The Independent Budget Office today released a report analyzing the recent proposals for tax cuts made by the Mayor and City Council. IBO estimates that the set of proposals made by the Mayor would cost $532 million in lost revenue in fiscal year 2002, growing to $1.3 billion in 2005; the Council's proposals would cost $368 million in 2002, growing to $776 million in 2005. These proposals as well as other initiatives for the fiscal year that begins July 1 are now being negotiated by the Mayor and Council.
"All of the prospective tax reductions deserve full discussion and careful consideration, particularly at a time when slower economic growth is making the city's fiscal choices increasingly difficult," said IBO Director Ronnie Lowenstein.
IBO's report, "Considering Tax Cuts: Current Proposals by the Mayor and the City Council," reviews eight of the Mayor's tax cuts (all but the extension of the Lower Manhattan Tax Abatement Program) and all six of the City Council's proposals. Among the findings:
- The proposed personal income tax surcharge reduction would cost the city $179 million in revenue in 2002 and provide a savings of $8.57 in taxes (6.5% of liability) for a two-parent family with two children and an income of $25,000 ; that same family earning $75,000 would save $60.76 (3.5% of liability); and that same family earning $150,000 would save $144.24 in taxes (3.3% of liability).
- A city earned income tax credit would cost $56 million in 2002 and eliminate local income tax payments for some 77,000 working filers who earn too little to pay state income taxes but currently must pay city taxes.
- Under both the Mayor's and the City Council's proposed extensions of the coop/condo abatement, which would cost $190 million in the Mayor's plan in 2002 and $232 million under the Council's, owners in the neighborhoods around Central Park will continue to receive a disproportionate share of the benefits.
- While costing $42 million annually in lost revenue, the proposed hotel tax cut is not likely to lead to substantial increases in hotel stays, economic activity, or other tax revenues.
The full report is available on IBO's Web site at www.ibo.nyc.ny.us or by calling IBO at (212) 442-0632.
