ALBANYThe "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:
- Utility taxes in New York were 5th-highest in the nation, and double the national average, at $120 per person. The gross receipts tax on utilities has been reduced since, and both Governor Pataki and Senate Majority Leader Bruno have called for further reductions in the GRT.
- Corporate income taxes in New York were the highest among all the states, and 139 percent above the national average, at $290 per person. The Governor and the Legislature enacted legislation in 1998 to reduce the corporate tax rate from 9 to 7.5 percent for corporations other than banks and insurers.
- Individual income taxes on New Yorkers were also the highest in the nation, at 112 percent above average and $1,176 per capita. The state has reduced personal income taxes significantly since 1996, and Governor Pataki has proposed further reductions in this year's budget.
- Using another measure of total tax burden, combined state and local taxes in New York were $144 for every $1,000 of personal income. That was 2nd-highest among the states, and 27.4 percent above the national average.
- Spending on welfare, at $1,377 for every resident, was the highest in the country and 88 percent above average.
- Education spending was 5th-highest among the states, at $1,812 per capita, 20.5 percent above average.
- Taxpayer spending on hospitals was 6th-highest, and 75.9 percent above average, at $468 per person.
- Spending on police and fire protection was the highest of any state's, and 46 percent above average, at $343 per capita.
- State and local government debt was the highest in the nation, and 86.7 percent above average, at $8,232 per person.
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.