By Denise Richardson Staff Writer
The Daily Star
---- — The Empire State has the highest tax burden in the nation, according to a recently released study — a ranking that frustrates at least two local lawmakers.
The Tax Foundation ranked New York as No. 1 in a study of states’ tax burdens for residents, based on 2011 data. The report was released earlier in April, just as many people are busy preparing their income tax returns, which are due Tuesday.
New York has held the top spot for seven years.
“That’s the one place we don’t want to be No. 1,” state Sen. James Seward, R-Milford, said Thursday.
Assemblyman Pete Lopez, R-Schoharie, agreed.
“It’s a sour note,” Lopez said. “It continues to be a source of vexation for all of us.”
Both politicians, referring to this year’s state budget, said some tax relief is ahead but agreed more work is needed, especially in the areas of reducing property taxes and state mandates that raise costs for local schools and municipalities.
“There’s a lot more to be done,” Seward said.
New Yorkers paid 12.6 percent of their income, or an average of $6,622 per person, in 2011, the year the most-recent data is available, to state and local governments, the foundation said. The average per capita income was $52,417.
Tuesday’s deadline for filing state and federal income taxes is a reminder of the state’s high tax burden.
Nationally, Americans paid 9.8 percent of their income in state and local taxes in 2011, the Tax Foundation said. The rate was up from 9.3 percent in 2000 but about the same in 2009.
New York’s “Tax Freedom Day,” the day on which New Yorkers have collectively earned enough income to pay off federal, state and local tax bills, will arrive May 4 this year.
New York will be the 48th state to reach Tax Freedom Day. May 9 is Tax Freedom Day for New Jersey and Connecticut.
National Tax Freedom Day falls on April 21, three days later than last year because of the continuing economic recovery, the Tax Foundation recently reported.
Wyoming, where residents paid 6.9 percent of their income, had the lowest state-local tax burden rate, according to the foundation. The study is based on many taxes that state and local governments collect, including property taxes.
New York has company at the top. New Jersey had a tax burden of 12.3 percent in 2011, and in Connecticut, the rate was 11.9 percent.
Gallup Politics recently reported that more than 75 percent of residents surveyed in each of those three states said the amount they pay in state taxes is “too high.”
Last year, at least 600 interviews were conducted with residents aged 18 and older in each of the 50 states. On average, 50 percent of residents across all states say their taxes are too high, Gallup said.
While taxpayers face the same federal income tax woes, Gallup said, those in states where the majority of residents consider their state’s taxes too high may be more distressed at this time of year than others elsewhere.
POLITICIANS SEE RELIEF IN STATE BUDGET
New York lawmakers approved a 2014-15 budget that holds spending growth by 2 percent for a fourth consecutive year and has $1.5 billion in property tax cuts to help homeowners and encourage local governments to increase efficiencies.
Gov. Andrew Cuomo in his State of the State Address said as a result of fiscal reforms from the last three years, New York is is poised to shift from a $10 billion deficit when he took office to a $2 billion surplus by 2016-17.
Rather than spend this projected revenue, Cuomo proposed to cut taxes, including estate taxes, which have been an incentive for elderly New Yorkers to move out of state.
The 2014-15 state budget cuts taxes for manufacturers, the governor’s office said, and the accelerated end of a utility surcharge assessed on all customers will save businesses and residents $600 million during the next three years.
New York state has passed targeted tax cuts in the last three years, Seward said, but now it is time for broad-based tax cuts to provide relief and to recognize those who have remained in New York.
During the next three years, changes in estate taxes will mean 2,800 family farms won’t have to be sold to pay inheritance taxes, among other benefits to New Yorkers who otherwise might follow their financial planners advice to move out of state, he said.
The toughest portion of the tax burden is property taxes, Seward said, and the Tax Foundation study quantifies issues about New York taxes that he regularly hears from constituents.
Senior citizens struggle with whether they can afford to stay in their residences, Seward said, and young families wonder if they can afford a home.
FOUNDATION: STATE NEEDS REFORM
Liz Malm, a Tax Foundation economist, in a media release attributed New York’s No. 1 ranking to high income and property tax rates, as well as high property values and salaries compared with other states.
During the 2011 fiscal year, state-local tax burdens as a share of state incomes decreased on average as a result of growth of income in all states, the nonpartisan Tax Foundation in Washington, D.C., said. State-local tax burdens are very close to one another and slight changes in taxes or income can translate into dramatic shifts in rank.
“Though the annual burdens report won’t reflect the effects of recent changes for several years because of a lag in the availability of data,” Malm said, “New York’s 2011 state-local tax burden — the highest in the nation — shows just how necessary tax reform is in New York.”
STATE TAXES HELP SCHOOLS — AND PEOPLE
Gina Keel, assistant professor in the political science department at the State University College at Oneonta, said the foundation’s ranking for New York wasn’t a surprise.
However, New York’s high tax burden also reflects a greater willingness than some states to support education and help the needy, for example, through Medicaid, Keel said.
Lopez said New York’s “rich array of services” includes a higher level of Medicaid than the federal standard, a program that impacts on county property tax bills.
Under mandates from Albany and Washington, D.C., school districts and municipalities will be challenged to avoid piercing the governor’s property tax cap, Lopez said, and the recently approved plan for property tax cuts will be an interesting experiment.
The question is whether Cuomo and the Legislature will be able to maintain a course of spending while implementing programs to strengthen the economy, Lopez said.
Meanwhile, constituents will reiterate funding demands for schools, highways and social programs. Funding was cut previously as a result of the recession and election pressures, he said.
“New York is challenged because it offers so much,” Lopez said.
STATE BUDGET, ECONOMY INTERTWINED
Development of this year’s budget was focused more on the economy, Lopez said, and changes in the corporate franchise and the energy surcharge, among others, will help households as well as businesses.
“Everyone does better if the economy is healthy,” Lopez said Thursday.
U.S. Rep. Chris Gibson, R-Kinderhook, said he is calling on state legislators to reduce taxes, but relief also is a “big issue” for federal lawmakers.
“It’s important that we work on this issue,” Gibson said.
Under tax reform, money goes back into the economy as taxpayers have more money to spend on home improvements, buying cars or appliances or other spending, he said.
“It’s also helping growth — economic growth,” he said.
Gibson said he supported successful efforts to make permanent tax cuts of 2001 and 2003, is opposed to taxes on energy and is working to close tax loopholes.
“I’m trying to make a difference at the federal level,” Gibson said.
RESIDENCY IS OPTIONAL; TAXES AREN’T
Legislators want New Yorkers to remain residents, Lopez said, but the high tax burden works against collective efforts to improve the economy.
Some may leave for warmer climates, Lopez said, but with the Internet and social media, it also isn’t hard for taxpayers to find out where the dollar has more spending power.
The census reported that New York lost a net 1.6 million residents to other states between 2000 and 2010, according to the independent Empire Center for Public Policy Inc.
States use nonresident collection of taxes to generate income, according to the Tax Foundation. However, the driving force behind a state’s long-term rise or fall in the tax burden rankings usually is internal and most often a result of policy choices regarding tax and spending levels or changes in state income levels.
Seward said the Tax Foundation’s ranking intensifies the awareness that New York isn’t going to be able to restore its economy by being the state with the highest tax burden.
“That’s a huge drag on the economy,” Seward said. “We’re going to continue to chip away at this.”Three State tax burdens in 2011 New York: 12.6 percent or $6,622 New Jersey: 12.3 percent or $6,675 Connecticut: 11.9 percent or $7,150