reducing future debt service obligations instead of simply absorbing the contested cash into current budgets.
Recommendations related to Sales Taxes
The best outcome of this dispute would be to return the contested money to City and State taxpayers in the form of long-term savings.
The money should be put to a use that yields longer term savings for taxpayers, an appropriate goal of a bond refunding.
This can be achieved by paying off outstanding debt that requires debt service payments over a period longer than three years and closer to the duration of the STARC bonds.
A negotiated division between the City and State should be reached, to give relief to city and state taxpayers over the longer term.
Key Data
$600 million
— Amount of New York City sales tax revenue the Governor’s Executive Budget proposed to divert to the State.
$2.5 billion
— Amount of Municipal Assistance Corporation (MAC) debt outstanding at the time STARC was created.
$500 million
— Annual debt service burden for the City that was eliminated over five years.
$170 million
— Annual amount the State guaranteed to repay the STARC debt.
$2.7 billion
— Amount borrowed in October 2004 to repay the City for MAC debt service and other costs.
$637 million
— Amount the City borrowed in excess of what was needed to pay off outstanding bonds during the STARC refunding.
The fiscal year 2017 executive budget includes a proposal to shift $600 million in sales tax revenue from New York City to the state over three years via the Sales Tax Asset Receivable Corporation. This move is criticized as a belated and punitive measure that misuses a local development corporation.
Recommendations related to Sales Taxes
The proposal to shift $600 million in sales tax revenue from the City to the State through the Sales Tax Asset Receivable Corporation should be rejected as it is belated and punitive.
Key Data
$600 million
— Sales tax revenue shifted from the City to the State over three years through the Sales Tax Asset Receivable Corporation.
The Metropolitan Transportation Authority's financial plan relies on optimistic economic growth projections, leaving it vulnerable to significant revenue shortfalls during a potential recession. To mitigate these risks, the agency should adopt more conservative revenue assumptions, establish a dedicated rainy day fund, and limit the reallocation of capital and benefit funds to cover operating expenses.
Recommendations related to Sales Taxes
The MTA should adopt more cautious economic and revenue assumptions to better prepare for potential recessions.
The MTA should establish an explicit rainy day fund covering a larger share of total expenses to mitigate revenue shortfalls.
The MTA should implement greater restrictions on the diversion of OPEB funding and maintain a firmer commitment to PAYGO capital allocations to reduce financial risks.
Key Data
0.375%
— The State collects and remits to the MTA a 0.375 percent tax on certain sales within the MTA region.
-8.3%
— In the third year of an illustrative recession, sales tax revenue is projected to experience a variance of -8.3% relative to the financial plan.
$1,069 Million
— The MTA's 2019 projected sales tax revenue is $1,069 Million.
New York City's transportation sector, including taxis and ride-hailing services, generates significant tax revenue that could be better utilized to address the Metropolitan Transportation Authority's $2.6 billion capital funding gap. By reforming existing per-ride and sales tax structures on these services, the city could generate substantial additional revenue to support critical transit infrastructure.
Recommendations related to Sales Taxes
The Metropolitan Transportation Authority should receive funding from additional motor vehicle cross-subsidies to help offset the negative externalities of automobile use.
All TLC service trips, not solely taxicab trips, should be considered for the per-ride tax.
It may be appropriate to extend the per-ride tax to black cars and update the charge to reflect current fare structures.
If the new tax applied to black cars including DSPs were set at a rate equal to that applied to taxicabs, the tax would be 3.95 percent of the fare.
Policymakers should consider lowering the sales tax burden on black cars while dedicating the entire tax revenue to the Metropolitan Transportation Authority.
Key Data
$2.6 billion
— The remaining gap in the Metropolitan Transportation Authority's five-year capital investment plan.
$250 million
— The total amount the two existing taxes on the transportation services industry will raise in 2015.
$94 million
— The amount the Metropolitan Transportation Authority will receive from transportation services industry taxes in 2015.
$33 million
— The additional revenue that would have been raised in 2015 by applying the per-ride tax to all black car and dispatch service provider trips.
$225 million
— The potential increase in Metropolitan Transportation Authority revenues in 2019 from a reformed sales tax.
