The tax burden in New York encompasses the combined state and local personal income, business, and property taxes paid by residents and employers. This page covers CBC’s work on national tax comparisons, the economic impact of high tax rates, New York City property tax reform, strategies for mitigating federal tax law changes, and the relationship between tax policy and economic competitiveness.
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 not include State or City tax increases in 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 rather than raising taxes.
The State cannot afford expanded child tax credit and middle-class tax cuts in the long run unless it restrains spending elsewhere.
The State should take the opportunity to use its surplus funds to restructure State government to be lower cost and higher quality, pay cash for capital projects, and further bolster reserves.
Major savings plans are needed to reduce the growth in Medicaid costs and education aid so we can sustain critical services.
Key Data
In 2024, New York State and its localities led the nation in taxes, collecting the most per person at $12,357, which is 71% more than the national average.
As of February 2026, New York City residents face the nation's highest tax rates, including a combined top marginal personal income tax rate of 14.776%.
Between 2010 and 2022, New York's share of the nation's millionaires plummeted 31%, with its share of millionaire tax filers falling from 12.7% to 8.7%.
In fiscal year 2024, New York collected 71% more taxes per person than the national average, eclipsing second-place California by 22%. To improve competitiveness and attract residents and businesses, the state must hold the line on or reduce these nation-leading tax burdens while improving government efficiency.
Recommendations related to Tax Burden
Given that it is already top of the charts, New York should hold the line on or preferably reduce taxes.
New York should hold the line on taxes where possible, reduce them where feasible, and ensure public dollars produce stronger results.
Key Data
71%
— Amount more per person New York collected in taxes than the national average in fiscal year 2024.
46%
— Amount higher New York tax collections per $1,000 of personal income were than the U.S. average in fiscal year 2024.
22%
— Amount by which New York's per-capita tax collections exceeded second-place California in fiscal year 2024.
94%
— Amount more personal income tax per $1,000 of income New York collected compared to the national average in fiscal year 2024.
43%
— Amount more corporate taxes per $1,000 of state gross domestic product New York collected than California in fiscal year 2024.
60%
— Amount higher corporate taxes per $1,000 of state gross domestic product New York collected than Connecticut in fiscal year 2024.
New York State and its localities currently collect 78 percent more in taxes per person than the national average, with New York City residents facing a combined top marginal personal income tax rate of 14.776 percent. To maintain competitiveness and avoid further population loss, the state should refrain from raising taxes and instead focus on maximizing the efficiency of existing multi-billion dollar budgets.
Recommendations related to Tax Burden
The State and New York City should hold the line on taxes and not include State or City tax increases in 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 rather than raising taxes.
Key Data
78 percent
— The amount by which New York State and its localities collect more in taxes per person than the national average.
$44 billion
— The amount by which projected State taxes this fiscal year are higher than they were five years ago.
14.776 percent
— The combined top marginal personal income tax rate for New York City residents.
17.44 percent
— The tax rate on business activity in New York City.
12.7 percent to 8.7 percent
— The decline in New York State's share of the nation's millionaires between 2010 and 2022.
140,000
— The number of more people who moved out of New York State to other parts of the country than moved in during 2024.
New York State and its localities lead the nation in tax collections, with residents paying $12,495 per capita and $153 per $1,000 of personal income. Additionally, the state ranks third in the nation for spending, with total state and local expenditures reaching $15,894 per capita in 2023.
Key Data
$12,495
— Total state and local taxes collected per capita in New York, which is the highest of all states.
$15,894
— Total state and local expenditures per capita in New York, representing 40% more than the national average.
$153
— Total state and local taxes collected per $1,000 of personal income in New York, the second highest in the nation.
$18.4
— Corporate income tax revenue per $1,000 of state GDP in New York, which is higher than all other states.
New York's share of the nation's millionaires has fallen significantly since 2010, resulting in billions of dollars of lost personal income tax revenue for the state and city. High tax rates, combined with other factors like quality of life and cost of living, challenge the region's ability to attract and retain high-earning residents who contribute a substantial portion of the tax base.
Recommendations related to Tax Burden
New York should prioritize strategies to retain and grow the number of millionaires to ensure the fiscal and economic viability of the state and city.
Policymakers should avoid raising personal income taxes, as doing so could accelerate the trend of millionaires leaving the state.
Key Data
$34 billion
— Contribution of millionaires to State and City personal income tax revenue in 2022.
$13 billion
— Additional personal income tax revenue the State and City would have collected in 2022 if millionaire shares remained at 2010 levels.
8.7 percent
— New York State's share of the nation's millionaires in 2022, down from 12.7 percent in 2010.
14.776 percent
— Marginal personal income tax rate for New York City residents earning over $25 million annually.
44 percent
— Portion of State personal income taxes paid by millionaires in 2022, despite them comprising less than 1 percent of resident filers.
40 percent
— Portion of City personal income taxes paid by millionaires in 2022, despite them comprising less than 1 percent of resident filers.
$252 billion is the Governor Kathy Hochul’s New York State Executive Budget for Fiscal Year 2026. How much does it matter that New York State and its localities are already #1 in taxes and #2 in spending nationwide? On today’s episode we talk with New York State’s Budget Director, Blake…
New York State faces a $15.6 billion structural imbalance that threatens the long-term affordability of proposed tax cuts, necessitating spending restraint in areas like Medicaid and education. While the state intends to reduce taxes, it currently collects more taxes per capita than any other state, requiring a focus on restructuring government to ensure fiscal sustainability.
Recommendations related to Tax Burden
The State cannot afford expanded child tax credit and middle-class tax cuts in the long run unless it restrains spending elsewhere.
The State should take the opportunity to use its surplus funds to restructure State government to be lower cost and higher quality, pay cash for capital projects, and further bolster reserves.
Major savings plans are needed to reduce the growth in Medicaid costs and education aid so we can sustain critical services.
Key Data
$15.6 billion
— The amount of the State's current structural imbalance.
$33 billion
— The size of the hole in the MTA’s capital plan that lacks a proposal to be filled.
New York State and its localities lead the nation in tax collections, with residents paying $12,751 per capita in 2022, which is 79% higher than the national average. This tax burden is the highest in the country when measured against personal income, with the state collecting $169 per $1,000 of personal income.
Key Data
$12,751
— New York State and its localities collected this amount in taxes per capita in 2022, the highest of all states.
$169
— New York's state and local taxes collected per $1,000 of personal income in 2022, which is the highest in the nation.
49
— The number of states that collect less total tax revenue per capita than New York.
79%
— The amount by which New York's state and local tax collections per capita exceed the national average.
56%
— The amount by which New York's state and local tax collections per $1,000 of personal income exceed the national average.
$19
— The amount of corporate income tax collected per $1,000 of state GDP in New York, the highest in the nation.
New York's status as the nation's highest-tax state, combined with significant domestic outmigration, makes it critical for government leaders to prioritize spending restraint rather than increasing taxes or depleting reserves. Aligning recurring expenditures with revenues is essential to avoid a looming fiscal reckoning and ensure the state remains an attractive place for residents and businesses.
Recommendations related to Tax Burden
Leaders in Albany and New York City should prioritize spending control and ignore calls to increase taxes and deplete reserves.
Both the City and State must align recurring expenditures for all programs with revenues to ensure long-term fiscal stability.
