Is Governor Cuomo’s proposal to extend the so-called millionaire’s tax a real budget-maker needed to fill a $4 billion hole he claims exists in the budget? Or is it just another hike through Sherwood Forest on the way to Washington, DC?
Originally enacted in 2009, the millionaire’s tax raised the top New York personal income tax rate on individuals earning over $1 million to 8.82%. Set to expire in 2011, it was extended once again through 2017. Now that the top rate is scheduled to drop back to 6.85% at the end of this year, the temporary surcharge is once again included for extension as part of the Governor’s proposed budget wish list.
Without the extension, New York’s top rate is scheduled to drop to 6.85%. Our neighbors in Connecticut and New Jersey currently have top rates of 6.99% and 8.97%, respectively. Yet the rates don’t tell the whole story. Despite having a lower rate than New Jersey and many other jurisdictions, a 2016 study by the Tax Foundation ranks New York as having the 48th latest tax freedom day. According to the study, New Yorkers must work through May 8th to earn enough to pay all of their tax obligations, while with its 13.3% top tax rate, California residents are all paid up on May 3rd.
Clearly the top income tax rate isn’t telling the whole story. Sales tax and property taxes, amongst others, must be considered as part of the equation. Surprisingly enough, as part of the 2015 New York State budget, the sales tax on general aviation aircraft was eliminated and purchasers of yachts in the Empire State only pay sales tax on the first $230,000 of the purchase price.
What actually makes it to the 2017 budget is anyone’s guess at this point. However, what we should be asking our lawmakers to do is look beyond the rates and look to the overall tax burden placed on all individuals and businesses alike. I can assure you in deciding where to live and work; this is what our clients are doing.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.