NY Taxes: High However Measured

One of the tricks, or possibility of playing a trick (which I would never do), in the presentation of social and economic data is adjusting it – for population, income, inflation, and other conditions – so it is truly comparable and meaningful across geography and time.

With the May 31 release of fiscal 2004 state and local finance data from the U.S. Census Bureau, you may have heard that New York’s state and local taxes are still the highest per capita in the country.  The per capita measure doesn’t take into account the higher overall wages and costs in downstate New York, which both limits the pain of higher taxes and requires them to purchase public services of equivalent scope and quality.  Thus I have always used the Bureau’s other measure,  revenues and expenditures as a share of the income of area residents, as the more fair and accurate metric.  No matter:  New York is still number one among states, and by some margin, and New York City is much higher than the rest of the state.

Dividing fiscal 2004 taxes by calendar year 2004 personal income, the U.S. average was 6.1% of personal income for state taxes and 4.3% of personal income for local taxes, a total of 10.4%.  The vast majority of states had a state and local tax burden between 9.4% of income and 11.4% of income, with seven states below 9.4% and six plus the District of Columbia above 11.4%.  The other outliers on the upside were Wisconsin at 11.5%, Vermont at 11.6%, Hawaii (which provides universal health care) at 11.7%, typically high Maine at 12.6%, oil tax-enriched Wyoming at 12.9% — and New York  State at 13.7%.  No state is higher, though D.C. at 14.0% is.

Like most Northeastern states (and unlike states elsewhere), New York collects a high share of its taxes at the local level.  Its state tax burden was 6.2% of its residents personal income, little different from the national average (as usual), while its local tax burden was 7.5% of income, 74% above the national average.  While the State of New York appears to have a worse fiscal situation that its localities, therefore, its fiscal problems would go away if New York’s state taxes were 74% above average like its local taxes are.  On the other hand, most New York localities would be bankrupt if their taxes were to fall by nearly half to the national average.

Despite all the complaints about local taxes outside New York City, they are actually much higher in New York City, as we find by using individual government data for the City of New York and getting local government data for the rest of the state by subtraction.  In New York City local taxes totaled 8.7% of personal income, compared with an average of 6.6% for the rest of the state.  Assume for a moment that state taxes are evenly distributed across the state in proportion to personal income (they are not – MTA taxes are only collected downstate).  In that case, state and local taxes were 14.9% of personal income in New York City in fiscal 2004, 43 percent above the national average (compared with 34% above average in fiscal 2002).  For the rest of the state, state and local taxes averaged 12.8% of personal income – behind Wyoming and far behind New York City, but ahead of every other state.

While New York State’s position is not affected by measuring taxes relative to personal income rather than per capita, the position of New Jersey and Connecticut – the two richest states in the country – is greatly affected.  Far from being among the highest, these states, at 10.9% of personal income, were comfortably in the normal range, and well below New York State.  So was Pennsylvania at 10.3% and Massachusetts at 10.0%.  Despite the higher fiscal burden put on them through a higher state and local matching share for Medicaid, in fact, Northeastern states other than New York, Vermont and Maine have never had high state and local taxes once income is taken into account.

Once I finish adjusting the data, I’ll report which categories of spending explain New York’s high taxes, both in New York City and outside it.  The results are unlikely to surprise.  Indeed, the only surprise may be how low spending in some categories is (or has been in the past, we’ll see) relative to income, given the high tax burden here.  If you are a conservative, the high taxes are an issue in themselves.  But even if you are a liberal, you have to be disappointed with what our state and local governments have failed to accomplish, given the high level of funding we the citizens have provided.  And after more than a decade of bashing the poor and cutting the welfare rolls, the question is "where is all the money going?"

United States 6.1% 4.3% 10.4%
New York 6.2% 7.5% 13.7%
  New York City 6.2% 8.7% 14.9%
  Rest of NY State 6.2% 6.6% 12.8%
Alabama 5.6% 2.8% 8.4%
Alaska 6.0% 4.6% 10.6%
Arizona 5.9% 4.2% 10.0%
Arkansas 7.9% 2.0% 9.8%
California 6.8% 3.8% 10.6%
Colorado 4.2% 4.5% 8.8%
Connecticut 6.5% 4.4% 10.9%
Delaware 8.0% 2.1% 10.1%
District of Columbia 0.0% 14.0% 14.0%
Florida 5.6% 4.3% 9.8%
Georgia 5.5% 4.2% 9.7%
Hawaii 9.3% 2.3% 11.7%
Idaho 7.1% 3.1% 10.1%
Illinois 5.4% 4.9% 10.2%
Indiana 6.4% 3.6% 9.9%
Iowa 5.7% 4.1% 9.8%
Kansas 6.2% 4.7% 10.9%
Kentucky 7.5% 2.7% 10.1%
Louisiana 6.3% 4.3% 10.6%
Maine 7.3% 5.3% 12.6%
Maryland 5.6% 4.5% 10.1%
Massachusetts 6.2% 3.8% 10.0%
Michigan 7.0% 3.3% 10.3%
Minnesota 8.0% 2.5% 10.5%
Mississippi 7.2% 2.8% 10.0%
Missouri 5.2% 4.1% 9.3%
Montana 6.3% 3.1% 9.5%
Nebraska 6.4% 4.7% 11.2%
Nevada 6.0% 4.1% 10.1%
New Hampshire 4.2% 4.3% 8.6%
New Jersey 5.8% 5.1% 10.9%
New Mexico 8.0% 2.9% 10.9%
New York 6.2% 7.5% 13.7%
North Carolina 6.7% 3.3% 10.0%
North Dakota 6.5% 3.6% 10.1%
Ohio 6.3% 4.7% 11.0%
Oklahoma 6.6% 3.1% 9.6%
Oregon 5.6% 4.0% 9.5%
Pennsylvania 6.1% 4.2% 10.3%
Rhode Island 6.5% 4.9% 11.4%
South Carolina 6.0% 3.8% 9.8%
South Dakota 4.6% 4.1% 8.7%
Tennessee 5.4% 3.1% 8.5%
Texas 4.5% 4.9% 9.4%
Utah 6.5% 3.8% 10.3%
Vermont 8.9% 2.6% 11.6%
Virginia 5.3% 4.0% 9.2%
Washington 6.4% 3.5% 9.9%
West Virginia 8.0% 2.6% 10.6%
Wisconsin 7.1% 4.4% 11.5%
Wyoming 8.7% 4.3% 12.9%
Sources:  Taxes, U.S. Census Bureau; Income, Bureau of Economic Analysis