Tax Principles, Volatility, and S.2021 and S.2654 Slides to - PowerPoint PPT Presentation

Tax Principles, Volatility, and S.2021 and S.2654 Slides to accompany testimony Albany, NY March 12, 2009 Donald J. Boyd, Senior Fellow Nelson A. Rockefeller Institute of Government Richard P. Nathan and Thomas L. Gais, Co-Directors Robert Ward, Deputy Director boydd@rockinst.org 1

Competing tax policy goals • Taxpayer equity or “fairness” – horizontal and vertical • Tax neutrality • Revenue adequacy – longer run, and cyclical • Administration and compliance 2

New York's economic volatility - perhaps surprisingly - is not atypical State economic volatility, 1986-2005 (AK excluded as extreme outlier: value=10.1) Economic volatility: "typical" % change in real gross product ND 5 WY LA NM adjusted for trend (standard deviation) 4 NH OK TX 3 MI MA VT HI CT RI ME UT OR ID IA NE MD AZ CA DE NV NY 2 WA MO GA NC NJ MN TN MT VA IN OH AL KS CO IL KY SC MS FL SD WV US WI AR PA 1 0 5 10 15 20 25 30 35 40 45 50 Rank (1=least volatile) Source: Author's analysis of data from U.S. Bureau of Economic Analysis 3

Excelsior! New York's rising reliance on the financial sector Finance and insurance wages as a share of total wages in New York State 25% 20% 15% 10% 5% 0% 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: Bureau of Economic Analysis data, spliced by Boyd 4

The top 0.5% of tax returns have an estimated 23% of AGI and 31% of tax liability Estimated distribution of NY tax returns, adjusted gross income, and tax liability in 2009 80 70 60 50 % share of total 40 # tax returns AGI Tax liability 30 20 10 0 $0-50k $50-100k $100-200k $200k to $1 million $1 million + Source: NYS Executive Budget 2009-10, Economic and Revenue Outlook, Table 6, p.200 5

Top 1% of NY income tax returns historically have paid 30-40% of total Tax liability of top 1% of NY income tax returns As percent of total income tax liability 45 Surcharge years 40.8 39.0 39.0 38.9 40 37.3 36.5 36.1 36.0 35.6 35.2 35.0 35.1 35 33.7 32.2 30.2 30 25 % of total 20 15 10 5 1% 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007* 2008* 2009* 2010* 6 Source: NYS Executive Budget 2009-10, Economic and Revenue Outlook, Table 7, p.200

Concluding remarks • S.2021 and S.2654 would increase the share paid by the top 1% significantly – perhaps by 5+ percentage points for S.2021 • This certainly will increase volatility of NYS income tax and NYS tax system, probably significantly 7