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In Fiscal Year (FY) 2015, New York collected $171 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average New York taxpayer can afford this level of taxation.
As shown in Chart 1, New York’s state and local tax burden (tax collections divided by private sector personal income) was the highest in the nation for FY 2015 at 21.4 percent—or 48 percent above the national average of 14.4 percent.
New York’s high state and local tax burden is driven by the fact that they have every tax imaginable and at very high tax rates. For instance, at the state level New York has the highest cigarette excise tax in the country ($4.35 per pack) and the eight highest top individual income tax rate in the country (8.82 percent). The income tax rate, however, is misleading because New York has an awful recapture provision which eliminates the tax benefits of lower marginal tax rates for high income taxpayers.
As bad as the state level taxes are, it gets much worse when local taxes are factored in, especially in New York City:
More troubling, as shown in Chart 2, New York’s tax burden has grown over time by a whopping 129 percent to 21.4 percent in FY 2015 from 9.3 percent in FY 1950.
New York’s high cigarette tax rate is also a great example showing that “taxes matter.” As a consequence of the combined state and local cigarette tax, New York has become a haven for cigarette smuggling. A recent study on cigarette smuggling by the Mackinac Center and the Tax Foundation measures this negative economic impact and concludes:
“In 2015, New York State had the highest inbound smuggling rate at 57 percent. In other words, more than half of all the cigarettes consumed there were not properly taxed. Directly following New York is Arizona, Washington state (up from fourth place last year) New Mexico and Minnesota.”
“Many other states found themselves exporting cigarettes to their higher taxed neighbors. New Hampshire was the top export state, with 72 percent of the cigarettes sold there eventually wound up smuggled into other states. New Hampshire was followed by Idaho, Virginia, Delaware and West Virginia.”
Ironically, New York has significant capacity in oil and gas resources which, in other states, has been a path to tax riches. Alas, New York decided in 2010 to ban the new process of hydraulic fracturing into the oil and gas rich Marcellus Shale in the southern portion of the state. The economic and tax boom that would result in such drilling could be the answer to lowering New York’s nosebleed tax rates.
To put New York’s tax burden into perspective, let’s compare it to the earning paid out by major industries in the state (earnings is the sum of wages and salaries, supplements to wages and salaries, and nonfarm proprietors' income).
As shown in Chart 3, New York’s 21.4 percent tax burden is the equivalent to these combined industries: information, manufacturing, construction, utilities, real estate, and management.
Of course, as shown in Chart 4, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in New York—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The New York counties with the top 10 highest local government tax burden include:
The New York counties with the top 10 lowest local government tax burden include:
Note: New York County (Manhattan) includes Bronx County (The Bronx), Kings County (Brooklyn), Richmond County (Staten Island), and Queens County (Queens)
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 65 years! See if your state has been above or below the national average?