Smart spending restraint should focus on prioritizing the programs that produce the most significant effects while shrinking or eliminating those that are ineffective.
Government leaders should increase efficiency by leveraging technology and streamlining processes to improve productivity.
State school aid needs to focus on better targeting aid to high-need districts rather than increasing aid to wealthy districts that already self-fund a sound basic education.
Key Data
$233 billion
— The State's total budget for fiscal year 2025.
$33 billion
— The increase in State Operating Funds spending between fiscal years 2020 and 2025.
$15 billion
— The structural gap in the State budget for fiscal year 2028 when accounting for non-recurring revenue.
$11.5 billion
— The increase in City-funded spending between fiscal years 2020 and 2025.
$3.6 billion
— The additional expenses in fiscal year 2025 to serve migrants.
40%
— The growth in Medicaid spending over the last three years.
New York City's property tax system is overly complex and inequitable, requiring comprehensive reform to improve transparency and fairness across different property types. The current structure places disproportionately high tax burdens on rental and commercial properties, which hinders housing production and economic competitiveness.
Recommendations related to Tax Burden
The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures do not lead to equitable treatment within rental and commercial property classes.
Policymakers must consider the proposed property tax reforms holistically rather than implementing them piecemeal, which could lead to greater inequities and uncertainty.
The City should analyze the extent to which there may be intra-class inequities resulting from the Department of Finance's valuation methods.
The City should eliminate class shares to narrow the disparities in tax burdens among property classes and encourage the development of rental housing.
Key Data
$1.5 trillion
— The estimated total market value of the new residential class, representing a 40 percent increase from the current valuation.
0.81 percent
— The nominal tax rate for the new residential class, which is far lower than the current rates of 20.309 percent in Class 1 and 12.267 percent in Class 2.
21 percent
— The assessment rate for a median condominium selling between $400,000 and $500,000, compared to 15 percent for units selling between $5 million and $7.5 million.
$0.83 per $100
— The median effective tax rate for one- to three-family homes, compared to $1.53 for large rentals and $1.72 for office buildings.
$940 or $960 per $100,000
— The amount properties not eligible for a homestead exemption would pay per $100,000 of market value, an increase from the current $810.
New York's Unemployment Insurance Trust Fund is currently insolvent with over $8 billion in debt, forcing employers to face significantly higher tax rates to cover the shortfall. To address this, the state must weigh the trade-offs of using state revenues to accelerate debt repayment and provide immediate tax relief against the need to preserve funding for other public services.
Recommendations related to Tax Burden
The State should pay off the debt over time with higher tax rates, which is the standard practice for managing UI trust fund deficits.
Lawmakers could partially accelerate repayment of the debt using State revenues, which would reduce the time needed to return to a positive balance.
The State could rapidly pay off the debt using State revenues, which would provide immediate tax relief to employers.
Lawmakers could provide additional targeted relief to small- and mid-sized employers through business tax credits that offset higher UI tax payments.
Longer term, lawmakers should consider reforming the UI system to ensure it is better equipped to meet claims during economic downturns and not be forced to borrow from the federal government regularly.
Key Data
$8.1 billion
— The amount of outstanding debt New York owes to the federal government for its Unemployment Insurance Trust Fund as of June 7, 2022.
$110 million
— The amount of interest New York has accumulated for the federal fiscal year 2022 on its unemployment insurance debt.
$14.7 billion
— The total amount of unemployment payments made by New York State in 2020.
$2.65 billion
— The balance of New York's Unemployment Insurance Trust Fund in February 2020, prior to the pandemic.
3.6%
— The average State unemployment insurance rate on employers in 2021.
$6.5 billion
— The total UI benefits paid out in New York in the second quarter of 2020.
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 State currently imposes the highest top personal income and corporate tax rates in the nation, creating fiscal risks by incentivizing high-income individuals and businesses to relocate. To improve economic competitiveness and reduce volatility, the state should lower, reverse, or allow the most recent tax increases to sunset.
Recommendations related to Tax Burden
Given the State’s stronger-than-expected receipts throughout the pandemic, the latest tax increases should be lowered, reversed, or at least allowed to sunset.
New York City's property tax system requires comprehensive reform to eliminate byzantine inequities and establish a more transparent, equitable tax rate setting process. The proposed changes should address disparities across residential, rental, and commercial property classes while clarifying the structure of exemptions and assessment methods.
Recommendations related to Tax Burden
Develop a simple and transparent tax rate setting process that eliminates the function of class shares and distributes the levy based on clearly articulated policy rationales for the differential levels of taxation.
Expand the scope to address disparities within the rental and commercial classes.
Provide details on how the homestead exemption and circuit breaker should be structured.
Clarify how assessed values for the new residential class will be set.
New York faces significant budget gaps, yet increasing taxes risks driving away high-income earners who currently contribute nearly 40 percent of personal income tax revenues. To maintain economic competitiveness, policymakers should prioritize controlling expenditures and seeking federal aid rather than relying on tax hikes, given that the state already imposes some of the nation's highest corporate and personal income tax rates.
Recommendations related to Tax Burden
Improving the fiscal outlook for both the State and the City primarily requires controlling expenditures and advocating for federal aid.
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.
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
16.49 percent
— The sum of the State effective tax rate, City rate, and MTA taxes on businesses operating in New York City.
12.696 percent
— The top personal income tax rate imposed in New York City, 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 billion
— The potential budget gap faced by New York State in fiscal year 2021.
$6.9 billion
— The potential budget gap faced by New York City in fiscal year 2022.
New York's state and local tax burden is the highest in the nation, creating significant risks that high-income earners will relocate to lower-tax states. To maintain competitiveness and fiscal stability, the state should avoid further tax increases and instead focus on restraining spending to address its serious fiscal imbalance.
Recommendations related to Tax Burden
Now is the time to make hard choices on spending and hold the line on the State’s already high tax burden.
Enacting additional tax increases now would make it even harder to balance the budget soundly in future recessions.
Increasing taxes now would be counterproductive; it would make New York even more expensive for residents and business, decrease competitiveness, and reduce options to weather the next recession.
Key Data
48 percent
— The amount by which New York's State and local tax burden is higher than the national average.
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.
8.49 percent
— New York’s average combined State and local sales tax rate, which is the nation’s 10th highest.
$19.3 billion
— The personal income tax liability of taxpayers with incomes greater than $1 million.
1 of every 5 dollars
— The portion of state operating funds spending that comes from taxpayers earning more than $1 million annually.
New York City's property tax system generates nearly $30 billion annually, funding a significant portion of city spending while remaining resistant to economic cycles. To improve equity and transparency, the system requires comprehensive reform, including moving to market-value assessments and implementing income-based tax rebates for homeowners.
Recommendations related to Tax Burden
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Valuation for tax purposes should reflect actual real estate market value, using sales-based models for one-, two-, and three-family homes, cooperatives, and residential condominiums.
Full market value should be the starting point for assessing the tax base, with differential effective tax rates to favor residential properties.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates of owner-occupied residential property taxes should be provided based on household income when tax bills exceed a set share of income.
Transition to the new system should occur over a five-year period.
Key Data
$30 billion
— The amount of revenue the property tax will generate in fiscal year 2020.
32 percent
— The portion of all city revenues generated by the property tax in fiscal year 2020.
