In New York City, Tax Freedom Day Comes Later Every Year

Now that April 15 has come and gone, Americans await another tax milestone: tax freedom day. Tax freedom day is the Tax Foundation’s way of dramatizing how many days each year the average citizen works simply to pay his taxes, after which he can start earning for himself. This year, says the Tax Foundation, tax freedom day falls on April 27; but if you live in New York State, with its inflated local tax rates and high income levels, you’ve got to wait until May 9 to win tax freedom. Moreover, if current efforts to raise taxes in New York City succeed, many Gotham residents may soon be working even longer for the government.

For most Americans, tax freedom day has been extending later and later into the year, thanks to tax increases and the booming economy of the 1990s, which pushed more people into higher tax brackets. This year, Americans will work an average of 117 days to pay off their tax bill—longer than they will have to work to pay for food, clothing, and shelter combined. A decade ago, Americans paid off their tax bill eight days earlier.

The federal tax bill has grown especially rapidly for the wealthiest Americans. Those with incomes in the top 5% nationwide paid 55.5% of all federal income tax in 1999, the last year for which statistics are available, up from 44% ten years earlier, according to the Tax Foundation. The top 1% paid 36.2% of all taxes, up from 25.2% in 1989.

The country’s progressive tax code hits New York City residents, with their higher-than-average incomes, much harder than residents of most states. When you add state taxes to the equation, only residents of Connecticut and Washington wait longer for tax freedom. Moreover, the tax burden in New York State falls even more disproportionately on those in higher income brackets than in the nation as a whole—IRS data show that the top 5% of wage earners in New York State paid a whopping 58.2% of all federal taxes collected in the state.

The Tax Foundation hasn’t calculated tax freedom day for residents of New York City, but with the city’s additional income tax on top of the state levy, tax freedom day falls even later in Gotham than in the rest of New York State. Despite that burden, many of the city’s elected representatives seem to think that New Yorkers still aren’t paying enough in taxes. One component of the new city budget proposed by the City Council is nearly $400 million in new personal income taxes, designed to fall disproportionately on those earning $150,000 a year or more—about 3 percent of the taxpaying public. They would pay $350 million, or 88%, of the tax hike under the City Council plan.

Mayor Bloomberg is right to resist this tax hike. New Yorkers, especially those earning more than $150,000 a year, already pay the highest personal income taxes in the country. Many people who fall into this income bracket can hardly be considered rich, especially in a city as expensive as New York. Taxing them even more heavily drains money out of the private economy just when New York needs it to spur an economic revival, and will likely drive more of these families out of the city. That sends exactly the wrong message for a city trying to rebuild confidence in its economy.

Mr Malanga is a contributing editor to City Journal. From the magazine’s Web site, www.city-journal.org.