New York State’s political campaign contribution limits automatically are “indexed” to rise with inflation in the years following general elections. But the state’s personal income tax brackets, exemptions and standard deductions are not adjusted to reflect the cost of living. As a result, middle-income New Yorkers have been hit with steady stealth tax hikes over the past decade or so, as I explain in today’s New York Post.

In 1997, for example, a family at the statewide median-income level earned $50,000 and sent 3.3 percent of its gross income to Albany. By 2010, median income had risen to $70,000 — essentially keeping pace with inflation — but under New York’s nonindexed tax code, the effective tax rate came to 3.8 percent. The difference translates into a hike of about $326 a year.

The difference for taxpayers is larger in higher-income downstate suburbs, where the cost of living is higher. In Long Island, where the median family income has risen to $103,000, state income taxes for 2010 are about $413 higher than they’d have been if the 1997 tax code had been linked to inflation.

New York’s largest stealth tax increases fall on those in the upper bands of the downstate middle class. For a family of four with income of $130,000 in 2010 dollars, the failure to link the 1997 tax code to inflation translates into an added tax bill of roughly $1,000.


The short-term fix is obvious: Index New York’s tax brackets, standard deductions and personal exemptions so they automatically rise with the Consumer Price Index every year. This could be done now, retroactive to the start of 2011, and the impact on state revenue will still be barely discernible in the year ahead.

In the long run, New York’s entire state personal income tax is overdue for an overhaul. The goal should be twofold — lower the tax rates and broaden the taxable income base through elimination of loopholes. And stop the stealth tax hikes, once and for all.

P.S. — New York City’s resident income tax isn’t indexed for inflation, either.

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