6.2 percent
— The average annual growth rate of property tax revenue since fiscal year 1999, adjusted for tax policy changes.
A new study by the Citizens Budget Commission finds that each trip costs taxpayers $10.73. That's more than 10 times the subsidy for a trip on the subway at $1.05. Watch the original segment here .
The proposed pied-à-terre tax on high-value homes owned by nonresidents is problematic because it ignores the need for comprehensive property tax reform and threatens the city's economic competitiveness. Policymakers should prioritize broader tax reforms and avoid creating new, potentially harmful tax burdens in an already high-tax jurisdiction.
Recommendations related to Tax Burden
The extensive disparities in the property tax system should be addressed through comprehensive reform, not another piecemeal approach.
Revenues should not be dedicated, but rather allocated through the budget process.
Lawmakers should seriously consider lower tax rates that will do less harm to the attractiveness of NYC.
The State should not adopt a pied-a-terre tax without thoughtful deliberation about whether it is needed and revision of the proposal to mitigate the negative impacts.
The Legislature should pass congestion pricing in order to raise revenue, decrease congestion, and improve service.
Key Data
$5 million
— Threshold for nonresident-owned homes subject to the annual property tax surcharge.
0.5%
— Starting annual property tax surcharge rate for homes worth more than $5 million.
4.0%
— Top annual property tax surcharge rate for the value of homes greater than $25 million.
$25 million
— Value threshold at which the pied-à-terre tax rate increases to 4.0 percent.
$650 million
— Projected annual revenue yield from the proposed pied-à-terre tax.
New York City's property tax system lacks transparency and equity, requiring a comprehensive redesign to address structural inequities and improve fairness. The proposed reforms include moving cooperatives and condominiums to Class 1, eliminating the existing class share system, and implementing a circuit breaker to provide targeted relief for lower-income homeowners.
Recommendations related to Tax Burden
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Class 1 should face the lowest tax burden, as measured by the effective tax rate, with increasing ETR’s for residential rental buildings, utilities, and commercial properties.
Valuation for tax purposes should reflect actual real estate market value, using more transparent methods that take advantage of the substantial data available to the Department of Finance.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates should be provided of owner-occupied residential property taxes based on household income when tax bills exceed a set share of income.
Transition to the new system should occur over a five-year period.
Key Data
10 percent
— The Constitutional debt limit sets the maximum outstanding debt for New York City at 10 percent of the five-year average of market value.
2.5 percent
— The maximum property tax revenue that can be raised and used for operating expenses is set at 2.5 percent of the five-year average of market value.
2.25 times
— A report on the largest city in each of the 50 states indicates that ETRs on commercial properties are no greater than 2.25 times that of owner-occupied homes in 46 of 53 cities.
5 percent
— The circuit breaker could apply to property taxes on residential properties that exceed 5 percent of household income for households with income below $100,000.
$100,000
— The circuit breaker could apply to property taxes on residential properties that exceed 5 percent of household income for households with income below $100,000.
20 percent
— The current five-year phase-in of assessment increases, and the 20 percent cap on assessed value growth over five years on Class 1 homes result in foregone revenue.
New York should implement an Unincorporated Business Tax to help residents and businesses mitigate the impact of the federal $10,000 cap on state and local tax deductions. By allowing an optional tax at the entity level, the state can provide relief while ensuring revenue neutrality and minimizing compliance burdens for taxpayers.
Recommendations related to Tax Burden
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 to reduce risk to the taxpayer by providing choice.
Preserving the proposed 5 percent rate, which combined with the 93 percent credit would provide significant benefit.
Preserving the proposed 93 percent personal income tax credit, which combined with the 5 percent rate will provide significant benefit.
Expressly reflecting in law that the UBT is not added back for taxable State income purposes to ensure the tax does not increase State revenues.
Making the UBT credit non-refundable, as reducing the risk of a legal challenge to the tax outweighs the benefits of making it refundable.
Modifying statutory language to strengthen the case for deductibility by expressly stating that the UBT is a tax imposed on the net business operations of the unincorporated business itself.
Working with other states to align tax provisions, including credits and apportionment rules, to maximize the UBT’s benefits and minimize cases in which multiple states tax the same income.
Key Data
$10,000
— The federal cap on a taxpayer's deduction of state and local taxes (SALT cap).
$500,000
— The suggested State taxable net income threshold at which to impose the tax.
5%
— The proposed Unincorporated Business Tax (UBT) rate.
93%
— The proposed personal income tax credit rate to be combined with the UBT rate.
New York City's tax burden is significantly higher than other large U.S. cities, with personal income and commercial property taxes being particularly high. Policymakers should be cautious about further tax increases, as the city's already high rates and the ease of intraregional migration create significant uncertainty regarding the potential for negative economic impacts.
Recommendations related to Tax Burden
Policymakers considering raising the personal income tax or the commercial property tax need to be aware that both taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities.
The policy implication is that these conditions should be considered in any initiatives to raise more revenue from the property tax.
The implications of these studies for New York City tax policy must be considered carefully because of the limited parallels between state and local circumstances.
Key Data
46 percent
— New York City's state and local taxes were higher than the average for other large cities.
51 percent
— New York City's commercial property tax was higher than the average for the other 14 of the 15 largest cities.
$327,000
— The annual difference in commercial property tax for a $25 million property in New York City compared to the average of the other 14 largest cities.
47 percent
— In 2012, the commercial property tax rate in New York City was higher than the average of the other 14 largest cities in the nation.
The Tax Cuts and Jobs Act creates a significant competitive disadvantage for New York by capping state and local tax deductions, which increases the tax burden on residents and businesses. This federal policy shift threatens to drive residents away and necessitates immediate state and city action to prevent unplanned tax increases and protect the local economy.
$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,…
New York City taxpayers currently subsidize the teachers' retirement system's tax deferred annuity by $1.2 billion annually due to a guaranteed 7 percent return that exceeds market rates. This arrangement creates a significant financial burden and risks the viability of the pension system by leveraging assets, necessitating reforms to align the plan with standard market-based investment options.
Recommendations related to Tax Burden
The most direct way to make the change would be to eliminate the TDA and transfer its assets and participants to the OLR plan.
A more gradual change would be to require only newly hired teachers to use the OLR plan, but to reform the TDA plan serving current teachers and retirees.
The fixed income option should be converted to choices comparable to those offered in the OLR plan – a government bond fund and a corporate bond fund with returns based on prevailing interest rates.
If the city’s elected leaders and taxpayers want to provide teachers, and other municipal employees, with a more secure investment option for their deferred compensation than is available in the OLR plans, they should consider the approach used by the federal government.
Key Data
$1.2 billion
— annual cost to New York City taxpayers for the guaranteed return on the teachers' tax deferred compensation plan.
7.0 percent
— current guaranteed interest rate on the TDA fixed fund option for most participants.
$18.7 billion
— amount of money in the fixed fund in 2015, representing 66 percent of total TDA assets.
$7.4 billion
— amount of money in the fixed fund in 2007, representing 40 percent of total TDA assets.
36 percent
— taxpayer subsidy as a percentage of the total taxpayer contribution to the TRS QPP in 2015.
$4.5 billion
— potential loss on investments the QPP would have to make good on if the highly leveraged investments suffered a loss equal to the 2008-2009 market decline.
