FINANCE

NEW YORK STATE'S TAX COMMISSIONER WARNED LAWMAKERS WEDNESDAY THAT THE STATE'S BUDGET FACES MOUNTING RISKS FROM OVER-RELIANCE ON A TINY SLIVER OF WEALTHY TAXPAYERS, EVEN AS THE GOVERNOR'S 2024-2025 BUDGET PROPOSES NO NEW TAX INCREASES. Acting Tax Commissioner Amanda Hiller testified before the Senate Finance Committee and Assembly Ways and Means Committee that the top 2 percent of earners now pay approximately 50 percent of New York's income tax revenue—a concentration that creates dangerous volatility. She cited a $7 billion swing in income tax revenue in tax year 2022 alone, driven by declining economic fortunes of high-income taxpayers. "We have an incredibly progressive tax system, but we don't have smooth progressivity across the tax brackets," Hiller said, warning that further reliance on wealthy taxpayers to fund recurring spending commitments poses significant budget risks. Several Republican senators seized on Hiller's testimony to challenge Democratic proposals for higher taxes on the wealthy. Sen. Bill Weber questioned whether the 2021 tax increase on top earners was a mistake, given continued outmigration of residents. Sen. George Borrello argued the problem is not that the rich aren't paying their fair share, but that New York is "chasing the rich out of New York State." Hiller acknowledged the state has seen outmigration of high-income New Yorkers, particularly to Florida and other southern states, though she cautioned that multiple factors drive relocation decisions. The Governor's budget proposal includes two major tax changes: shifting sales tax collection responsibility for short-term vacation rentals from individual hosts to internet platforms, and replacing the complex potency-based cannabis tax with a simpler price-based tax. Hiller said these changes will "streamline and simplify tax compliance." The Tax Department reported processing 27 million tax filings last year, closing 750,000 audit cases, and collecting $147 billion in tax revenues. The department is also piloting a Direct File program allowing New Yorkers to file state taxes for free, with an estimated 10 percent of income tax payers eligible when the program expands later this spring. Assemblywoman Jaime Williams, chair of the Real Property Tax Committee, pressed Hiller on three major real property tax proposals, including one to return surplus funds from tax foreclosure sales to former homeowners—a change required by a recent Supreme Court decision. Hiller acknowledged the change will create financial challenges for local governments that have historically retained those surplus funds. Sen. John Liu questioned the Executive's claim that extending a Dodd-Frank sales tax exemption for financial services has no fiscal impact, arguing the state is clearly losing revenue by continuing the exemption. Hiller acknowledged the revenue loss but said it cannot be quantified because those transactions were not taxable before the Dodd-Frank requirement to spin out back-office functions. Assemblyman Edward Ra raised concerns about enforcement gaps for flavored vape products and questioned whether New York's "convenience rules"—which treat remote work days as New York workdays for tax purposes—could be vulnerable to constitutional challenge as neighboring states encourage residents to challenge them. Hiller acknowledged the issue "will ultimately be resolved in our Court of Appeals or in the Supreme Court" and said the state may need to reconsider its approach to remote work taxation. NEW YORK — A joint legislative hearing on the 2024-2025 executive budget revealed sharp disagreement over tax policy effectiveness and millionaire migration patterns, with lawmakers challenging the Department of Taxation and Finance on everything from the film tax credit's dismal returns to the slow rollout of legal cannabis sales. DTF Acting Commissioner Hiller faced pointed questions from Sen. Thomas Murray, who cited a 359-page study showing the film tax credit returns just 31 cents on the dollar—prompting him to ask why the Legislature increased the credit from $520 million to $700 million last year. "Wouldn't it be wise maybe to stop this program, get that revenue in and maybe recoup some of that money for, say, schools?" Murray asked. Hiller acknowledged the study's findings but deferred the policy decision to lawmakers. The hearing was dominated by debate over whether New York's high tax rates are driving away wealthy residents. Assemblyman Mamdani presented data showing millionaire outmigration rates declined after the 2021 tax increase, attributing earlier departures to the COVID-19 pandemic. But Hiller countered that more recent data shows increased migration among those most affected by the tax increases, though she acknowledged the complexity of isolating tax policy from other factors. Sen. Hoylman-Sigal challenged the department's data