November 10, 2003
Report: New York's local tax burden dwarfs the national average
New York State is home to the highest local taxes in the nation, more than 70 percent above the national average, according to a new study by the Citizens Budget Commission (CBC).
In fact, New York's overall tax burden, and its local taxes in particular, dwarf even those in comparably large and urbanized competitor states with similar economic profiles and histories, the study shows.
"Excessive local government taxes are only one part
of a broader and troubling pattern of state fiscal practices
that includes extraordinary debt levels and looming multi
billion dollar budget gaps," said Charles Brecher, CBC
research director and professor at NYU's Wagner School.
"These practices must be improved, if New York is to compete more effectively with other states."
"Among the 11 large, urbanized states with which New York most directly competes, six have local tax burdens below the national average, and the second highest is New Jersey, where taxes are 20 percent above the national average," the report said.
The report also found that, when measured as a proportion of personal income, New York's combined state and local tax burden is 26 percent above the national average. The state with the second highest tax burden, California, is far behind New York at only 8 percent above the national average.
The state's high local tax burden is not confined to New York City, the report noted. Local taxpayers in New York City pay especially high income taxes, but residents and businesses elsewhere in the state pay unusually high property taxes, the report said.
The CBC attributed the high tax burden to four government programs:
- Medicaid: New York’s Medicaid program is the most
expensive in the nation and requires more local funding
than any other state. One fourth of the tax disparity between
New York and the national average can be blamed on Medicaid.
- School aid: Education spending accounts for another quarter
of the tax disparity. New York’s per-pupil spending
is among the highest in the nation, but state aid to local
school districts is poorly targeted.
- Benefits and pensions: The state-regulated pensions and
fringe benefits for local government employees’ accounts
for another quarter of the tax disparity.
- Government employment: New York’s government employment, and the salaries paid to government employees, are both 25 percent above national average.
New York State faces a major structural imbalance between spending and recurring revenues, the report said.
“Recent history of failure to confront the unsustainable expenditure base has serious future consequences,” it added.
The full report is available at: www.cbcny.org.