When pols who can’t control their spending, decide they must take more out of the taxpayers, they often end up with fewer taxpayers.

Indeed, here in New York the state and the city have become a tax hell for many, with some New Yorkers looking for the exits.
That’s because this year New York is once again the most taxing state in the nation, a new study says.

The Tax Foundation, in its 2019 State Business Tax Climate Index, found that Tax Freedom Day will arrive here the latest of any state—May 3rd. That’s almost three weeks later than the national average of April 16th.

“New York’s tax burden is incredible,” says Garrett Watson, special projects manager with the Tax Foundation.

How Long Do I Have to Work Each Year?

The Tax Freedom Day is the time it takes the average American to pay his or her total tax burden. There are several reasons New York is last to tax freedom among the 50 states. And living in the state’s biggest municipality, New York City, is a particularly taxing experience.

High Taxes? Blame Both City and State

Sometimes it is a high state tax. Sometimes it is a city tax combined with a state tax. Sometimes it is the effect of federal policies.

But the Tax Foundation says the result is the same: the average New Yorker’s total tax burden is much more than in the rest of the nation.

The average state and local tax burden per capita is $8,957 compared to $4,946 in the rest of the country, according to the Tax Foundation’s State Business Tax Climate Index study. This comes when many New Yorkers must also pay more federal taxes because of the new tax code.

New York’s leadership, analysts say, has created a Groundhog Day of high taxes that has been going on for decades. It spends a lot. It taxes a lot. That tends to drive out the people who pay the most in taxes, raising the taxes of those who stay.

“It creates a vicious cycle,” Watson says.

What Do the Powers that Be Say?

Almost all state and city officials didn’t respond to questions about the Tax Foundation report except State Senate Majority Leader Andrea Stewart-Cousins (See Notes).

Governor Cuomo, Mayor De Blasio, State Assembly Speaker Carl Heastie, and State Senate Finance Committee Chairwoman Liz Krueger all declined.

Another analyst says high taxes on the rich, New York’s millionaire’s surcharge, is counterproductive because they leave. (See Note: “The New York Tax Exiles”)

“Regardless of what you think what high earners should be paying in taxes, it is costing much less for them to live in a place like Florida,” says Dave Friedfel, director of state studies with the Citizens Budget Commission.
Friedfel says the state’s millionaire’s tax was initially supposed to be temporary but has become a permanent tax for over a decade. He says the state needs the rich to stay because they pay a lot.

“The top one percent of the wage earners are paying 40 percent of the state’s tax bill,” he adds.

Washington Makes It Tougher on New Yorkers

And New York’s problem worsened with the adoption of the new federal tax code, Friedfel adds. It is squeezing the high tax states like New York by reducing deductions for state taxes.

New York, a recent report notes, is also being short-changed by the federal government. “New York remains the single largest net contributor to the federal government of all the states,” says the Rockefeller Institute report, “Giving or Getting?” It claimed New York taxpayers pay much more in federal taxes than they receive in federal services.

And governor Cuomo, in a recent comment, called the federal tax code change, “economic civil war.”

But the federal code is just one reason why New Yorkers dig deeper.

New York Taxes? Let Me Count the Ways

For instance, New York State also has one of the highest individual tax rates in the nation, 8.82 percent.

Drive a car? Smoke? Pay sales taxes? Own property? State and city taxes hit you.

New York levies the highest tobacco taxes in the country and “it imposes the fifth highest gas tax in the country,” the Tax Foundation says.

Still, the New York State sales tax of 4.49 percent is “relatively low,” according to the Tax Foundation. However, when state and local sales taxes are combined New York has the 10th highest sales taxes in the nation.

A similar situation exists on corporate taxes. Here the state levies a 6.5 percent but then the city “adds an onerous corporate tax on top of the state and the total tax is nine percent,” Watson says.

The state’s property tax collections per person is $2,782, the fourth highest in the country. The Tax Foundation finds that New York levies a 4.54 percent effective property tax rate.

“This is the sixth highest effective rate in the country,” Watson said.

This collective tax burden affects Albany’s tax collections. The state had to close a $2.3 billion gap this year.

How did it do it?

In part the state extended the millionaire’s’ tax, which was due to expire.

Notes:

The New York Tax Exiles

Many people have been putting New York in their rear-view mirror for close to a decade.

Indeed, a recent study documented the trend of people seeking less taxing places.

“New York experiences more domestic out-migration than in-migration, and the size of this gap has doubled since 2010 from a net loss of 93,712 residents in 2010 to a net loss of 189,413 residents in 2016,” according to the Citizens Budget Commission report, “New York State Trends during the Cuomo Administration.”

Governor Recognizes the Problem

Governor Cuomo recently acknowledged the exiles: “People are mobile. They will go to a better tax environment.”

An example is CPA Kenneth Morris, formerly a Long Island resident. He moved to Nevada about a decade ago. Morris says he saves $15,000 just on real estate taxes.

“Taxes are considerably less than in New York. Nevada has no state income tax,” he said.

Morris added other benefits are “less congestion, roads are newer and cost of living much cheaper.”

How does New York reverse the allure of low tax Florida and Nevada after years of high taxes?

Supply side economist Arthur Laffer, who has studied New York’s tax structure, warns “it’s hard to turn around lung cancer in the last month.” He argues that New York needs “major, major efforts in reforming the tax code.”

Notes:

Some New Yorkers Get Lower Taxes, Leader Says

New York is expensive so the new state budget provides a permanent property tax cap and has more funds for municipalities to avoid tax increases.

Those are some of the sentiments of state Senate Majority leader Andrea Stewart-Cousins. She says she will work to lower taxes on low and middle-incomes and says the state deserves credit for not raising the millionaire’s surcharge.

The Senate majority, she says, is not “looking to raise taxes, including the millionaires’ tax. Following the state budget process tax rates for middle- and working-class New Yorkers will actually be lower.”


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. His latest book "MoneySense" is available on Amazon. Got a question, comment, or anything else you'd like to provide? You can contact Gregory at: gbresiger@hotmail.com

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