collection methods, suggesting they systematically survey departing taxpayers. He cited Fiscal Policy Institute data showing millionaires pay 44 percent of state income tax while earning 35 percent of personal income, suggesting the burden is proportionate. Hiller noted New York has gained 17,500 millionaires over four years, though she clarified these are mostly existing residents whose incomes crossed the million-dollar threshold, not in-migration. Sen. O'Mara criticized the cannabis program as "embarrassing," noting slow legal market rollout and persistent illegal sticker shops in his district. He also questioned the shift from THC-level to price-based taxation, arguing the market should be established first. Hiller defended the change as a simplification, noting testing is expensive and unreliable. Sen. Gounardes focused on the net gain in millionaire filers and questioned the public policy rationale for subsidizing charitable donations of multimillionaires, asking why libraries and parks should depend on tax deductions rather than full public funding. Hiller deferred to lawmakers on policy rationale but noted wealthy donors make the largest contributions to nonprofits. The hearing also covered proposed tax credits for commercial security, conversion of commercial property to affordable housing, and a Direct File pilot program that Gounardes praised as "the future of tax collection and administration." Hiller said the pilot would initially be limited to simple returns with standard deductions and certain credits, following IRS parameters. The Finance Committee hearing underscored persistent tensions between revenue needs, tax competitiveness, and the state's heavy reliance on high-income earners—a concentration Hiller acknowledged creates budget volatility when stock market performance fluctuates. NEW YORK — Advocates for progressive taxation dominated a joint legislative hearing on the 2024-2025 executive budget's tax provisions Wednesday, presenting data and arguments that the state has substantial fiscal capacity to raise taxes on high earners and corporations without triggering mass outmigration. The Fiscal Policy Institute presented a statistical study finding that New York's top 1 percent of income earners move out of state at roughly one-fourth the rate of other income groups, and that tax increases enacted in 2017 and 2021 did not significantly alter migration patterns. FPI Executive Director Nathan Gusdorf noted that the state's top income tax rate of 10.9 percent applies only to those earning over $25 million annually, compared to New Jersey's 10.8 percent rate and California's 13.3 percent rate, both of which apply to earners over $1 million. "There's considerable room to raise income tax rates at the top in particular, and to repair certain peculiarities of our progressivity," Gusdorf testified. Multiple advocacy organizations — New York Communities for Change, Invest in Our New York, Citizen Action of New York, and the Strong Economy for All Coalition — urged lawmakers to pass the five-bill Invest in Our New York package, which would increase taxes on the state's wealthiest residents and most profitable corporations. They cited polling showing two-thirds of New Yorkers support such increases regardless of political affiliation. Michael Kink of the Strong Economy for All Coalition noted that the state currently holds approximately $30 billion in reserves — $20 billion in reserve funds plus $10 billion in unspent money — while facing an affordability crisis. He cited Comptroller data showing that the 2021 tax increases raised $10 billion more than predicted. Advocates emphasized that working-class and low-income New Yorkers, not high earners, are most likely to leave the state due to housing costs and affordability pressures. Carolyn Martinez-Class of the Invest in Our New York Campaign cited the Comptroller's December 2023 report identifying people earning less than $500,000 annually as most likely to leave. The hearing also addressed specific budget concerns. Rebecca Garrard of Citizen Action of New York cited 740,000 New Yorkers carrying medical debt in collections and opposed proposed cuts to Medicaid and Foundation Aid. Advocates called for investments in housing, including a proposed Social Housing Development Authority, and for meeting climate mandates under the Climate Leadership and Community Protection Act. Warren Wheeler of the New York State Assessors Association supported Part M of the budget clarifying telecommunications assessment ceilings and backed the Condo Bill (A1292/S04065) as a local option measure to address what he characterized as a loophole in how condominiums and cooperatives are taxed compared to single-family properties. The hearing concluded with limited senator engagement, with Chairwoman Weinstein noting no further questions from members after the panel testimony.