Zack Hutchins
Director of Communications

For Release — Thursday, March 4, 1999

"Tax gap" shrinks from 60% to 53.5%; may be headed below 40%,
Institute says

ALBANY—The "tax gap" between New York and other states, the extra cost of taxes in the Empire State compared to the average for all states, is at its lowest level since 1982, new data from the U.S. Census Bureau show. And an analysis by The Public Policy Institute indicates the extra tax burden on New Yorkers will continue to shrink significantly as a result of additional tax cuts taking place in coming years.

The latest improvement in New York's competitive standing came during Governor Pataki's first budget year in 1995-96. The Census Bureau, the authoritative source of financial data on all 50 states, released its data for the 1995-96 fiscal year on the Internet today (Thursday). The Public Policy Institute, research affiliate of The Business Council, analyzed the Census data to calculate per-capita figures which allow comparisons of all the states. (See attached tables.)

The combined state and local tax burden on New Yorkers in 1996 was $3,987 per capita, compared to a national average of $2,597, according to the Census data. As it has in many years past, New York's tax burden topped those of all other states.

New York's "tax gap" of 53.5 percent above the national average in 1996 was down from 56.4 percent in 1995, and 60.5 percent in 1994, according to Census Bureau data for those years.

The last time the state's tax differential was lower was in 1981-82, Governor Hugh L. Carey's last full year in office. That year, combined state and local taxes in New York were 52.3 percent above the national average.

"The fight to make New York more competitive is paying off," said Daniel B. Walsh, president of The Business Council and CEO of the Institute. "This new Census report is the latest proof."

During the 1995-96 fiscal year covered by the new Census data, Governor Pataki and the Legislature implemented the first step of a three-year reduction in New Yorkers' personal income taxes. That year also brought partial implementation of business tax cuts the Legislature initiated in 1994.

The new Census data also show that the property tax burden on New Yorkers, while one of the highest in the nation, rose less than the rate of inflation from 1995 to 1996. The 1.8 percent increase in New York's per-capita property taxes was less than the national increase. Still, property taxes per capita totaled $1,279 in the Empire State, 62 percent higher than the average of all states.

"Some critics of the state's new fiscal policies predicted that tax cuts and spending restraint in Albany would result in massive property tax increases at the local level," Walsh said. "Obviously, the critics were wrong."

New York has continued to improve its competitive standing in the years since 1996. A Public Policy Institute analysis indicates that, as of 1999, the "tax gap" faced by New Yorkers has been cut further, to around 40 percent, a level last seen in the 1960s. That estimate takes into account some $6.8 billion in reductions to personal income taxes, business taxes and other taxes that have been reduced since 1996. Future tax cuts, already enacted, will shrink the gap further in coming years.

As with taxes, government spending in New York remains high, despite relatively low increases in 1996. Combined state and local government spending totaled $7,990 per capita, second only to Alaska and 51.7 percent above the national average.

The new Census Bureau data for 1996 also show:

The Business Council is New York's largest broad-based business group, representing over 3,000 member companies large and small across the state. Based in Albany, it lobbies for a better business climate, and offers cost-cutting services to its members.

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