The 2007 Census of Governments Finance Data: Local Government Revenue Data
Local government is where the rubber meets the road in the public sector, the level of government were most public services are directly provided. This post compares local government revenues for the United States, New York State, different parts of New York State, and selected other states in Fiscal 2007, the year of the most recent Census of Governments conducted by the U.S Census Bureau. The attached spreadsheet contains data for revenues, and for expenditures and debts -- which will be discussed separately to keep post lengths reasonable. The data is for all local governments in a given area added together, to adjust for varying local government organization in different places. The measure of revenues, expenditures and debts, for the most part, is the amount per $1,000 of the income of area residents. This adjusts for the level of per person income, and the level of population, in different places. It may be understood this way: New York City spent $9.18 for every $1,000 city residents earned on its police force. So for every $1,000 earned by city residents, they may have spent $250 on housing, $120 on food, $30 on utilities…and $9.18 on the police as part of their taxes. Other adjustments have been made to make the comparison between places as fair as possible. If the reader hasn’t already, he or she should read this post with background data and data on state governments.
The data show in FY 2007 (as in past years) local government revenues absorbed a much higher share of area residents’ income in all areas of New York State, compared with the U.S. average, the average for New Jersey, and selected other states: Connecticut, Massachusetts, California, Illinois, North Carolina and Texas. The difference in revenues was accounted for by relatively high local taxes –sales taxes, individual income, corporate income, and other non-property taxes (such as real estate transfer taxes) in New York City, and high sales and property taxes in the rest of the state. Although state taxes are only modestly above average in New York, in part because local governments receive majority of sales tax revenues here, the combined state and local tax burden as a share of personal income was 47.0% above the U.S. average in New York City, 26.8% above average in the Downstate Suburbs, 17.5% above average in Upstate Urban counties, and 24.0% above average in Upstate Rural counties.
The attached spreadsheet contains two worksheets. The “Reorganized” spreadsheet contains the source data from the Census Bureau edited to adjust for anomalies, and data for every county in New York State, to the extent that I could make it comparable. The Downstate Suburbs in this compilation are Nassau, Suffolk, Westchester, Rockland, and Putnam. The Upstate Urban counties are the other counties with the highest population density – Dutchess and Orange at the Upstate/Downstate border, and the counties containing major upstate cities and their suburbs in the largest upstate metro areas: Erie (Buffalo), Niagara, Monroe (Rochester), Broome (Binghamton), Onondaga (Syracuse), Oneida (Utica) and Albany, Rensselaer, Saratoga and Schenectady (the Capital District). It should be noted that mass transit data was assigned to these different regions of the state but not to individual counties within them. It would be hard to allocate the LIRR spending between Nassau and Suffolk.
The “Print Tables” worksheet is the same data without individual counties, reorganized further to print on six 8 ½ by 11 inch pages. Before reading further, I suggest that this worksheet be printed (if you have trouble downloading this Excel data, please say so in the comments – it was tabulated on an I-Mac in xlsx format). A discussion of local government revenues in FY 2007 follows.
The U.S. average for the total local government tax burden is $44.26 per $1,000 of personal income, or 4.4% of personal income. Property taxes are the greatest local government revenue source, at an average of $31.73 per $1,000 of personal income nationwide, or more than 70.0% of the total. In the portions of New York State outside New York City, as well, the property tax is the dominant revenue source for local government, and with higher than average taxes overall, these areas have higher than average property taxes. The property tax burden is $54.42 per $1,000 of personal income in the Downstate Suburbs, or 71.5% above average, $49.08 per $1,000 in rural Upstate counties, and $41.64 per $1,000 in urban Upstate counties. New Jersey, Connecticut, Illinois and Texas are also well above average in property taxes, although not in state and local taxes overall. Massachusetts and California are about average in property taxes as a share of income, due to limitations on property tax increases enacted long ago.
Although those with high incomes generally occupy more expensive property than those with lower incomes, and thus property taxes may be collected in proportion to income if assessments are fair and timely, high property taxes can be particularly burdensome for those whose income has fallen, due to unemployment, illness or retirement. Those in gentrifying areas, if limitations are not put on the growth of their assessments, may also end up with expensive property and high property taxes relative to their incomes, as the value of their property comes to reflect the incomes of their more affluent new neighbors. Newer and less profitable businesses may be squeezed by commercial property taxes passed on to them by their landlords, if property values for tax purposes include an assumption that more profitable and established businesses could be occupying the space. And farmers, whose business is land, can also be squeezed if their assessment reflects the value of their property if developed rather than farmed. On the other hand, those in expensive property relative to their income have extensive wealth. That wealth is cashed in at the time of sale, often as a windfall that less fortunate people do not receive.