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…
The passage of the federal "Tax Cuts and Jobs Act" necessitates a thorough evaluation of its potential consequences for the economy, property values, and tax revenues in New York City and State. A special committee of experts has been assembled to analyze these legislative changes and develop strategies to address any resulting negative impacts on the region.
New York's Health Care Reform Act taxes, which generate over $4.3 billion annually, impose a regressive financial burden by inflating health insurance premiums for individuals and employers. Shifting to broader-based revenue sources and reforming the inequitable funding of graduate medical education would reduce these costs and create a more rational tax structure.
Recommendations related to Tax Burden
The Legislature should think creatively about how to replace the HCRA taxes in future budgets to lower health insurance premiums and ease the burden on lower wage workers.
The State should explore alternative waivers or other special provisions to retain the federal funding while shifting to a more progressive revenue stream.
The State should re-evaluate the nature and scale of the State’s commitment to graduate medical education.
Whatever money the State decides to allocate to graduate medical education should be raised from a tax levied uniformly across the State.
Key Data
$4.3 billion
— Annual yield from the two major taxes authorized under the Health Care Reform Act.
$1.1 billion
— Annual yield from the Covered Lives Assessment tax on commercial health insurance.
$3.2 billion
— Annual yield from the hospital revenue surcharge.
$500 million
— Annual federal government financing for the Medicaid portion of the hospital revenue surcharge.
$1 billion
— New York State's annual commitment to funding graduate medical education.
$2.1 billion
— Federal Medicare program support for graduate medical education going to hospitals in New York.
New York’s economic development tax incentive programs are the most expensive in the nation, costing taxpayers $8.25 billion in 2015. These programs, which often lack evidence of cost-effectiveness, require significant reform to improve transparency, accountability, and fiscal oversight.
Recommendations related to Tax Burden
The State should implement a moratorium on new economic development spending until it increases transparency, establishes performance criteria, and enforces accountability.
New York should establish a unified economic development budget that captures both state and local costs.
The State should use standardized metrics across all economic development initiatives to ensure consistency.
The State should publish a database of deals to shine a light on the recipients of tax incentives.
The State should improve program design to follow best practices and reward actual performance.
The State should make administrative reforms to procurement and oversight rules.
Key Data
$45 billion
— The estimated cost to taxpayers for state and local economic development tax incentives nationwide in 2015.
$8.25 billion
— The total amount of incentives awarded by New York in 2015.
2.5 times
— The rate at which New York's incentive use exceeds the national average.
New York's requirement for local governments to fund a significant portion of Medicaid creates an inequitable tax burden, as low-income counties pay disproportionately more relative to their wealth than affluent ones. To address this, the state should phase out local Medicaid funding over four to five years and replace it with statewide revenue sources to ensure a more equitable distribution of costs.
Recommendations related to Tax Burden
The State should assume responsibility for the local share liability over a period of four or five years.
New York should eliminate the local funding requirement for Medicaid to improve the way the state finances the program.
New, statewide revenues will be required to replace the current local share in a way that relieves the disproportionate burden placed on taxpayers in low-income counties.
Key Data
$7.1 billion
— The amount New York's counties will pay for Medicaid in state fiscal year 2012.
$6.5 billion
— The amount New York's counties paid for Medicaid in fiscal year 2008.
$555
— The Medicaid burden per capita in New York City, which ranks first among counties.
$11.07
— The Medicaid burden per $1,000 of personal income in New York City.
$86
— The lowest per capita Medicaid spending, found in Putnam County.
$1.63
— The lowest Medicaid spending as a portion of personal income, found in Putnam County.
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 City's property tax system generates $24 billion in annual revenue, yet it relies on a structure where effective tax rates vary significantly by property type, often placing a higher burden on commercial and rental properties compared to small homes. These disparities, driven by policy decisions and exemption programs, create inequities among similar properties and can increase costs for renters and businesses.
Key Data
$24 billion
— Projected revenue generated by property taxes in fiscal year 2017, representing 44 percent of all City tax revenues.
4.12 percent
— Average effective tax rate for large rental properties, which is more than five times that of small homes.
3.87 percent
— Average effective tax rate for commercial property, which accounts for 42 percent of the property tax levy despite comprising less than 20 percent of total market value.
$3 billion
— Total cost of housing and economic development tax exemptions granted in 2016.
$350 million
— Total cost of personal property tax exemptions granted in 2016.
0.74 percent
— Lowest average effective tax rate, which applies to small homes.
New York City teachers have access to a tax-deferred compensation plan that guarantees a 7% investment return, a policy that costs taxpayers $1.2 billion annually due to the gap between guaranteed rates and market returns. This arrangement creates a significant financial burden and poses risks to the viability of the teachers' pension system, necessitating reform to align benefits with market conditions.
Recommendations related to Tax Burden
The most direct way to make the change would be to eliminate the TDA and transfer its assets and participants to OLR’s plan.
A more gradual change would be to require only newly hired teachers to use the OLR plan, but to reform the TDA plan serving current teachers and retirees.
The fixed income option should be converted to choices comparable to those offered in the OLR plan – a government bond fund and a corporate bond fund with returns based on prevailing interest rates.
If the city’s elected leaders and taxpayers want to provide teachers, and other municipal employees, with a more secure investment option for their deferred compensation than is available in the OLR plans, they should consider the approach used by the federal government.
Key Data
$1.2 billion
— The taxpayer subsidy for the teachers' fixed return fund in fiscal year 2015.
$238 million
— The taxpayer subsidy for the teachers' fixed return fund in fiscal year 2007.
$18.7 billion
— The total amount of money in the fixed return fund as of 2015.
36 percent
— The portion of the total taxpayer contribution to the teachers' pension system that the 2015 taxpayer subsidy represented.
7.0 percent
— The current guaranteed interest rate on the tax deferred annuity fixed fund option.
8.25 percent
— The previous guaranteed interest rate on the tax deferred annuity fixed fund option.
The Access-A-Ride paratransit program faces a worsening fiscal outlook, with expenses projected to reach $621 million by 2020, placing an increasing financial burden on the transit agency and its riders. To mitigate this, the agency should pursue strategies such as shifting to lower-cost service providers, increasing fares, and securing Medicaid reimbursement for eligible medical trips.
Recommendations related to Tax Burden
The MTA should double the paratransit fare, which could save as much as $184 million annually by reducing trips and increasing fare revenue.
The MTA should shift ambulatory trips to its broker car service (BCS) program, which could save the MTA up to $126 million annually.
The MTA should seek Medicaid reimbursement for non-emergency medical transportation trips, which could generate an estimated $14 million annually.
The MTA could provide a capped subsidy to allow paratransit users to use the City’s taxicab fleet and Transportation Network Companies, which could save up to $28 million annually if applied to the Manhattan hail zone.
The MTA should consolidate management layers by contracting a single, full-service broker, which could save up to $30 million annually.
Key Data
$461 million
— The cost of the Access-A-Ride program in 2015.
$385 million
— The amount of MTA revenue projected to subsidize the program in 2020.
$256 million
— The total internal MTA cross-subsidy for the program in 2015.
$621 million
— The projected total program expenses for 2020.
