Tax Policy Choices and New York City’s Competitive Position Donald Boyd - 1 The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission Conference December 6, 2013

Outline NYC taxes: high, rising How easy is it to leave NYC taxes behind? Impact of PIT options Disparities between NYC commercial property tax rates and competitive locations Conclusions 2

New York City Tax Burden Is Relatively High 3

Taxes on Upper Income Households Long Among Highest in Nation 4

NYC Taxes Highest Percent of GCP in 30 Years; Recent Increases Driven by Property Tax 5

How Easy is it to Leave NYC Taxes Behind? Outmigration Commuting Research on – Intraregional responses to taxes – Millionaire taxes 6

Outmigration of High-Income NYC Individuals More Common than in Neighboring Areas 7

Commuting More Common among Higher-Wage NYC Earners than Lower-Wage Earners 8

Impact of PIT Increases Examined two options: – 10% surcharge – 0.75% increase in top rate on income above $500k (from 3.876% to 4.626%) Within the bounds of past changes; similar in magnitude (surcharge somewhat greater) 9

Net State-Local PIT Tax Payments MUCH Higher than Neighbors; Difference Increased by Policy Options 10

NYC Property Tax Much Higher than Nearby Jurisdictions 11

Conclusions NYC tax levels extremely high relative to neighbors, particularly for PIT and commercial property tax Intraregional competition carries greater risks of economic impacts than longer-distance competition – Millionaire migration studies show relatively small impacts, but NYC differentials much greater than in those studies – Higher income individuals in NYC relatively more likely to migrate than in neighboring areas. Higher wage workers more likely to commute to NYC than lower wage workers PIT increases examined would exacerbate existing differentials Differential between NYC property tax and some competitors is large Caution advisable when considering increased taxes in areas where NYC is already an outlier 12