In some counties, property taxes are not paid out of the incomes of local residents, but out of the incomes of second homeowners. In Long Island’s Suffolk County, 8.3% of all housing units in use (occupied plus second home) are second homes. The highest shares among New York State counties with American Community Survey data available are 33.8% in Sullivan County and 29.5% in Delaware County, each in the Catskills. The property tax burden shown by the data as expressed per $1,000 of the personal income of residents alone may exaggerate the extent to which those residents are burdened.
New York City shows a different pattern. Although its tax burden is high overall, and higher than elsewhere in the state, its property tax revenues per $1,000 of personal income are at about the national average. While paying modest property taxes, New York City residents pay a virtually unique local individual income tax, on top of the federal and state income taxes: the self employed earning more than $100,000 pay a second local income tax, the unincorporated business tax. Combined, New York City’s property and local income tax revenues equaled $50.40 per $1,000 of its residents’ personal income in FY 2007, compared with $54.54 in the Downstate Suburbs, $41.64 for Upstate urban counties, and $49.08 for Upstate rural counties.
A higher than usual share of New York City’s property taxes, moreover, are paid by commercial properties rather than residential properties due to a state law that limits the growth of assessed values for one to four family homes. That limitation is not means tested, and comes with no obligation in two to four family homes to limit rent increases for tenants. In neighborhoods that have gentrified since the property tax limitations were enacted in 1982 affluent homeowners, after years of paying lower property taxes relative to their incomes, can walk away with wealth windfalls at the time of sale. Which is why I have suggested, in place of other limitations on property taxes, that property owners be allowed to merely defer taxes above a certain percentage of their incomes to the time when the property is sold, and the proceeds are available to pay. This would limit the revenues local governments could squeeze from people in a given year, and prevent them from taxing people out of their homes, but also prevent homeowners from walking away with huge windfalls at the time of sale, after having paid lower taxes on their property wealth than others with equal property wealth.
The retired are also favored by New York City’s tax structure, compared with people with the exact same income who are working. In New York (but not most other states) the retirement income of former public employees is exempted from state and local income tax at any age and any amount of income, while for private sector retirees Social Security income, and other retirement income up to $20,000, is exempt from state and local income tax at age 59 ½ and afterward. So a private sector retiree with $60,000 in Social Security and other retirement income would pay much lower state and local income taxes than a worker with $60,000 income, while a public sector retiree would pay no such taxes as all. This exemption, and the nation’s richest senior benefits under Medicaid (particularly for the non-poor) and enriched public employee pensions, make New York perhaps the best place in the country to be a non-working senior citizen.
New York City also has a virtually unique local corporate income tax, and other miscellaneous unique taxes such as real estate transfer taxes and a commercial rent taxes. These taxes provide enormous revenues to the City of New York during Wall Street and real estate booms, as in FY 2007 when they totaled $16.59 and $7.94 per $1,000 of personal income, compared with virtually nothing in other parts of New York State and other states. Like the property taxes paid by second homeowners in certain counties elsewhere in the state, most of these taxes (aside from real estate transfer taxes on individual homes) were paid by not by city residents out of their own income, but by businesses and real estate investors. New York state government corporate income tax revenues equaled $5.85 per $1,000 of state residents’ income if FY 2007, compared with $4.45 for the U.S. average, $6.64 in New Jersey, $4.61 in Connecticut, $4.95 in North Carolina, and nothing in Texas. That is the corporate tax burden in the portion of the state outside New York City. Adding the $16.59 per $1,000 of personal income from the local corporate income tax in New York City, however, and business taxes there are considerably higher there.
With the recession, financial crisis, and real estate bust, it is likely the windfall generated by these taxes for New York City has diminished considerably. However, to the extent that city’s local corporate income tax, on top of the state corporate income tax, and the shift of the city’s property tax burden to commercial property discourage business growth in there, residents of other parts of the state share the burden. In the parts of New York State outside New York City the economic and tax base increasingly consists of commuters to New York City, and public employees paid for by taxes collected in New York City, both of which are dependent on the city’s economic base. To the extent that the city has offset its high overall burden with special deals for some businesses to keep them from leaving, other businesses are taxed more. City residents who don’t benefit from its particular tax base, as well, share the downside of a less attractive business climate without the upside of lower taxes for themselves. Those who do not own 1 to 4 family homes and are not retired, for example. New businesses and young renters, in particular.
