New York residents will pay almost $90 billion in added taxes over the next two years if the federal government plunges over its fiscal “cliff” with no changes to current law, according to a timely report issued last week by Comptroller Thomas DiNapoli. The scheduled tax changes outweigh the impact of scheduled “sequestration” cuts to federal spending, which would cost the state and local governments $5 billion over the next nine years, including a $600 million hit to the state budget in fiscal 2013.

No one really expects all of these things to happen, of course — but the comptroller’s estimate provides a valuable illustration of key tax issues at stake in the current cliff-avoidance negotiations between President Obama and congressional Republicans.  Nearly half the tax increase, and nearly one-third in 2014, would result from an automatic expansion of the Alternative Minimum Tax (AMT), which already hits New York harder than almost any other states.  The number of New York filers affected by the AMT would increase from about 500,000 under current law to more than 3 million if the temporary annual “patch” on the AMT is not extended, the comptroller’s report says.

Nearly $15 billion in tax increases on New Yorkers over the two-year period would come from expiration of a temporary cut of two percentage points in the Social Security payroll tax.  Virtually all of the other increases would result from the expiration of the tax cuts enacted under President George W. Bush in 2001 and 2003.  The Bush tax cuts slashed rates across the board on “ordinary” income, coupled with deeper cuts in capital gains and dividends. It also expanded the child credit from $500 to $1,000 per child.  The net result was an especially large tax cut for New York.

This table from the comptroller’s report provides a summary of the tax impacts if current federal law were left unchanged.


Again: Congress and the President inevitably will agree on some compromise to avoid these increases before they fully unfold.  But given the Empire State’s high concentration of investors and “wealthy” households (in Obama’s definition, those earning $250,000 or more), New York will be hit disproportionately if the final deal is largely on the President’s terms.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Budget Deal Slows Medicaid Growth But Plants Seeds for Future Spending

The growth of New York's Medicaid spending is projected to slow but not stop as Governor Hochul and the Legislature effectively split their differences over health care in the newly enacted state budget. Read More

Albany Lawmakers Push a $4 Billion Tax on Health Insurance

Legislative leaders are proposing an additional $4 billion tax on health insurance plans in the upcoming state budget – but withholding specifics of how it would work. Read More

As migrants flow to NY, so does red ink 

The influx of foreign migrants to New York could cost the state $4.5 billion more than expected next year, Governor Hochul today warned.  Read More

The Bill Arrives: NY Faces $9B Budget Gap Next Year 

New York’s outyear budget gaps, the shortfall between planned state expenses and state tax receipts over the next three years, has exploded to more than $36 billion, just-released documents show.  Read More

NY school spending again led US, hitting all-time high in 2020-21

Public elementary and secondary school spending in New York rose to $26,571 per pupil in 2020-21, according to the latest Census Bureau data Read More

A Tale of Two Levies

New York school districts are getting record levels of state aid. But how many are using it to cut taxes? Read More

Albany’s Belated Budget Binge 

State lawmakers have begun passing the bills necessary to implement the state budget for the fiscal year that began April 1. Read More

Courts set a limit on NY’s tax reach

Just in time for tax season, New York State's tax agency just lost a major legal challenge to its policy of pursuing maximum income tax payments from wealthy vacation homeowners—even when they live elsewhere. Read More