The Port Authority Trans-Hudson (PATH) rail system faces growing annual deficits, projected to reach $487 million by 2018, which are currently covered by bridge and tunnel toll revenues. To address this, a new financing model is proposed that would introduce a dedicated tax subsidy, such as a sales tax in five New Jersey counties, alongside fare increases to share costs more equitably among riders, motorists, and the general population.
Recommendations related to Sales Taxes
The region should implement a sales tax in the five New Jersey counties with the most PATH use—Bergen, Essex, Hudson, Middlesex, and Union—to provide a dedicated tax subsidy for the transit system.
Policymakers should consider a tax of 0.32 percent on retail sales in the five counties to raise $175 million to dedicate to PATH under the "50-25-25" funding guideline.
To meet the "equal shares" funding guideline, the region should implement a tax of 0.43 percent on retail sales in the five counties to raise $233 million.
The new sales tax rate in the five counties should be set at 7.32 percent to satisfy the "50-25-25" funding guideline.
The new sales tax rate in the five counties should be set at 7.43 percent to satisfy the "equal shares" funding guideline.
Key Data
$49.1 Billion
— Estimated taxable sales generated by the five counties in fiscal year 2013.
$54.2 Billion
— Estimated taxable sales in fiscal year 2018, assuming 2 percent annual growth.
0.32%
— Tax rate on retail sales in the five counties required to raise $175 million for PATH.
0.43%
— Tax rate on retail sales in the five counties required to raise $233 million for PATH.
7.32%
— New sales tax rate in the five counties to satisfy the '50-25-25' funding guideline.
7.43%
— New sales tax rate in the five counties to satisfy the 'equal shares' funding guideline.
Broadening the sales tax base to include more non-essential services, such as dry cleaning and kitchen renovations, could generate over $1 billion in annual revenue for New York City. This approach offers a less regressive alternative to other tax increases and aligns with state-level sales tax structures.
Recommendations related to Sales Taxes
The city should broaden the base of the sales tax to generate new revenue.
The city should subject more non-essential items to the sales tax, such as services like dry cleaning and kitchen renovations, to create a less regressive revenue stream.
Key Data
$440 million
— The amount Mayor Bloomberg raised annually by increasing the sales tax by 0.5 percent in 2009.
$1 billion
— The amount of annual revenue the City could raise by broadening the sales tax base to include a reasonable list of non-essential items.
New York's state sales tax system currently includes over 150 exemptions totaling more than $9 billion, many of which disproportionately benefit higher-income consumers. Repealing or examining these exemptions, alongside potential rate reductions or personal income tax offsets, could improve the tax system's fairness and competitiveness.
Recommendations related to Sales Taxes
The State should repeal or examine $1.8 billion in sales tax exemptions identified by the Commission.
The State should reduce exemptions from the sales tax to improve the tax system.
The State should consider lowering the sales tax rate as a simpler alternative to personal income tax offsets.
Key Data
$9 billion
— Total value of the state's more than 150 separate sales tax exemptions.
$1.8 billion
— Value of sales tax exemptions that the Commission identifies should be repealed or examined.
$611 million
— Value of the sales tax exemption for auto trade-ins.
$520 million
— Value of the sales tax exemption for capital improvements to property.
$305 million
— Value of the sales tax exemption for cable TV.
$4 million
— Value of the sales tax exemption for services to private aircraft.
The 2011 agreement in New York introduced a new personal income tax structure expected to generate $1.9 billion in annual revenue while aiming to curb future spending and reform the state's tax system. Although the agreement addresses the need to reform the state's high and regressive tax structure, which includes sales and property taxes, it focuses primarily on income tax adjustments and long-term fiscal measures.
The Mayor's preliminary budget for fiscal years 2010 through 2014 avoids broad tax increases while incorporating new, narrower revenue measures. This includes expanding the sales tax base to include aviation fuel, which is projected to generate $169 million in revenue for the upcoming fiscal year.
Key Data
$169 million
— Estimated revenue yield from including aviation fuel in the sales tax base for the next fiscal year.