Compared with the national average and other states, however, no one except possibly the retired pays less in New York State than elsewhere. It is merely that some people and interests are impacted by less of the excess taxation that other people and interests. Just because it is the national average does not make it right. But New York’s high state and local tax burden calls into question whether inadequate overall revenues are the reason for an public service and benefit inadequacies here. If some believe the rich are paying too little, for example (although they are carrying a higher share of the total tax burden here than in most other states), that merely implies that someone else is therefore paying too much.
Sales taxes are the first or second most prominent tax at the state level in most places. At the state level, New York’s general sales tax burden, at $11.76 per $1,000 of state residents’ personal income, was well below the U.S. average of $20.06, or the $19.79 in New Jersey. However local governments elsewhere collect far less in general sales taxes, as a share of their residents’ income, than those in New York. New York’s local governments collected $14.07 in general tax revenues per $1,000 of personal income, compared with a national average of $5.16 and $0.24 in New Jersey. The state-local combined general sales tax burden is $25.83 per $1,000 of personal income in New York, compared with the U.S. average of $25.22 and $20.03 in New Jersey. Within New York State, the Downstate Suburbs have the least general sales tax revenues relative to income, due to the high average incomes there.
While New York’s local governments may receive sales tax revenues that go to state governments in other parts of the country, they also are required to send the State of New York substantial aid. Local government to state government aid totaled $8.57 per $1,000 of personal income in New York State on average, compared with a national average of $1.16 and negligible amounts in New Jersey, Connecticut, Massachusetts, California, Illinois, and Texas. Most of New York’s local to state aid is the local matching share of the Medicaid program, and New York City – where Medicaid beneficiaries are concentrated – is hit hardest. The city’s payments to the state for “public welfare” programs (in this case Medicaid) and state hospitals totaled $10.21 per $1,000 of personal income, compared with $2.74 per $1,000 of personal income in the Downstate Suburbs, $4.78 in Upstate urban counties, and $4.76 in Upstate rural counties. North Carolina may be the only other state with a local matching share for Medicaid; such local to state aid totaled $2.30 per $1,000 of that state’s residents in FY 2007.
In a confusing circle, since the MTA is classified as a state agency, money paid by New York City to the MTA count as local to state aid, and money transferred back from MTA headquarters to New York City Transit is state to local aid. Payments by the city to the state for transit have increased in recent years, as part of the deal to have the MTA take over the formerly private bus lines, which the city had been subsidizing separately.
There is a similar circuit of funding for public hospital spending paid for by Medicaid: New York City and some other local governments send local to state Medicaid aid to New York State, which combines it with state and federal funding and sends it back to public hospitals to provide Medicaid funded services. This aid is called “public welfare” aid because Medicaid is a categorical program.
There is also a local matching share in New York for cash welfare payments, which don’t amount to much money, and social service programs, which account for more. As a result, whereas federal and state aid, and charges for health and hospital services, cover 76.4% of local government public welfare, public hospitals and public health spending in the U.S., leaving less than a quarter to be covered by local taxes, that share is less than 60.0% in New York State, leaving 40.0% for local taxes.
According to Census Bureau data a higher share of local government spending in these categories is covered by aid and charges Downstate than Upstate. The reason, most likely, is that a higher share of Medicaid money Downstate is paid to public hospitals and clinics, where it counts as state government to local government aid, rather than private medical vendor payments, where it does not. As we will see later, public hospital spending is concentrated downstate. As discussed in other posts previously, to the extent that state matching share differences favor any part of the state it is the part outside New York City, because the local match is higher in categories where the city accounts for a higher share of total New York Medicaid spending (hospitals, home health care) than in categories where it accounts for a lower share (nursing homes, Family Health Plus).
Primarily as a result of state to local aid for “public welfare,” which local governments in many states don’t even have to pay for, New York’s state to local aid per $1,000 of personal income, at $48.28, was well above the U.S. average of $37.60. Note that this state to local aid includes money received from the federal government and passed on, rather than collected in state taxes, since federal aid is generally sent to states before being passed on to local governments. A major exception is money for public and Section 8 housing, which is sent directly to local housing authorities. In New York State most of this direct federal to local government aid goes to New York City, where most of the beneficiaries of public and Section 8 housing are located.
To disentangle the varying federal, state and local roles in Medicaid, cash welfare, and social service funding and management, the table presented includes a figure for state to local aid excluding aid for welfare, hospital and housing programs, and net of local to state aid in the public welfare and hospital categories. For more typical kinds of state to local aid, New York State is about average at $32.77 per $1,000 of its residents’ personal income, compared with $31.89 nationally. California is above average at $41.82 per $1,000 of its residents’ personal income, as higher state income taxes (and borrowing) have made up for restrictions on local property taxes in the wake of Proposition 13, in particular with regard to funding for public elementary and secondary schools. New Jersey is below average in net state to local aid, with particularly low state aid for public schools. New Jersey used to have relatively low state taxes and relatively high local taxes, but now that the state is deep in debt, both its state taxes and its local taxes are above average.
