New York Tops Nation in Taxes, Ranks Second in Spending, Report Finds

New York holds the distinction of having the highest tax burden per resident in the nation, using the collected revenue to fund extensive spending programs, according to a new report from the Citizens Budget Commission (CBC). The state also ranks as the second-largest spender among mainland states, surpassed only by Alaska.

The CBC's analysis, which covers fiscal year 2024, found that New York's combined state and local taxes placed it at number one nationally for tax burden per inhabitant. The report noted that New York's substantial spending includes significant outlays on Medicaid and public education per student.

"Combined with New York’s high cost of living and uneven public services, these fiscal burdens weaken New York’s value proposition and its ability to attract and retain residents and businesses," the report stated, recommending that state and local governments focus on reducing taxes while improving service quality and efficiency.

State and local governments in New York collected the most per resident in taxes, 71% above the national average and 22% higher than California. The state also levies the highest personal income taxes per $1,000 of income, 94% above the national average, and collects the most corporate taxes per $1,000 of state GDP. Spending per capita is also higher than all states except Alaska, at 44% more than the national average.

The report indicated that New York would have saved $99 billion if its spending mirrored that of New Jersey and $143 billion if it matched Texas. The state's tax structure includes high personal income taxes, high corporate income taxes, the third-highest property taxes, and the sixth-highest sales taxes.

Factors contributing to New York's high tax burden include a broad range of taxes, progressive income tax rates that draw more revenue from high earners, and substantial property taxes on valuable real estate. New York City also imposes a 6% commercial rent tax on certain tenants in Manhattan.

New York spends approximately $34,000 per student on K-12 public education, according to the Education Data Initiative, and $4,940 per resident on Medicaid, significantly higher than the national average of $2,800. Despite these high education expenditures, student performance on national standardized tests has been described as mediocre.

The analysis did not include the recent "pied-a-terre" tax on luxury second homes that was authorized for non-resident New York City property owners. The CBC warned that increasing taxes further could make New York less competitive and less attractive to residents and businesses.

In the preceding fiscal year 2023, New York ranked first in taxes and third in spending. The CBC recommended that the state prioritize improving the value taxpayers receive by controlling and, where feasible, reducing taxes while ensuring public funds yield stronger results.

The findings emerge during the gubernatorial campaign, with Republican challenger Bruce Blakeman promising significant income tax cuts if elected. Democratic incumbent Kathy Hochul's office did not immediately comment on the report.