New York City’s struggling economy will lose another 62,000 private sector jobs as a result of the 18 percent property tax hike agreed to by Mayor Bloomberg and the City Council, according to an estimate based on the Manhattan Institute’s NYC-STAMP econometric model.

A job loss on that scale would be more than enough to offset the modest employment gains that have been projected for the city in 2003 by most economic forecasters. It would also continue a downward trend dating back to the end of 2000, during which the city already has lost 150,000 jobs.

The NYC-STAMP model uses standard statistical methods to estimate the significance of relationships between economic variables, such as private sector employment, and changes in the city’s income tax, sales, property tax and general corporation tax rates. The model’s findings stem from correlations based on a quarter-century’s worth of tax and economic data.[1]

The STAMP model also is designed to generate “dynamic” estimates of revenue changes associated with tax cuts and tax increases—taking into account other economic consequences that such changes are likely to have. In the case of the property tax increase, the model estimates the net annual revenue gain ultimately will be $300 million lower than the $1.68 billion projected in the city’s modified financial plan.

Mayor Bloomberg originally asked the Council to approve a 25 percent property tax increase, which would have resulted in the loss of roughly 85,000 jobs, according to NYC-STAMP’s calculations. However, while the job loss under the agreed-upon 18 percent tax hike will be smaller, there may be even worse news ahead for the city’s battered economy.

With Council support, the mayor also plans to seek state legislative approval to expand the city’s existing resident income tax to all wages earned by the 800,000 to 1 million daily commuters to the city. At the same time, tax rates would be immediately cut by 26 percent across the board. In effect, this would mean a $1.3 billion tax cut for city residents, offset by $2.3 billion tax increase for commuters, yielding a net $1 billion in new revenue.

The impact of Bloomberg’s income tax proposal, which he has termed a “tax reform,” cannot be measured by NYC-STAMP based on the city’s existing tax structure.[2]  However, the new commuter tax appears highly unlikely to gain approval from the state Legislature and Governor Pataki. If the Mayor and the City Council respond by seeking to raise an additional $1 billion through a surcharge on the existing resident income tax, NYC-STAMP estimates the city will lose another 37,000 jobs—bringing the total tax-related employment loss to roughly 100,000 jobs.

Originally Published: FISCALWATCH MEMO

Notes

  1. NYC-STAMP is a variant of the State Tax Analysis Modeling Program  created by the Beacon Hill Institute at Suffolk University in Boston, Mass. STAMP is designed to identify the effects of tax policy changes by using standard, widely accepted statistical techniques and by creating a “model” of interactions between economic and tax variables, based on data gathered over a long period of time. For more on the model and its previous findings, see “What New York Has Gained from Tax Cuts,” Manhattan Institute Civic report #20, at  http://www.manhattan-institute.org/html/cr_20.htm#06.
  2. If the city’s resident income tax rates were reduced as Bloomberg proposes withoutexpanding the base to commuters, the NYC-STAMP model calculates the combined effect of this change and the property tax hike would be a net loss of 12,000 private sector jobs in the first year of the change. If the income tax rate was reduced to 2.2 percent—again,without expanding the base to include commuters— the resulting employment gains would completely offset the loss caused by the property tax hike. Bloomberg’s proposal to combine such tax cuts with what amounts to a massive new wage tax on commuters would have other negative economic consequences, for both the city and the surrounding region, which the STAMP model cannot currently estimate.

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

Sales Tax Receipts Surge Statewide, Filling Local Government Coffers

Local governments across every region of the state raked in robust sales tax collections during the three months that ended on June 30th Read More

Report Reveals Albany’s Balanced Budget a Gimmick

Extending the budget window reveals large, yawning budget gaps growing from nearly $8 billion in 2026 to nearly $20 billion by the end of the decade. Read More

Remote Threat 

Remote work and a more mobile professional class will increase the speed and scope of New York's ongoing out migration. 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

DiNapoli Predicts $3.8B More in State Tax Receipts

New York State's tax receipts in the current fiscal year will exceed Governor Cuomo's latest projections by $3.8 billion—still down from last year, but a big improvement over the governor's worst-case scenario—according to updated estimates from state Comptroller Thomas DiNapoli's office. Read More

With Hopes Dashed for “Blue Wave” Bailout, Cuomo Needs to Deal With Budget Shortfall

With the national election results still unclear, Governor Cuomo can no longer put off tough decisions on how to balance New York's pandemic-ravaged state budget. Read More

For State Lawmakers, Secrecy May Pay

New York state legislators may get a raise on January 1, 2021—but the people who elect them may not get to find out before voting ends next week. Read More

In Pandemic Recovery, New York’s Tax Base Is More Fragile Than Ever

New York's exceptionally wealthy state tax base is also exceptionally fragile, due to its heavy dependence on the highly volatile (and portable) investment-driven incomes of Wall Street workers and fund managers. 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!