New York's tax system is progressive in its treatment of low-income residents through credits, but middle-income families face the highest state and local tax burden as a share of their income. While the state effectively eases costs for the poorest households, the overall tax structure places a disproportionately heavy load on the middle class compared to the wealthiest earners.
Key Data
5%
— The share of income that the poorest fifth of New Yorkers pay toward state and local sales taxes.
The Metropolitan Transportation Authority faces a growing fiscal shortfall that requires a balanced funding approach, with 50 percent of costs covered by fares, 25 percent by drivers, and 25 percent by general tax subsidies. This strategy avoids implementing major new levies, such as increased sales taxes or payroll taxes, by focusing on fare adjustments and new revenue streams from drivers.
Recommendations related to Sales Taxes
The Ravitch Commission does not need to propose major new taxes dedicated to the MTA, such as a payroll tax or increased sales tax.
Fares should cover half of mass-transit operating costs.
Drivers should pay a quarter of the cost of mass transit, in addition to the full cost of MTA bridge and tunnel operations.
A general tax subsidy should cover the remaining 25 percent.
We must link fares to costs to create an incentive for efficiency.
Key Data
$1.2 billion
— Revised 2009 MTA cash shortfall estimate.
$2.7 billion
— Revised 2012 MTA cash shortfall estimate.
13%
— Current portion of mass-transit costs covered by driver revenues.
46%
— Current portion of mass-transit costs covered by fares.
$1.3 billion
— Additional revenue needed from drivers in 2009.
$1.9 billion
— Additional revenue needed from drivers in 2012.
In order to promote fiscal reform, the Citizens Budget Commission (CBC) convened three separate agenda-setting conferences for key stakeholders in the state budget process in 2007. Each session focused on one aspect of fiscal reform with a goal of identifying specific changes for the coming budget cycle. The expectation is…
New York State's local tax burden is among the highest in the nation, driven by heavy reliance on property and sales taxes, with local governments collecting 55 percent of total state and local tax revenue. While the state has implemented programs like STAR and Medicaid cost-sharing to address these burdens, these measures often shift costs rather than reducing the overall tax burden.
Key Data
8.25%
— New York's average combined state and local sales tax rate as of 2006, compared to a national average of 5.93%.
4%
— The current state sales tax rate, which generates 22 percent of state tax revenue.
17%
— The portion of local tax revenue contributed by local sales taxes.
3% to 5%
— The range of local sales tax rates levied largely at the county level.
Research indicates that while the impact of taxes on economic growth is complex and debated, high tax burdens can negatively affect a city's competitive position and employment levels. Policymakers should prioritize broad-based tax reform and efficient public service delivery over ad hoc tax incentives to foster a more favorable economic environment.
Recommendations related to Sales Taxes
The City should prioritize broad-based tax reform rather than relying on ad hoc discretionary tax incentives.
To compensate for the tax wedge, New York City must be ever more diligent in promoting agglomeration benefits and providing public services efficiently.
Policymakers should pursue property tax reform, specifically by reducing differentials across property classes.
Key Data
$8 of every $100
— New York City's local taxes absorbed this amount of taxable resources in 1997.
19.1 percent
— The long-run change in economic activity resulting from a 10 percent change in property taxes in one locality compared to its neighbors.
1.6 percent
— The projected reduction in the city's share of national employment resulting from a 10 percent increase in the city's top income tax rate.
26,400 jobs
— The estimated increase in private sector employment if the city's 18.5 percent increase in property tax rates instituted in 2002 were phased out.
New York State faces the challenge of financing education reform while maintaining its competitive tax status, leading to proposals that include broadening the sales tax base and expanding gambling. These strategies aim to generate billions in revenue without further increasing the overall tax burden on residents.
Recommendations related to Sales Taxes
Broadening the tax base through increased enforcement of sales tax on remote purchases could help generate necessary revenue for education reform.
Extending the sales tax to professional services and to certain cover exemptions is a recommended strategy to raise funds without compromising state competitiveness.
Revising the corporate income tax alongside broadening the sales tax base could raise up to $2.6 billion annually.
Key Data
$2.6 billion
— Potential annual revenue generated by 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.
