Gov. Cuomo is proposing the most significant reform and reduction of New York’s estate tax in 17 years. This is a big reason why public employee unions and their allied advocacy groups are now claiming that Cuomo’s tax agenda favors “millionaires and billionaires.”

In fact, the governor’s estate tax proposal will serve largely to remove a shadow from the legacies of hundreds of thousands of middle-class households, small-business owners and farmers. It also will greatly reduce an enormous incentive for the wealthiest New Yorkers to “move to die,” as the governor has put it.

New York is one of only 14 states still imposing any tax on estates — the cash, real estate, stocks, bonds and other property left by residents who have died. Other states have allowed their death taxes to disappear since 2004, when the federal government eliminated a tax credit that used to absorb the cost of these state levies.

The federal estate tax — also called the death tax — now applies only to assets exceeding $5.34 million, or up to double that amount for a married couple. The excluded amount rises every year with inflation.

New York, however, still taxes estates with gross values starting at a fixed level of $1 million, with no added break for spouses. For an estate just below the federal threshold, the added cost of dying in New York is a cool $431,600.

How many New Yorkers are in a position to leave estates big enough for Albany to tax?


The answer is by no means limited to the much-vilified “1 percent.”

As of 2013, New York was home to 429,153 households with “investable assets” of $1 million or more, according to a report by Phoenix Marketing International, a private research firm. That’s nearly 6% of all households in the state, and more than 10 times the number of New York tax filers reporting annual incomes of $1 million of more.

And because it doesn’t include land and home values, even this figure underestimates the true number of millionaire households in New York. Untold thousands of otherwise middle-class New Yorkers — including Mayor de Blasio — now own homes and apartments whose value has risen above $1 million or more in recent years.

Skyrocketing real estate prices haven’t been confined to gentrifying urban neighborhoods. The average price of agricultural land in New York has nearly doubled since 2000, increasing from $1,430 to $2,600 per acre. As of 2007, there were more than 3,000 New York farms worth more than $1 million, according to federal statistics.

Homes and properties aside, many New Yorkers also own small businesses. Depending on the industry, even small firms generating a relatively modest net income for their owners can be worth a total of more than $1 million. And middle-class New York couples who don’t own a business can amass net assets of $1 million simply by following standard advice to save sufficiently for retirement.

Beyond its impact on individuals and families, many economists believe the death tax discourages savings and investment, and increases consumption by older wealthy people. Repealing the tax could ultimately boost the state’s net economic output by $5.6 billion — five times the revenue it currently generates — and lead to the creation of nearly 10,000 additional jobs, according to an analysis by the Beacon Hill Institute of Boston.

We must not forget the final perverse consequence of the current state estate tax. The wealthiest households can most easily hire high-priced accountants and estate planners to find legal means of minimizing the tax.

They are also more likely to move to reduce their tax, research has found — and they’ve got plenty of options. State death taxes are no longer imposed in much of the Midwest, almost all of the South, the entire Southwest and California.

Cuomo’s 2014-15 budget would reform the New York estate tax in two significant ways: by phasing in a higher basic exemption over the next five years, ultimately matching the federal threshold, and by cutting the state’s top death tax rate to 10% from the current 16%.

This would reduce the number of state death tax filings in New York by 90% — a giant first step toward complete repeal.

The moral case for and against the death tax has been debated nationally for decades now. But the strongest argument for Cuomo’s proposal is an eminently practical one: Why perpetuate yet another competitive disadvantage for New York when we’re already losing too many people and too much wealth to the rest of the country?

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

Hochul Tells It Like It Is

Presenting her budget this week in Albany, Gov. Kathy Hochul delivered more than just a financial plan. She gave the state a refreshing dose of fiscal honesty. “The truth is,” Hochul said, “we can’t spend like there’s no tomorrow, because tom Read More

Putting Hochul to the test: Will the governor use her budget powers to protect New York’s fiscal future?

“We will not be raising income taxes this year,” Gov. Hochul declared in January at the opening of New York’s 2023 legislative session. Read More

Questions on Cuomo’s COVID memoir need answers

As New York marks the third anniversary of the beginning of the coronavirus pandemic, questions about how state leaders handled the crisis keep piling up. The latest disturbing revelation concerns the memoir that Andrew Cuomo published in October 2020. Read More

What Gov. Hochul must do to prevent a coming fiscal crash

The pandemic and its fiscal aftermath have given rise — temporarily — to a state budget trend unique in New York’s history. Read More

Bear market spells big trouble for NY state and city budgets

Wall Street generates an outsized share of New York’s tax revenue, so the recent drop in stock prices should worry both Gov. Kathy Hochul and Mayor Eric Adams. Read More

Kathy Hochul will have to prove she can hold the line on state spending

Hochul’s specific priorities were lowest-common-denominator stuff: “combating” the spread of COVID-19 linked to the Delta variant, pushing billions in stalled federal rent relief out the door to tenants (and ultimately their landlords) and “beginning to change the culture in Albany.” Read More

Nursing Cuomo’s broken trust: Kathy Hochul’s responsibility on COVID and long-term care

One of the most urgent imperatives confronting soon-to-be Gov. Kathy Hochul will be getting real about the state’s pandemic response Read More

Calling Tax Cut “Theft,” Cuomo Continues to Push For Federal Bucks With Phony Math

The results of this week’s Georgia Senate runoffs, assuring Democrats will soon control both houses of Congress, as well as the White House, had to come as a huge relief to Gov. Andrew Cuomo. Read More