Tax cuts emerged as a major issue early in the 2000 Presidential campaign, with George W. Bush and Al Gore each emphasizing the savings he would deliver to middle-class taxpayers. Tax policy is also a sharp point of contention in New Yorkâ€™s Senate race, where Rick Lazio and Hillary Clinton have sparred over whether large scale tax relief is either desirable or affordable.
This is an especially important question for New York State, which bears a disproportionately heavy share of the nationâ€™s income tax burden. New York remains second only to California in federal income tax payments, in both absolute and relative terms, even though it has lost population, jobs, businesses, and political influence to other, faster-growing states over the past two decades. New York Stateâ€™s 18 million residents generate more federal income tax revenue than 19 million Texans; in fact, New Yorkers pay more income taxes than residents of Ohio and Pennsylvania combined. The Empire Stateâ€™s heavy federal income tax burdenâ€”23 percent above the national per-capita averageâ€”contributes to its persistent imbalance of payments with the federal government.1
New York families, in particular, have a great deal at stake in the tax cut competition. Many of them earn more than the national family median incomeâ€”at least 50 percent more in New York Cityâ€™s suburban countiesâ€”but that does not mean they are living any better. In addition to their high federal tax burden, New Yorkers bear one of the highest combined state and local tax burdens in the country.2Â Factor in the cost of living, and itâ€™s easy to see why New Yorkâ€™s middle class, particularly in the City and its suburbs, feels just as squeezed as families in other states.
The candidates do not simply differ in the details of their plans: they offer totally different philosophies on how best to cut taxes. Governor Bushâ€™s plan relies on cutting tax rates for every taxpayer. In contrast, the Vice PresidentÂ opposes across-the-board rate cuts because they drive benefits to â€œthe wealthy.â€ Instead, he and and Mrs. Clinton both offer low- and middle-class families a series of targeted tax credits, which can be claimed only by families that behave in certain ways and have incomes below specified levels.
Which approachâ€”cutting tax rates or providing income-targeted tax creditsâ€”would give more tax relief to New York State as a whole? And which is better for the individuals and families that work, live and pay taxes in New York?