$1.5 billion - $2.6 billion
— Estimated annual revenue range from broadening the tax base.
New York State could generate significant revenue for school finance reform by modernizing its tax code, specifically by collecting sales tax on remote and internet transactions and broadening the tax base to include currently exempt items and professional services. These measures offer a more efficient and equitable alternative to simply raising the existing sales tax rate, which would place the state at a competitive disadvantage.
Recommendations related to Sales Taxes
The state should collect the existing sales tax on remote and internet sales to capture revenue that often goes unpaid.
The base of the current sales tax should be broadened to include items now exempt, such as home improvements, veterinarian services, eyeglasses, newspapers, magazines, and laundry.
The base of the existing sales tax should be extended to include retail or consumer sales of selected professional services such as law and accounting.
Key Data
4.0%
— The current State sales tax rate.
$950 million
— Estimated annual yield from eliminating a reasonable set of sales tax exemptions.
$40 million to $590 million
— Estimated annual yield from better enforcement of sales tax on remote and internet sales.
$175 million to $595 million
— Estimated annual yield from extending the sales tax base to include selected professional services.
8.2%
— The required State sales tax rate to fund an $8.4 billion mandate if relying solely on rate increases.
New York State faces a significant funding gap to provide a sound basic education, which could be addressed by broadening the base of the existing sales tax to include currently exempt items and services. While higher tax rates are a last resort, restructuring the tax system to include remote and internet sales, as well as professional services, offers a more efficient and equitable path to generating necessary revenue.
Recommendations related to Sales Taxes
The State should collect the existing sales tax on remote and internet sales to generate significant new revenues.
The State should broaden the base of the current sales tax to include items now exempt without a sound economic basis.
The State should extend the sales tax to include consumer purchases of professional services such as law and accounting.
If the Court mandate requires more than the previous sources, the State should consider increasing sales tax rates as a last resort.
Key Data
$1 Billion
— The amount generated by each 0.5 percent increase in the sales tax rate.
$40 million to $590 million
— The estimated annual yield from collecting existing sales tax on remote and internet sales.
$950 million
— The estimated annual yield from broadening the sales tax base to include currently exempt items.
$175 million to $595 million
— The estimated annual yield from extending the sales tax to include consumer purchases of professional services.
New York State could generate significant additional revenue by broadening the sales tax base to include currently exempt retail and professional services, as well as by participating in the Streamlined Sales Tax Project to capture taxes on remote and internet sales. These measures would help address the state's need for revenue to fund court-ordered education reforms while potentially improving the stability and long-term viability of the sales tax system.
Recommendations related to Sales Taxes
The State should embrace the national Streamlined Sales Tax Project to ensure that taxes on internet and remote sales can be collected in the future.
The State should broaden the base of the sales tax to include many retail services that are not subject to tax.
The State should apply the sales tax to professional services when they are sold to consumers (not businesses).
Key Data
$40 million to $590 million
— Estimated annual increase in state sales tax collections if the state embraces the Streamlined Sales Tax Project.
$950 million
— Potential additional annual revenue from broadening the sales tax base to include currently untaxed retail services.
$175 million to $595 million
— Estimated annual revenue from applying the sales tax to professional services sold to consumers.
$521 million to $2,339 million
— Estimated sales tax revenue lost by New York State and its local governments due to remote sales in 2003.
$1.5 billion
— Annual tax revenue foregone by New York State due to its current exemptions of selected retail services.
$9.7 billion
— Total sales tax raised in New York State during the 2003-2004 fiscal year.
The New York region's transportation system, which requires $9.4 billion in annual mass transit operating expenditures, is currently financed through a patchwork of fares, tolls, and subsidies, including $1.1 billion in dedicated taxes for the MTA. To ensure long-term viability, the region should adopt a more comprehensive, regional approach to planning and financing that relies more heavily on user fees and less on general fund appropriations.
Key Data
$1,141.5 million
— Annual dedicated tax revenue collected specifically for the Metropolitan Transportation Authority (MTA).
$19.6 million
— Annual dedicated tax revenue collected specifically for road maintenance by local governments in the New York region.
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