Federal income taxes paid by New Yorkers decreased by nearly $3.4 billion in 2018, the first year of the new federal Tax Cuts and Jobs Act (TCJA), according to newly released Internal Revenue Service data.

The drop in New York’s total federal income tax burden runs counter to the Cuomo administration’s repeated claim that New Yorkers would pay an additional $14 billion as a result of the federal cap on state and local tax (SALT) deductions, a key element of the tax package crafted by congressional Republicans and signed into law by President Trump.

In fact, given the expanded standard deduction and the distribution of rate cuts in the TCJA, it was always clear that the new tax law would result in tax savings for most New Yorkers—and the new data confirm it, showing that taxes paid by New Yorkers dropped in every income range reported in IRS data, up to $500,000. Tax payments increased by 4.3 percent for New Yorkers earning between $500,000 and $1 million, and by 0.2 percent from those earning $1 million or more, the IRS Statistics of Income showed.

(Strictly speaking, the change in federal taxes paid by state residents in 2018 cannot be described as a “savings” compared to 2017 because the base figure is not what New Yorkers would have paid under the previous tax law applied to their actual 2018 incomes, which on average would have been higher than in 2017.)

The touch of SALT

As a share of the 2017 total, the decrease in 2018 income taxes paid by New Yorkers was equivalent to 2.4 percent, barely half the national decrease of 4.5 percent and among the smallest net tax changes in any state. The SALT cap was no doubt a major reason for this—as were New York’s higher average incomes, since the TCJA was geared to provide the biggest percentage savings for low- and middle-income households as defined by broad national standards. In downstate New York, “middle class” definition reaches into the low six-figures, taking in tax filers whose marginal rate cuts were smaller and who had more to lose from the SALT cap.

The national distribution of tax reductions by income range was largely replicated in New York, as shown in the map below. Total taxes paid in the 12-county downstate region, including New York City, decreased just 0.7 percent, while the decrease in upstate counties was 6.3 percent, above the national average. This reflects average incomes, which are much higher downstate than upstate.

The biggest percentage decreases were in upstate New York counties whose household income distributions are closer to or even below the national norm. Conversely, tax payments were higher in 2018 than in 2017 from residents of affluent Westchester and Nassau counties, from those living in the fast-growing Albany suburb of Saratoga County, and from residents of Kings County (rapidly gentrifying Brooklyn). The lone rural county generating higher federal income taxes in 2018 was Sullivan, which is small enough that its total might have been pushed up by a net in-migration of a handful of high-income residents.

The total reduction in income taxes paid by New Yorkers was the fourth largest of any state, trailing slightly behind Pennsylvania’s total decrease of just over $3.4 billion. However, in percentage terms, only six states had smaller changes than New York—including California and Nevada, whose residents paid slightly more in federal income taxes in 2018, as shown below.

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

New York’s State Share of Medicaid Spending is Due to Jump 22 Percent This Fiscal Year

The state share of Medicaid spending is projected to jump 22 percent under the recently approved state budget, an unusually steep one-year jump for what is already one of New York's biggest expenditures. Read More

The Public Can Now See the Vaccine Task Force Recommendations that the Cuomo Administration Held Back

Even as Governor Cuomo touted vaccine approvals by a state-appointed panel of experts, his office was withholding the group's detailed findings from public view. The governor's six- Read More

New York’s Medicaid and Public Health Crises Get Short Shrift in the New State Budget

In spite of an ongoing pandemic and spiraling Medicaid costs, New York's health-care system received surprisingly little attention in the new state budget. On issue after issue, law Read More

Empire State’s new budget is a bridge to nowhere

Looking ahead to an uncertain post-pandemic recovery, New York’s newly enacted state budget for fiscal year 2022 raises spending by staggering amounts that—barring an unlikely rapid return to peak 2019 economic activity in New York City—can't possibly be sustained for more than a few years. The budget is a mid-2020s fiscal disaster in the making: an incomplete bridge over a deepening river of red ink. Read More

Lawmakers Mull Medicaid Proposals That Would Speed New York Toward a Fiscal Cliff

As a budget deal nears in Albany, reining in spiraling Medicaid costs seems to be the last thing on anyone's mind. Governor Cuomo is advancing only Read More

Tax hike and huge spending increase seem likely in next NY budget

New York state today began its 2022 fiscal year without an adopted budget—which, in itself, is not a big deal. The state government can continue to pay bills and employee salaries next week if either final appropriations Read More

Cuomo Pushes Budget Change Sought by Hospital Group Implicated in Pandemic Scandals

A hospital lobbying group at the heart of scandals plaguing the Cuomo administration is again getting the governor's help in pushing a late change to the state budget. Aides to Gove Read More

Albany’s soak-the-rich push ignores the large grain of SALT

Tax proposals embraced by Democrats represent a sizable increase in a top rate that already stands at an all-time record high. Read More

Subscribe

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

CONTACT INFORMATION

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

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

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!