New York City's property tax system is riddled with inequities, where different classes of property are taxed at vastly different effective rates due to assessment caps, phase-ins, and the undervaluation of co-ops and condos. Reforming this system to be more equitable and transparent requires either consolidating property classes or eliminating the caps and phase-ins that currently distort tax burdens and create significant revenue disparities.
Recommendations related to Tax Burden
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
The City should eliminate the caps and phase-in provisions for all properties to address inequities among properties.
The City should value condos and co-ops based on market values using sales prices as is currently the case for Class 1 properties.
The City should assess co-ops and condos with 1-3 family homes at an assessment ratio of 6 percent.
The City should eliminate the assessment growth caps on 1-3 family homes to ensure all homeowners face the same effective tax rate.
Key Data
$2 billion
— The target amount of additional property tax revenue to be raised in fiscal year 2015.
$4.5 billion
— The estimated revenue foregone in fiscal year 2015 due to the cap and phase-in rules.
0.81%
— The effective tax rate for Class 1 properties in fiscal year 2014.
3.79%
— The effective tax rate for Class 2 properties in fiscal year 2014.
4.57%
— The effective tax rate for Class 3 properties in fiscal year 2014.
3.83%
— The effective tax rate for Class 4 properties in fiscal year 2014.
New York City's tax burden is significantly higher than in other large U.S. cities, with personal income and commercial property taxes acting as major outliers. Policymakers should exercise caution when considering further tax increases, as the city's already high rates and the ease of intraregional migration create significant uncertainty regarding the potential economic impact.
Recommendations related to Tax Burden
Policymakers considering raising the personal income tax or the commercial property tax need to be aware that both taxes are already significantly higher than in other large cities.
Policymakers would be well advised to examine options where New York City is not as far out of line with other cities.
The policy implication is that conditions regarding the high commercial property tax and the disparity between commercial and residential rates should be considered in any initiatives to raise more revenue from the property tax.
The implications of studies on tax migration must be considered carefully because of the limited parallels between state and local circumstances.
Key Data
46%
— New York City's state and local taxes were 46% higher than the average for other large cities in 2004.
90%
— New York City's local taxes were 90% higher than the average for other large cities in 2004.
51%
— The New York City commercial property tax was 51% higher than the average for the other 14 of the 15 largest cities in 2012.
$800 Million
— A 10% across-the-board surcharge on the personal income tax would raise more than $800 Million annually.
$750 Million
— Increasing the top personal income tax rate to 4.626% would likely raise more than $750 Million annually.
New York City's property tax system is riddled with inequities, including assessment caps and the undervaluation of co-ops and condos, which create disparate effective tax rates across different property types. To address these issues while raising $2 billion in revenue, the city should consider reforms such as revaluing properties, eliminating assessment caps, and consolidating homeowner categories to ensure a more equitable distribution of the tax burden.
Recommendations related to Tax Burden
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
The city should eliminate the caps for Class 1 properties and treat co-ops and condos identically to Class 1 properties to eliminate disparities.
The city should eliminate the caps and phase-in provisions for all properties to address inequities among properties.
The city should provide special exemptions or property tax “circuit breakers” to elderly or low-income homeowners to protect them from tax payments on appreciating property.
The city should value condos and co-ops based on market values using sales prices rather than income-producing methodology to reduce undervaluation.
Key Data
$2 billion
— The target amount of additional property tax revenue the city aims to raise through the proposed reforms.
$4.5 billion
— The estimated revenue foregone in fiscal year 2015 due to existing assessment cap and phase-in rules.
0.78 percent
— The effective tax rate for Class 2 condos and co-ops based on the Department of Finance's market value determinations.
4.60 percent
— The effective tax rate for large Class 2 rental buildings.
1.21 percent
— The assessment ratio for a two-family home in Park Slope/Carroll Gardens.
45 percent
— The assessment ratio for a commercial property in East New York/Starrett City.
New York's tax relief programs, including the $3.4 billion STAR program and the Family Tax Relief Rebate, are poorly targeted and often benefit wealthier households rather than those with the greatest burden. Reforming these existing programs and expanding the Real Property Tax Credit would more effectively provide relief to low and moderate-income residents than creating new, costly initiatives.
Recommendations related to Tax Burden
The Commission should be focused on repurposing and improving the significant sums already directed to local tax relief, not on spending for sizable new programs.
The Tax Relief Commission should re-examine and reform the local tax relief programs on which the State already spends $4 billion annually.
The Commission should achieve its objective by better targeting STAR aid and the Family Tax Relief rebate and by expanding the Real Property Tax Credit so that all three of these programs provide deeper relief for low and moderate income households with the greatest burden.
The State should pursue cost containment measures if given financial responsibility for the entire Medicaid program.
Key Data
$2 to $3 billion
— Projected out-year budget gaps by fiscal year 2016-17.
$4 billion
— Annual state spending on local tax relief programs.
$3.4 billion
— Cost of the STAR (School Tax Relief) program in fiscal year 2014.
$410 million
— Funding allocated for Family Tax Relief rebates.
$20.2 million
— Total credit provided by the Real Property Circuit Breaker Tax Credit in 2010.
Expanding universal prekindergarten in New York would impose a significant new fiscal burden on already highly taxed residents, as the local tax burden is currently 72 percent higher than the national average. Policymakers must carefully consider the high costs of such programs, as funding them through school tax levies could require increases ranging from 2.3 percent to 7.1 percent depending on the scope and funding model.
Recommendations related to Tax Burden
New York’s leaders should review the history of such efforts and take stock of key fiscal realities before raising public expectations for universal prekindergarten.
Policymakers should acknowledge that underfunding services for students who could benefit most for the sake of achieving universality is not sound public policy.
The state should question whether funding pre-k seats in public schools for children from upper-income families should be a priority use of scarce tax dollars.
Key Data
$80.60 per $1,000 of personal income
— The current local tax burden in New York, which is 72 percent higher than the national average.
2.3 percent
— The estimated average school tax levy increase required to fund an Abbott-style pre-k program for all four-year-olds.
5.0 percent
— The estimated average school tax levy increase required to fund an Abbott-style pre-k program for all three- and four-year-olds.
3.4 percent
— The estimated school tax levy increase needed for all four-year-olds if per pupil spending is equivalent to K-12 general education spending.
7.1 percent
— The estimated school tax levy increase needed for all three- and four-year-olds if per pupil spending is equivalent to K-12 general education spending.
New York City's health insurance costs for employees and retirees have more than doubled over the last decade, creating a significant fiscal burden that contributes to an $83 billion unfunded liability. Implementing premium-sharing for active employees and retirees, alongside eliminating Medicare Part B reimbursements, could generate up to $2.2 billion in annual savings by fiscal year 2016.
Recommendations related to Tax Burden
The City should implement premium-sharing for employees, with a target of 10 percent for single coverage and 25 percent for family coverage, to align with private sector and other government standards.
The City should require premium-sharing by retirees, with a target of 50 percent contribution, to reduce the long-term financial obligations currently borne by taxpayers.
The City should eliminate the reimbursement for Medicare Part B premiums for retirees and their spouses to further reduce the fiscal impact on the municipal budget.
Key Data
$83 billion
— The estimated unfunded liability for retiree health insurance and other post-employment benefits (OPEB).
$2.2 billion
— The projected annual savings by fiscal year 2016 if the proposed health insurance premium-sharing and reimbursement reforms are adopted.
