Reimposing the full 14 percent surcharge on New York City’s resident income tax will cost New York’s battered economy 10,700 badly needed private sector jobs, according to the Manhattan Institute’s tax policy simulation model. As a result, our model indicates the revenue gain from a restored surcharge will be about $30 million less than has been projected.

The City Council’s inaction on the surcharge in December did not amount simply to the shelving of a prospective cut in the surcharge. New York residents were already paying income taxes at reduced rates this year, as shown in the table below. Therefore, by deciding not to extend the surcharge reduction which it had approved just six months earlier, the lame-duck Council was giving its approval to a tax increase for all New Yorkers starting in 2002. This is the first city tax hike in 10 years. And its impact will be regressive, hitting lower-income taxpayers harder, on percentage basis, than high-income taxpayers.

Over the next few months, Mayor Bloomberg and the new City Council have a narrow window of opportunity for keeping faith with taxpayers by extending the surcharge reduction on the original schedule. To be sure, there is a tradeoff here: Failing to extend the cut will close a small portion of the budget gap, but only at the price of hobbling the City’s economic recovery from the September 11th attack.

New York City Resident Income Tax—Married-Joint Filers

Taxable Income 2001 Tax 2002 Tax* Tax With
Full 14% Surcharge
Prospective Tax Hike**
Between…
And…
Over 2001 Actual Over 2002
Planned
0 21,600 2.68% 2.64% 2.91% $48 $58
21,601 45,000 3.26% 3.21% 3.53% $63 $76
45,001 90,000 3.32% 3.26% 3.59% $124 $149
Over $90,000 3.59% 3.54% 3.65% *** ***

* Planned rates reflected in enacted 2001-02 city budget and Mayor Giuliani’s November financial plan modification.

** If no action is taken to extend surcharge reduction beyond 2001. Number reflects tax hike on maximum amount in each bracket. Taxpayers falling into multiple brackets add the maximum for each relevant bracket to obtain their total tax hike.

*** Increase depends upon how much over $90,000 the taxpayer earns.

As shown above, for a taxpayer with $90,000 in taxable income, restoration of the full surcharge would represent an actual tax increase of $235 compared to 2001 law, and an increase of $283 over the planned 2002 rates reflected in the enacted 2002 city budget and the mayor’s November financial plan modification.

ABOUT THE TAX MODEL

To measure the impact of city taxes on key economic variables such as employment, the Manhattan Institute joined with the Beacon Hill Institute at Suffolk University in Boston, Mass., to develop a New York City variant of a proven econometric tool—the State Tax Analysis Modeling Program (STAMP). In September, the Institute issued a report showing that tax cuts had been responsible for about one-quarter of the city’s job growth since 1997. The projected change in employment reflects the impact of tax increases on decisions by businesses and individuals to work and invest in New York. A copy of the full report on our tax model can be downloaded via the Internet.

Originally Published: FISCAL WATCH MEMO January 17, 2002

Tags:

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

Big bucks, no impact

The billions of dollars funneled from New York's treasury to movie and TV producers had no statistically significant impact on the industry's employment in the Empire State through 2017, according to a new multi-state study of such tax incentives. Read More

NY job gains remain below US rate

Today's jobs report from the state Labor Department carried the usual "Jobs at All-Time High" headline (when the "high" disappears, think recession).   Also as usual, the April numbers showed a wide regional variation in private job creation rates around the state—and New York as a whole continues to trail employment growth nationally. Read More

Jobs grow further apart in NY

Newly revised data from the state Labor Department indicate New York's regional economic performance gap has grown larger in the last year. On a year-to-year basis, the state gained 103,900 private-sector jobs in January—a growth rate of 1.3 percent at a time when the U.S. as a whole was growing by 2.1 percent, according to the state Labor Department's monthly jobs report. Read More

Lights, camera, cash in!

The collapse of New York's effort to lure Amazon's "second headquarters" to Queens with more than $3 billion in city and state incentives sheds fresh light on a bigger, ongoing corporate subsidy—New York State's Film and TV Production Credit. Read More

Cuomo’s misleading labor stats

When it comes to rhetorical use of upstate New York unemployment statistics, Governor Cuomo is consistent. Unfortunately, he's consistently misleading. The latest example came at today's ribbon-cutting today for the new 136,000-square-foot Expo Center at the state fairgrounds in Syracuse, where Cuomo delivered a roughly 25-minute stream-of-consciousness riff that focused on what he portrayed as an economic turnaround in upstate and the Syracuse area. Read More

NY’s Labor Day “arrows”

Governor Cuomo frequently asserts that "the arrows are pointed in the right direction" for the upstate New York economy, thanks to state policy changes under his leadership. But approaching the sixth Labor Day of Cuomo's tenure, the latest job statistics continued to tell a different story. Read More

DiNapoli confirms: upstate sluggish

State Comptroller Thomas DiNapoli has just issued a report confirming what employment statistics have been showing: upstate New York's economy has lagged behind the nation and downstate regions for years now. Read More

Upstate job gains stay near nil

At the mid-summer mark, the private sector in upstate New York was still struggling to produce net employment gains, according to the state Labor Department's latest monthly report. 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
Fax: 518-434-3130
E-Mail: info@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.