inverted-houseofcards-150x150-6870935New York City’s Independent Budget Office (IBO) has released its latest data on the distribution of city and state income taxes among city residents—and, once again, the numbers show the tax burden is very light on low- and middle-income households, and disproportionately heavy for top earners.

As of 2014, the top 1 percent of New York City residents—those with adjusted gross incomes (AGI) above $705,000—reported 40.5 percent of total income but paid 49.3 percent of the city income taxes, according to the IBO numbers for full-year city residents.  The entire fifth quintile (i.e., the highest-earning 20 percent of city filers) earned 76.7 percent of AGI but paid 86.5 percent of city taxes.

Summary details based on the IBO data are broken out in the following table, with tax shares representing total tax liability after credits.


The distribution of the New York State income tax burden among New York City residents was even more steeply progressive, with the top 1 percent paying 56.3 percent and the highest-earning quintile paying 91.8 percent of the tax owed to Albany. This in large part reflects the impact of the so-called “millionaire tax,” a temporary 29 percent flat surcharge on filers with incomes starting at $1 million for individuals and $2 million for married couples. However, the state income tax distribution was somewhat more progressive than the city’s even before that higher rate first went into effect in 2009.

The lowest-earning 40 percent of tax filers are eligible for generous refundable city and state child tax credits and earned income credits. As a result, they get more back from the city and state than they pay in, so their tax shares are negative numbers.

New York City’s middle quintile of filers—the 20 percent slice with incomes of $21,273 to $41,036 — earned 7.3 percent of AGI but paid just 3.7 percent of city taxes and 1.8 percent of state taxes.

The combined top income tax rate for city residents is 12.7 percent, second highest in the country after California’s 13.3 percent and more than double the roughly 6 percent median for the 42 states with state and local income taxes. States with no income taxes include Florida, which has been beckoning New York’s wealthiest residents for many years.

The problem with this steeply progressive distribution is not only the incentive it gives high-income households to consider investing, working and living elsewhere. It also makes the city and state budgets dangerously volatile and vulnerable to economic events, especially stock market downturns, whose effects are concentrated among high earners with volatile incomes from dividends and capital gains. The income of the top 1 percent plunged in the Great Recession, blowing a huge hole in the state budget that the millionaire tax only partly closed when it was first enacted in 2009.

While the incomes of very high earners have recovered, the added tax is still there through at least 2017. Even if it is finally allowed to sunset, New York’s city and state income tax base will be comparable to an inverted house of cards.

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

Climate Activists Keep Moving the Goalposts

Activists want total control over every building in the state. How much will this add to the costs of new homes and commercial properties as developers scramble to make last-minute changes? Read More

The State of the State Spending Spree

The State of the State is the prelude to Hochul’s state budget reveal. It’s a budget that represents a generational opportunity. Read More

Since downstate is the epicenter of omicron, why are upstate hospitals feeling the crunch?

A puzzling pattern has emerged from New York's latest wave of the pandemic: Downstate hospitals are dealing with the lion's share of COVID patients, but upstate hospitals are the ones running out of beds. The paradox was Read More

Climate Act Accounting Overstates Benefit to New Yorkers

The Scoping Plan prepared by the Climate Action Council claims benefits of up to $430 billion from the Climate Act. Read More

Putting Governor Hochul’s $10 billion health-care ‘investment’ in context

In her State of the State address this week, Governor Hochul prominently called for a $10 billion "multi-year investment" in the state's health care system, including $4 billion earmarked for wages and bonuses, with a goal Read More

Hochul’s new old “middle class tax cut” agenda

In her first State of the State message today, Governor Kathy Hochul pledged to accelerate scheduled personal income tax cuts for "middle class" New Yorkers, with a fiscal impact she pegged at $1.2 billion. That figure sounds large but doesn't amount t Read More

Lights Out for New York?

New York can have 100 percent zero emissions electricity in 2040. But it can’t have enough of it to keep the lights and the heat on. Read More

Pandemic drove largest New York population loss ever

Thanks mainly to a pandemic-driven boost in its already high outflows to other states, New York has just suffered its largest single-year population loss ever—and the worst, in percentage terms, of any state in the past y Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries:

Press Inquiries:


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!