$1.8 billion
— The projected annual savings by fiscal year 2014 if the proposed health insurance premium-sharing and reimbursement reforms are adopted.
$7 billion
— The projected cost of health insurance for municipal employees and retirees by fiscal year 2016.
$4.8 billion
— The cost of health insurance for municipal employees and retirees in fiscal year 2012.
$280 million
— The cost to the City in fiscal year 2013 for reimbursing retirees and their spouses for Medicare Part B premiums.
New York City spends over $2.2 billion annually on waste management, costing the average household $700 per year, primarily due to the high expense of exporting trash to distant landfills. To reduce this financial burden, the city should prioritize the construction of local waste-to-energy facilities and implement financial incentives like "pay-as-you-throw" to encourage waste reduction and recycling.
Recommendations related to Tax Burden
The City should foster the construction of waste-to-energy plants sited and designed for city needs and should partner with owners of existing facilities within the region to expand their capacity and willingness to process New York City’s waste.
The City should implement a trial pay-as-you-throw system in the short-term, taking lessons learned to a citywide program in the long-term.
The City should stick to its plan and reinvigorate the recycling program by touting the expansion and the simplification of recycling rules.
Municipal leaders should give high priority to managing solid waste in a way that is fiscally and environmentally sound.
The City should require prospective companies to demonstrate a record of meeting fiscal and environmental benchmarks.
Key Data
$2.2 billion
— Total annual cost to taxpayers for DSNY waste management responsibilities in fiscal year 2012.
$700
— Annual cost per household for DSNY waste management responsibilities.
$95 per ton
— Cost to export and bury garbage in landfills hundreds of miles away.
$119 million
— Annual savings for the City if new and expanded facilities accommodate two million tons of waste.
$2 billion
— Present value savings over 30 years from expanding local waste-to-energy capacity.
$300 million
— Cost of disposing of garbage, usually in out-of-state landfills.
New York's public pension system places a disproportionate financial burden on taxpayers, with employer contributions significantly outpacing employee contributions compared to national norms. Implementing the proposed Tier VI pension reforms, which include increasing employee contribution rates and establishing a risk-sharing mechanism, would help align the state with national standards and provide necessary relief to taxpayers.
Recommendations related to Tax Burden
The state should adopt the Tier VI pension reform proposal to shift some of the financial burden from taxpayers to employees.
Policymakers should implement the proposed 'risk-reward' approach to share the downside risk of market downturns with employees rather than placing it entirely on taxpayers.
New York should increase employee pension contribution rates to a range of 4 to 6 percent to provide much-needed relief to local government leaders and taxpayers.
Key Data
8:1
— The ratio of employer to employee contributions in New York State's state-run pension systems, significantly higher than the national average.
7:1
— The ratio of employer to employee contributions for New York's local pension systems, compared to a national average of 4:1.
$7.2 billion
— The amount contributed by local taxpayers to New York's local pension plans in 2009, representing 87 percent of total contributions.
$97.7 billion
— Total employer and employee contributions to state-run public pension funds nationwide in 2010.
$8.3 billion
— The total amount contributed to New York's local pension plans in 2009.
New York's state and local tax burden is the third highest in the country, driven significantly by high public employee pension costs that are 70% above the national average. Implementing a new pension benefit package for new employees could align the state with national norms and save $123 billion over the next 30 years.
Recommendations related to Tax Burden
The governor should use his strong hand in the budget process to bring about more affordable pension benefits at all levels of government.
A pension reform proposal should be included in the governor's budget, and the Legislature should swiftly adopt it.
Implementing a new package of pension benefits for new employees would bring New York more closely in line with national norms and save New York state and local governments $123 billion over the next 30 years.
Key Data
$143 per $1,000 of personal income
— New York's state and local tax burden in fiscal year 2009.
40%
— Amount by which New York's state and local tax burden exceeds the national average.
$12 per $1,000 of personal income
— Pension costs in New York, which are more than 70% above the national average.
70%
— Amount by which New York's pension costs exceed the national average.
$574
— Annual taxes paid per person in New York for public employee pensions.
$123 billion
— Projected savings for New York state and local governments over the next 30 years from a new package of pension benefits for new employees.
New York's high state and local tax burden, which is 40 percent above the national average, is exacerbated by the rising costs of public employee pensions. Implementing the proposed "Tier VI" pension reform would help align benefits with national norms, reduce the competitive disadvantage caused by these costs, and generate significant long-term savings for taxpayers.
Recommendations related to Tax Burden
The Legislature should adopt the "Tier VI" pension reform plan in a timely manner.
Governor Cuomo should include the "Tier VI" pension reform plan in the Executive Budget.
The state should extend optional defined contribution plans to other groups of employees to draw those looking for more portable retirement benefits.
Key Data
$143
— New York's state and local tax burden per $1,000 of personal income in fiscal year 2009.
40 percent
— The amount by which New York's state and local tax burden exceeded the national average in fiscal year 2009.
$93 billion
— Estimated savings for New York State and local governments over 30 years from the proposed Tier VI pension changes.
$30 billion
— Estimated savings for New York City pension systems over 30 years from the proposed Tier VI pension changes.
$123 billion
— Total estimated savings for public employers and taxpayers from the proposed Tier VI pension reforms over 30 years.
The proposed legislation allowing school districts to borrow for pension contributions would undermine the property tax cap and obscure the true cost of public employee pensions from taxpayers. Instead of shifting these financial burdens to future residents and students, the state should implement lasting pension benefit reforms to ensure long-term sustainability.
Recommendations related to Tax Burden
Governor Cuomo should veto A6309/S4067 to ensure the property tax cap functions as intended without being undermined by school district borrowing.
The state should implement real and lasting changes to pension benefits to ensure they are sustainable over the long run rather than deferring costs.
Policymakers should prioritize the enactment of a new pension tier to ensure the true cost of public employee pensions is clear to taxpayers.
Key Data
$211 million
— Employer contributions to the New York State Teachers’ Retirement System in 2000.
$925 million
— Employer contributions to the New York State Teachers’ Retirement System in 2010.
16 percent
— The average annual growth rate of employer contributions to the New York State Teachers’ Retirement System between 2000 and 2010.
125 percent
— The amount of required 2011 pension contributions that school districts would be allowed to borrow under the proposed legislation.
New York State's high debt burden, which consumes a significant portion of tax revenue, places it in a 'danger zone' compared to other states. To improve fiscal health and reduce the long-term tax burden, the state must reduce its long-term liabilities by $20.4 billion.
Recommendations related to Tax Burden
In order for New York to be below the danger zone threshold, it would have to lower its long-term liabilities from the 2008 level of $120.0 billion by $20.4 billion.
If all the reduction were in long-term bonds, then that debt would have to be lowered from $71.9 billion to $51.5 billion.
Key Data
$5.6 billion
— Amount New York is currently paying in annual debt service.
$7.1 billion
— Projected annual debt service for New York in four years.
$120.0 billion
— New York's total long-term liabilities in 2008.
$20.4 billion
— Amount New York would need to lower its long-term liabilities to exit the 'danger zone'.
$71.9 billion
— New York's long-term bond debt in 2008.
$48.1 billion
— Combined unfunded pension and OPEB liability in New York.
