FOR IMMEDIATE RELEASE
Contact: E.J. McMahon
Federal income tax increases proposed by Democratic presidential candidate Barack Obama could indirectly blow a nearly $1 billion hole in New York State’s treasury over the next two years, according to a new report released last week by the Empire Center for Public Policy, a non-partisan, independent think tank.
The report, entitled “High-Stakes Taxing: New York’s Prospects Under the Next President’s Tax Agenda,” estimates the impact on New Yorkers and the New York tax base of individual income tax proposals offered by Obama and his Republican opponent, John McCain.
McCain, the report notes, supports retaining all income tax cuts enacted under President George W. Bush, which are otherwise scheduled to expire at the end of 2010, the report notes. Obama would preserve Bush’s low- and middle-income tax cuts but repeal tax cuts in the top two brackets, restoring higher rates in effect before 2001. He also would raise capital gains and dividends taxes for taxpayers earning over $250,000. The resulting revenues would help fund new and expanded tax credits for low- and middle-income taxpayers, including millions who already pay little or no taxes.
E.J. McMahon, author of the report and director of the Empire Center, said research has shown that high-income taxpayers can be expected to react to federal rate increases by earning less and sheltering income. The report estimates this behavioral effect will sap growth in state tax revenues by a range of $800 million to $1 billion over the next two years. The impact on New York City revenues is estimated at $144 million to $285 million over the same period, the report says.
Concerning other areas of the candidates’ tax plans, the report makes these estimates:
McCain’s proposal would drive about $675 million in added tax cuts to low- and middle-income families in New York in 2009 and 2010.
Obama would provide low- and middle-income New Yorkers with new or expanded tax credits worth about $13 billion over the next two years. But during the same period, he would increase taxes on the state’s high-income residents by at least $16 billion.
Obama would count on New York’s high-income households to help finance a large portion of his proposed tax credits nationwide. With just 6.4 percent of the nation’s tax filers, New York State’s share of the Democratic candidate’s tax increases would come to nearly 11 percent – more than any state except California.
“New York and its securities industry got a big boost from the federal tax cuts of 2003,” McMahon said. “The outcome of the coming presidential election may determine whether Washington helps or hinders Wall Street’s recovery from the current financial crisis.”