Bulletin #18: July 12, 1999
Our taxes are lower - but New York is still a high-tax state
It's hard to imagine that New York's 1999-2000 budget might not include another major round of tax cuts. Hard to imagine, because - despite a lot of progress in recent years - our taxes are still the highest in the country. Hard to imagine, because the state's newfound economic growth is producing huge surpluses. And, not least, the idea of no new tax cuts is hard to imagine because it's looking increasingly likely that the new budget will include another huge spending increase.
Yet, the possibility that this year's budget will break New York's string of five straight tax cuts seems to be growing. All of the discussion in Albany these days is how to add more money for spending, and how to find one-shots to pay for that spending. There's little, or no, serious talk about tax cuts.
Progress: New York's taxes are 53% above U.S. average
Clearly, the tax cuts enacted by Governor Pataki and the Legislature have improved our competitive standing. At one point, a few years ago, state and local taxes in New York were 62 percent above the national average, on a per-capita basis. As of 1996, the latest year's numbers available, we were still No. 1 in taxes - but "only" 53 percent above average.
We've made more progress since, with the tax cuts that took effect in 1997, 1998 and this year. But our overall taxes are still far out of line with our competitors'. The extra cost of government in New York is one reason that some parts of the state still lag far behind the nation's growth rate.
How high are taxes in the Empire State? Combined state and local taxes, as of 1996, totaled $3,987 per person. In New Jersey, the figure was $3,436; in Michigan, $2,588; Pennsylvania, $2,512; Ohio, $2,503; Texas, $2,128. (See The Public Policy Institute's Just The Facts for more figures.)
Our state corporate income taxes in 1997 (again, the latest available) totaled $168 per capita. That was 7th-highest among all the states, and 47 percent above the national average. Corporate tax rates are dropping as a result of 1998 legislation - but not for banking and insurance companies, two key industries that were not included in the 1998 reduction.
For five straight years, New York's political leadership recognized - and acted on - the fact that high taxes hurt our economy. The new strategy paid off in hundreds of thousands of new jobs. This is no time to go backward.