New York maintains the sixth most progressive tax system in the nation, yet middle-income families face a disproportionately high tax burden compared to both the poorest and wealthiest residents. To achieve a more equitable distribution, policy efforts should prioritize reducing the tax obligations for households in the middle of the income spectrum.
Recommendations related to Tax Burden
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 percent
— The poorest fifth of New Yorkers pay 9.6 percent of their income for state and local taxes.
11.6 percent
— The middle quintile of New York families pay 11.6 percent of their income to state and local taxes.
7.2 percent
— The top 1 percent of earners in New York pay 7.2 percent of their income for state and local taxes.
6th
— New York has the 6th most progressive tax system in the nation.
6.7 percent
— The top 1 percent in New York pay 6.7 percent of their income to state and local personal income taxes.
New York City taxpayers currently fund $10.4 billion in municipal employee pension and health benefits, a cost that significantly exceeds private-sector standards and places an unnecessary strain on public finances. Aligning these benefits with private-market norms could generate nearly $1.4 billion in annual savings for taxpayers.
Recommendations related to Tax Burden
The city should require current workers to make contributions toward health-insurance premiums equal to the amounts paid by employees of local private-sector firms to generate $628 million in annual savings for taxpayers.
The city should require retirees to make contributions toward health-insurance premiums to generate $741 million in annual savings for taxpayers.
The city should convert to defined-contribution plans for future hires to reduce long-term pension costs for taxpayers.
Key Data
$10.4 billion
— Total annual cost for pension and health-insurance benefits for current and retired municipal employees.
$628 million
— Potential annual savings if current workers contributed to health-insurance premiums like private-sector employees.
$741 million
— Potential annual savings if retirees contributed to health-insurance premiums.
$1.4 billion
— Combined annual savings for health-insurance premiums if the city aligned policies with the private sector.
$2.5 billion
— Payments for health insurance of current employees.
$1.2 billion
— Payments for health insurance of retirees.
New York faces a severe budget crisis driven by rising costs in Medicaid, personnel, and education, alongside declining tax revenues. To address the projected $18.2 billion gap by 2012-13, the state must prioritize aggressive spending cuts rather than increasing taxes, borrowing, or shifting costs to local governments.
Recommendations related to Tax Burden
New York State must implement aggressive spending cuts to address the budget crisis rather than relying on tax increases, borrowing, or shifting costs to local governments.
The state must avoid increasing taxes as a solution, given that New York already has the highest local tax burden in the nation.
The state must avoid borrowing to cover the budget gap, as current debt levels are already bumping against the state's debt cap.
The state must avoid passing costs on to local governments, as they are already under tremendous pressure.
Key Data
$18.2 billion
— The projected budget gap by 2012-13.
$4.6 billion
— The minimum projected budget gap for the upcoming year.
22%
— The decline in personal income tax revenue from the previous year.
$7,746
— Medicaid expenses per beneficiary.
$26 billion
— The current outlay for education aid to local school districts.
$58 billion
— The amount of outstanding state-supported debt planned by 2013-14.
New York's high tax burden, which sits significantly above the national average, is driven by rising government costs, particularly generous public employee pension benefits. These pension enhancements, often enacted as sweeteners, create long-term fiscal liabilities that strain local government budgets and taxpayers.
Recommendations related to Tax Burden
Legislators should refrain from introducing or supporting any pension sweetener legislation that drives up government costs and tax burdens.
Legislators should support the legislation endorsed by Governor David Paterson and New York City Mayor Michael Bloomberg that would create a new pension tier for future workers to provide more reasonable and affordable benefits.
Key Data
78 percent
— The local tax burden in New York is above the U.S. average in dollars per $1,000 in personal income.
35 percent
— The combined state and local tax burden in New York is above the U.S. average.
$292 million to $2.6 billion
— The growth in required employer contributions to pension funds since 1999.
$5.6 billion
— The total amount of pension benefit payments reached in 2008.
High local taxes in New York State create a difficult environment for businesses and residents, necessitating the removal of barriers that prevent school districts from controlling costs. Vetoing legislation that mandates specific health insurance benefits for retirees would allow districts to manage expenses more effectively and help reduce the overall tax burden.
Recommendations related to Tax Burden
We ask that you veto A4628, a bill that would renew the provision that prohibits school districts from reducing the health insurance benefits offered to retirees, to help lower local taxes.
State leaders should not stand in the way of school district managers that find ways to provide satisfactory benefits at reduced costs, which is necessary to lower local taxes.
New York should, whenever the opportunity arises, roll back costly mandates to help lower local taxes.
New York's tax system faces a structural challenge where the personal income tax is progressive, but the overall tax structure is regressive due to heavy reliance on sales and consumption taxes. To address budget gaps and maintain economic competitiveness, any temporary tax increases must be paired with significant spending reductions, while long-term reform should focus on creating a more equitable and stable tax system through a bipartisan commission.
Recommendations related to Tax Burden
Any income tax increase should be temporarily imposed with a fixed set of dates for phase out or expiration.
Tax increases must run in tandem with significant measures to lower expenditures in ineffective and low priority programs and contractual changes with public employee unions.
Policymakers should consider a rearrangement of the state and local tax systems, including reform of the property tax system, to balance equity and stability.
The state should form a bipartisan commission to examine tax reform from the dual perspective of fairness and competitiveness.
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.
35 percent
— The amount by which New York's overall tax burden per $1,000 of personal income exceeds the national average.
56.5 percent
— The portion of total State tax collections comprised by the personal income tax in 2006.
$18.7 billion
— The projected budget gap in year three of the financial plan under fairly optimistic economic and revenue assumptions.
New York faces a massive fiscal gap during the 2009 recession, and the state should prioritize spending cuts over tax increases to maintain economic competitiveness. The proposed budget includes nearly $1.9 billion in mis-categorized revenue measures, such as utility taxes and insurance assessments, which effectively function as tax hikes on residents and businesses.
Recommendations related to Tax Burden
The State should avoid excessive reliance on increased taxes to prevent discouraging investment and spending during the recession.
The Legislature should reduce the Governor’s proposed $5 billion in new revenue measures to no more than $2 billion.
The State should use identified savings to eliminate tax increase proposals that curtail economic activity and add to the high cost of doing business.
The Legislature should reject the numerous tax, fee, and revenue increase proposals identified in the Executive Budget that place a burden on New Yorkers.
Key Data
$5 billion
— The amount of new revenue measures proposed in the Governor’s Executive Budget.
$2 billion
— The maximum amount of new revenue measures the State should adopt.
$1.9 billion
— The total amount of revenue increases mis-categorized as spending reductions in the Governor’s budget.
$404.0 million
— The projected revenue from the proposed non-dietetic soft drink tax.
$240.0 million
— The projected revenue from the proposed covered lives assessment on insurance companies.
New York's local taxes are 79% above the national average, largely due to state-imposed unfunded mandates that force local governments to cover costs without flexibility. A recently passed bill would further restrict local officials' ability to manage retiree health insurance costs, necessitating a gubernatorial veto to prevent further increases in the local tax burden.
Recommendations related to Tax Burden
Governor David Paterson must veto the legislation (A9393A/S6457A) to prevent further increases in the local tax burden.
Local government leaders need flexibility in negotiating with unions to better manage escalating expenses and control local tax burdens.
