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 Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

NY Post-Pandemic Employment Tide Stopped Rising At Year’s End

New York's post-pandemic employment recovery came to a halt and moved into reverse in December, according to the state's for the final month of COVID-wracked 2020. Private payroll employment in December was 966,000 jobs below the level of the previous Read More

State Tax Receipts Strong Again in November, But Jobs Recovery Remains Slow

New York State's tax receipts in November were a whopping $800 million above Governor Cuomo's projections for the month—further evidence that the current-year budget gap is probably much smaller than Cuomo has been claiming. Meanwhile, however, priva Read More

New York’s Jobs Recovery Chugged to a Near-Halt in October

After rising sharply once the economy began to reopen, private payroll growth in New York ominously ran out of steam in October, according to the state's monthly jobs report. Read More

Fewer Workers, Not More Jobs, Explains NY’s September Unemployment Rate Drop

New York State's unemployment rate has fallen sharply since the economically devastating pandemic lockdown last spring. But as state Comptroller Thomas DiNapoli points out in  his latest economic report, the jobless rate doesn't tell the whole story. Read More

New York’s Private Jobs Rebound Still Trails Most of U.S.

In the seventh month of the coronavirus pandemic, private-sector employment in New York was still recovering more slowly than in other states from the after-effects of the broad spring shutdowns of normal business and social life, according to federal Bureau of Labor Statistics data. Read More

Mixed September for NY: Job Recovery Sluggish, Tax Receipts Up

Continuing a trend from mid-summer, New York's private jobs recovery slowed a little more in September—but state tax receipts came in a bit stronger than expected, according to two monthly reports released by the state late today. Read More

It’s Official: New York State’s Second Quarter Economic Crash Was the Worst on Record

Further evidence of the massive damage done to New York’s economy by the coronavirus pandemic shutdown has emerged in the latest gross domestic product (GDP) data from the federal Commerce Department's Bureau of Economic Affairs. Read More

Sluggish Reopening: NY’s Private Job Count Down 1.1 Million From Pre-Pandemic Level

Six months into the novel coronavirus pandemic, New York State's private-sector employment recovery was the slowest in the 48 contiguous states—and getting slower. 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.

Empire Center Logo "...the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo's government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it (the Empire Center) sued, Team Cuomo finally started coughing up some of the records." -Wall Street Journal, February 19, 2021

SIGN UP TO READ ABOUT THE ISSUES IMPACTING NEW YORKERS.