No. 43 August 2004
The $36 Billion Bonus
New York’s Gains from Federal Tax Cuts
- The 2001 law also phased in a repeal of the federal estate tax, which is not a subject of this report.
- Long-term capital gains are gains on assets held for at least 12 months; shorter-term gains are taxed at regular income rates.
- As a stimulus measure, the first installment of the EGTRRA cut was distributed to taxpayers in the form of “advance payment” checks beginning in late July 2001. These payments—up to $300 for single taxpayers, $500 for heads of household, and $600 for married couples—reflected the value of the new 10 percent bracket on the first $12,000 of income. New York’s share of the advance payments totaled just over $2.5 billion, including about $1 billion for New York City residents. In fact, many of these checks ended up being cashed during the weeks leading up to and immediately following the World Trade Center attack.
- Governor George Pataki’s 2004–05 Executive Budget projected state personal income tax receipts of $26.8 billion.
- The city expects $4.6 billion in federal categorical aid and $5.4 billion in receipts from its own personal income tax in fiscal 2004–05.
- Income measured as estimated adjusted gross income.
- These family median income figures are from annual estimates developed by the U.S. Department of Housing and Urban Development (HUD) to determine eligibility for subsidized housing. The nationwide income estimates are available at http://www.huduser.org/datasets/il/il04/.
- See, for example, Hollow at the Middle, a 1996 report issued by the New York City Council Finance Committee, which suggests that “middle class” in the city ranges up to 200 percent of the size-adjusted median family income. For a family of four in 2004, that would be $123,600.
- For more analysis of the Republican and Democratic tax proposals during the last senatorial and presidential campaigns, see Campaign 2000 Tax Proposals: What They Mean for New Yorkers, Manhattan Institute Center for Civic Innovation, Civic Report No. 15, October 2000.
- Securities Industry Association, “The Street, the City, and the State: The Securities Industry’s Importance to New York City and State,” Securities Industry Trends 40, no. 2 (March 22, 2004), from cover page highlights.
- Ibid., p. 12.
- Required quarterly estimated income tax payments were also temporarily increased by the State and City on an accelerated basis.
- In the aggregate, our model indicates that households throughout New York State with incomes above $125,000 saved about $3.8 billion more in federal taxes while paying about $900 million more in new state income taxes in 2003. In New York City alone, households in the same bracket saved nearly $2 billion in federal income taxes while paying about $410 million more in City income taxes and about $420 million more in State income taxes.
- The State and City income tax rates are supposed to “sunset” at the end of 2005.
- For more on this phenomenon, see Robert Carroll, “Do Taxpayers Really Respond to Changes in Tax Rates?,” U.S. Treasury Office of Tax Analysis, OTA Working Paper 79, November 1998.
- The state’s fiscal year ended March 31, and the city’s fiscal year ended June 30.
- Kerry also favors an expansion of existing tax credits for college tuition, which phases out at incomes between $83,000 and $103,000 and effectively excludes many middle-class New York families from sharing in its benefits.
- A summary of the Democratic candidate’s tax proposals can be found at http://www.johnkerry.com/issues/economy/fiscal_responsibility.html.
- Carroll, op cit.