Key Data
79%
— New York's high local taxes are 79% above the national average statewide.
$49.7 billion
— The state's liability for government retiree health insurance is estimated at $49.7 billion.
$57.8 billion
— New York City's liability for government retiree health insurance is estimated at $57.8 billion.
New York's current property tax circuit breaker program is outdated, with eligibility criteria unchanged since 1985, leaving it ineffective for the vast majority of residents whose incomes and housing costs have far outpaced these limits. Replacing the flawed STAR homestead exemption with a modernized circuit breaker program could provide more targeted relief to millions of homeowners and renters by capping property tax liability as a percentage of income.
Recommendations related to Tax Burden
An improved circuit breaker would work more effectively than the STAR homestead exemption program, which is fraught with problems.
New York should implement a circuit breaker that refunds property taxes above 5 percent of New York Adjusted Gross Income for homeowners earning less than $20,000 and above 7 percent for all others.
The state should adopt a circuit breaker program for renters that refunds property taxes in excess of 6 percent of New York Adjusted Gross Income.
Key Data
$18,000
— The income ceiling for New York's current circuit breaker program, which has remained unmodified since 1985.
$51,384
— The median household income in New York in 2006, which is far above the current circuit breaker income ceiling.
$303,400
— The median home value in New York in 2006.
$875
— The median rent in New York in 2006.
$2.6 billion
— The estimated cost of a proposed circuit breaker program for homeowners earning less than $20,000 and others.
$2.7 billion
— The estimated cost of a proposed circuit breaker program for renters.
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 maintains one of the highest tax burdens in the nation, driven primarily by exceptionally high local property taxes and elevated labor costs for local governments. Current relief programs like the School Tax Relief (STAR) program function as ineffective tax shifts rather than true reductions, necessitating structural reforms such as state Medicaid takeovers, government consolidation, and the implementation of income-based circuit breakers.
Recommendations related to Tax Burden
The state should convert the public employee pension system to a defined contribution rather than a defined benefit system to make benefits more reasonable.
A complete state takeover of local Medicaid expenses would shift financing to the state, where revenues are more progressive than local property and sales taxes.
New York should base a household’s property tax rebate on property taxes as a share of income to create a more transparent and equitable relief program.
The state should consolidate property tax assessment units to reduce costs and ensure a greater level of assessment equity among municipalities.
The state should reform the legal framework for collective bargaining to make the dispute resolution process more timely and encourage bargaining that relies less on arbitrator judgment.
Key Data
$111 billion
— New Yorkers pay about $111 billion annually in state and local taxes.
$150
— In fiscal year 2005, New York collected $150 for every $1,000 of personal income.
$82
— Local taxes represent $82 per $1,000 of personal income in New York.
$4.7 billion
— School property tax relief spending increased from $600 million to $4.7 billion between fiscal year 1998-99 and 2007-08.
459
— Excluding New York City, New York localities employ 459 workers for every 10,000 residents.
24 percent
— In New York City, police, firefighters and district attorneys represent 24 percent of all local government employees.
New York City's business tax rates are significantly higher than those of key competitors, with an average effective rate of 7.5% compared to 4.5% elsewhere. The current property tax structure disproportionately burdens commercial property owners compared to homeowners, necessitating a comprehensive strategy to reform the tax system and improve economic competitiveness.
Recommendations related to Tax Burden
The Mayor and City Council should appoint a blue-ribbon commission to map a multi-year strategy relating to the whole range of taxes and tax incentives.
The city should consider revamping business taxes in New York while the economy is thriving and surplus revenues can ease the transition.
The proposed commission should provide estimates of the fiscal impact in time for the mayor's January 2008 financial plan and specific recommendations for his executive budget in April 2008.
Key Data
7.5%
— Average effective state and local tax rate on businesses in New York City.
$2.3 billion
— Annual cost to city businesses from excluded taxes like the commercial rent tax, real property transfer tax, and mortgage recording tax.
$41
— Property tax paid per thousand dollars of value by an owner of an office building.
$6
— Property tax paid per thousand dollars of value by the average homeowner.
$240 million
— Value of the tax deal struck with JPMorgan Chase for the construction of a new office tower.
$42 million
— Amount of corporate income tax cuts passed in Albany out of the $77 million sought by the city.
New York City imposes the highest or second-highest business tax burden among the locations studied, with combined federal, state, and local taxes reducing the rate of return on new business investment by 36% to 50%. While recent state budget changes are expected to lower the average effective tax rate in the city from 42.1% to 40.9%, the city is projected to retain its status as the highest-tax location for most industries.
Key Data
36-50%
— The range of the effective tax rate on new business investment imposed by combined federal, state, and local taxes in 2006.
42.1%
— The average combined federal-state-local effective tax rate in New York City for representative firms in 2006.
40.9%
— The projected average combined federal-state-local effective tax rate in New York City following tax changes adopted in the 2007-08 state budget.
34-36%
— The typical percentage point reduction in the rate of return on new business investment driven by federal corporate income taxes.
New York City's high tax burden remains a significant concern for economic competitiveness, as research indicates that tax increases can negatively impact employment and economic growth. While the exact magnitude of these effects is debated, evidence suggests that broad-based tax reform and property tax restructuring are preferable to ad hoc incentives for maintaining a healthy local economy.
Recommendations related to Tax Burden
The Citizens Budget Commission supports broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
There is plenty of room for property tax reform, in particular, reducing differentials across property classes.
A further shift of financial responsibility toward the State will move that level of government to address these high costs at the same time that it rationalizes the assignment of governmental responsibilities.
Key Data
$8
— Amount of every $100 of taxable resources absorbed by New York City's local taxes in 1997.
0.3 percent
— Average annual growth rate of New York City's private sector employment from 1986 to 2001, compared to 1.8 percent nationally.
2.7 percent
— Annual growth rate of New York City's real gross city product from 1986 to 2001, compared to 2.8 percent nationally.
1.6 percent
— 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
— Estimated increase in private sector employment from phasing out the 18.5 percent increase in property tax rates instituted in 2002.
$22 billion
— Total Medicaid spending on New York City residents in 2004, up from $15 billion in 2000.
New York State's excessive debt, which has reached $46.7 billion, places an unsustainable burden on current and future taxpayers that creates a competitive disadvantage compared to other states. To address this, the state must implement constitutional debt reform that links borrowing to affordability and restricts the use of debt for long-term capital projects rather than operating expenses.
Recommendations related to Tax Burden
Voters should reject bond referendums such as the Transportation Bond Act of 2005 until debt is brought under control.
The State needs a new constitutional limit that does not require voter approval for every debt issuance, but does impose a binding limit that is linked to ability to pay.
Establish a new debt limit based on the concept of affordability as determined by an independent Debt Policy Committee.
Apply the limit to all forms of state-backed debt, including such bonds issued by authorities.
Eliminate the need for voter approval within that limit.
Restrict the use of borrowed funds to true capital investments.
Key Data
$46.7 billion
— Total outstanding state-funded debt.
$8 billion
— Increase in debt since 2000.
$43.0 billion
— Amount of backdoor borrowing.
$11.5 billion
— Backdoor borrowing used for operating deficits.
$2.9 billion
— Amount authorized by the Transportation Bond Act of 2005.
$13 billion
— Planned state borrowing.
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