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Number of Million-Dollar NYC Earners Hit Record, New Stats Show, Even as Tax Bills Grew

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The luxury co-op San Remo in Manhattan’s Upper West Side.

Jon Bilous/Shutterstock

With a clamor to raise taxes on the rich echoing through City Hall, Albany and Washington, newly released figures show that much of New York City’s personal income tax is already paid by the well off.

The report also reveals that the total number of New York taxpayers surged in 2017 and 2018 — suggesting that the city’s relatively high income taxes and the 2018 elimination of deductions for state and local taxes didn’t spur an immediate flight.

Along with that surge: A hike in the number of New Yorkers making at least $1 million a year. The figure surpassed 30,000 in 2018 — a 20% increase over three years prior. 

Data released Wednesday by the city Independent Budget Office showed that 42.5% of all the city income tax was paid by the top 1% of earners, defined as households pulling in about $900,000 or more a year. 

Overall, the top 10% of taxpayers accounted for seven out of 10 tax dollars. And the bottom 50%, with incomes of under $37,000, paid 1.7% of $11.6 billion in income tax liability in 2018.

The figures were released amid a pandemic-driven recession that’s spurred massive job losses and a widening budget hole for the state and the city. 

Push to Hike Taxes

Some state lawmakers have introduced more than a dozen proposals to further tax the rich, varying in complexity and aggressiveness. They’re pushing to get the measures passed in the new session that starts in January, or even sooner. 

Mayor Bill de Blasio is firmly in their camp and has publicly supported plans to tax the wealthy “at a much higher level.” Gov. Andrew Cuomo says he is opposed, fearing higher taxes will cause wealthy New Yorkers to leave the state.

The top 1% does not comprise only the super-rich, since New Yorkers qualify with incomes of about $900,000 a year. But about half their income comes from dividends, interest and capital gains, meaning they are less tied to the city than those whose money comes almost exclusively from wages at full-time jobs.

As THE CITY previously reported, the number of New Yorkers making $5 million-plus grew to more than 4,400 in 2018, according to the IBO.

That and the increase in the overall number of millionaires suggest the elimination of unlimited deductions for state and city taxes in the 2017 Republican tax bill— especially income and property taxes — did not result in an immediate rush of the wealthy to states with lower or no income taxes. 

That doesn’t preclude a possible longer-term trend symbolized by President Donald Trump, a lifelong New Yorker who made Florida his permanent home only a year ago. 

And Cuomo is among those concerned that raising taxes amid the pandemic and the growing prevalence of working remotely could drive some well-heeled taxpayers from the state. 

Florida imposes no income tax and its total state and local tax burden is 35th among the 50 states, according to the Tax Foundation, an independent tax policy nonprofit, while New York has long been No. 1 in the ranking.

The combined state and local income tax for individuals making more than $1 million and families making more than $2 million comes in at 12.7%, second only to California’s 13.3% rate.

The millionaires tax increase just enacted in New Jersey pushes its take to 10.75%.

Poor Disproportionately Hit

But judging the city’s tax system by the income tax alone is misleading, said economist James Parrott of the New School.

He said the combination of income taxes, property taxes and sales taxes leads to “lower-income households paying a higher share of their income in New York City local taxes than high-income households.”  

Parrott advocates instituting higher top brackets in the state income tax and restoring state corporate income taxes to the share of total taxes that prevailed a decade or two ago. Business taxes now amount to about $8 billion a year, the same as a decade ago, while total tax collections have jumped by almost a third.

He also has called for reforming the city’s property tax system, which studies have shown puts a large burden on lower-income homeowners and renters.

Parrott served on a mayoral commission charged with reforming the property tax system, although nothing has come of the members’ work so far.

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