New York has the Third Highest Tax Burden in the Nation for 2013

Jan 27, 2015


In Fiscal Year (FY) 2013, New York collected $155.8 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average New York taxpayer can afford this level of taxation.


As shown in Chart 1, New York’s state and local tax burden (tax collections divided by personal income) was the third highest in the nation for FY 2013 at 14.6 percent—or 42 percent above the national average of 10.3 percent. More troubling, as shown in Chart 2, the tax burden has grown over time by a whopping 83 percent to 14.6 percent in FY 2013 from 8 percent in FY 1950.


New York State and Local Tax Burden Rank 2013.jpg




Unlike Alaska or North Dakota, New York’s high state and local tax burden is driven by the fact that they have every tax imaginable and at very high tax rates. For instance, at the state level New York has the highest cigarette excise tax in the country ($4.35 per pack) and the eight highest top individual income tax rate in the country (8.82 percent). The income tax rate, however, is misleading because New York has an awful recapture provision which eliminates the tax benefits of lower marginal tax rates for high income taxpayers.


#NewYork #taxburden has grown 83 percent between FY 1950 to 2013 to 14.6% from 8%. (click to tweet)


As bad as the state level taxes are, it gets much worse when local taxes are factored in, especially in New York City:


  • New York City levies an additional $1.50 per pack of cigarettes bringing the total state and local tax to $5.85. 

  • New York City levies an additional 4.5 percent sales tax bringing the total state and local tax to 8.5 percent.  If New York City were a state that would be the highest sales tax rate in the country.

  • New York City levies an additional 3.876 percent on the highest earners under the individual income tax bringing the total state and local tax to 12.696 percent. If New York City were a state that would be the second highest individual income tax rate in the country—behind California’s 13.3 percent tax rate.

  • New York City levies an additional 8.85 percent on corporations bringing the total state and local tax rate to 15.95 percent. If New York City were a state that would the highest corporate income tax rate in the country.

  • Adding insult to injury, New York City also levies a unique 4 percent tax on partnerships and proprietorships known as the Unincorporated Business Tax.

New York’s high cigarette tax rate is also a great example showing that “taxes matter.” As a consequence of the combined state and local cigarette tax, New York has become a haven for cigarette smuggling. A recent study on cigarette smuggling by the Mackinac Center measures this negative economic impact and concludes:


“The top states for inbound casual contraband smuggling were New York and Washington, while Vermont and New York had the highest rates of inbound commercial smuggling. New York ranks so high in both the casual and commercial smuggling because it has very high excise tax rates (state and city) and is located close to low-tax Virginia.”


Ironically, New York has significant capacity in oil and gas resources to emulate Alaska’s and North Dakota’s path to tax riches. Alas, New York decided in 2010 to ban the new process of hydraulic fracturing into the oil and gas rich Marcellus Shale in the southern portion of the state. The economic and tax boom that would result in such drilling could be the answer to lowering New York’s nosebleed tax rates.


 

Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in New York—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.




 

The New York counties with the highest local government tax burden include: Hamilton County, NY (18.5 percent), Sullivan County, NY (9.3 percent), and New York County, NY (9.1 percent). The New York counties with the lowest local government tax burden include: Jefferson County, NY (4.1 percent), Saratoga County, NY (4.9 percent), and Tioga County, NY (5 percent).


Click here to view tax burden data by state, type of tax, and for years 1950 to 2013.


New York State and Local Tax Burden 1950 to 2013.jpg



Category: Tax Burdens

J. Scott Moody

J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.


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