Within New York State, New York City was just slightly below the statewide average in net state aid outside the welfare, hospitals and housing categories, at $30.30 in state aid receipts per $1,000 of its residents’ personal income. This data, however, was for a booming economic year. During the early 1990s and early 2000s recessions state aid to New York City, particularly for public schools, was cut disproportionately to protect local government jobs and public services in the rest of the state, and press reports imply that may be happening again. In FY 2007, the city’s state school aid, at $23.10 per $1,000 of personal income, was just slightly below the U.S. average of $25.47, and well below the state average of $27.28. The city’s local revenues provided to its public schools totaled $21.04 per $1,000 of personal income that year, slightly under the U.S. average of $21.90.
The Downstate Suburbs are below the New York State and U.S. averages in net state aid at $21.15 per $1,000 of personal income, since state aid formulas direct money to less affluent areas and the average and total income levels are high in those well off counties. The $18.97 per $1,000 of personal income these counties received in state to local public school aid, however, was merely about 25.0% lower than the national average. Which implies that most of the very high $35.33 per $1,000 of personal income collected locally for education in the Downstate Suburbs is due to high spending, not low federal and state aid.
Net state aid in Upstate New York is very high in urban counties at $43.42 per $1,000 of personal income and extremely high in rural counties at $60.24 per $1,000 of personal income. In part this is due to low incomes. As can be seen in the BEA spreadsheet attached to this post, per capita income in most Upstate Counties (and indeed virtually the entire state outside Manhattan, the Downstate Suburbs, and the Capital District) is lower compared with the national average than it had been 40 years ago.
As in the Downstate Suburbs, however, relatively high spending plays a major role in high local taxes upstate. As Current Employment Survey data attached to the same post linked in the prior paragraph shows, shows, local government employment in the portion of New York State outside New York City increased by 130,000 from 1990 to 2009, with about 80,000 of that in the public schools; local government employment in New York City fell during the period. State to local aid for education totaled $37.71 per $1,000 of personal income for Upstate urban counties and $53.63 per $1,000 for Upstate rural counties, compared with the U.S. average of $25.47. But local resources for public schools totaled $29.44 and $28.69 per $1,000 of personal income as well, far above the national average of $21.90.
Increases in charges for services and fines for local ordinance infractions in New York City during the Bloomberg Administration have left many feeling that they were being fee-d and fined to death. A look at the data, however, shows that charges for services, fines, and other miscellaneous revenues (special assessments, rents on public property, interest payments, etc) are just as great a source of local government revenue for the U.S. as a whole as for New York City. These local government revenue sources totaled $38.46 per $1,000 of personal income in the U.S., or nearly as much as the $44.26 in local taxes. Charges for services, fines and miscellaneous revenues totaled $41.12 per $1,000 of personal income in New York City, just slightly higher than the U.S. average. New York City’s charges for services included $2.1 billion for its public hospitals, $785 million for its public housing, and $3.9 billion for New York City Transit, services that local governments in most of the U.S. do not even have, and none have to the same extent as NYC. On the other hand, charges for services covered 68.1% of direct local government solid waste management spending compared with virtually nothing in NYC. Charges for local government services as a share of the income of local residents were below the U.S. average in most of the state.
Charges for services, unlike taxes, are not higher and lower in proportion to income (like an income tax), household spending (like a sales tax), or wealth (like a property tax). In homogeneous suburban jurisdictions there may be little difference between a tax and a charge, save for ensuring that those who benefit from a service pay for more of it. In a city with people at many income levels such as New York, on the other hand, charges for services may either burden those with lower incomes more, or prevent them form taking advantage of the services altogether. On the other hand, charges discourage the waste and overuse of scarce public resources, such as water, sewage capacity, transit capacity at rush hour, street space, and on-street parking.
One more note about taxes: what is the range for individual New York counties? According to the 2007 Census of Governments, the highest total state and local tax burden as a share of local residents’ personal income was in Hamilton County in the Adirondacks at more than 2 ½ times the national average, although I suspect a great deal of that tax burden is shouldered by second homeowners and other absentee landowners rather than local residents. The lowest, at just 2.4% above average, was Jefferson County in the North Country, where Watertown is located – beating out Chemung County, home of Elmira and the low tax champ in the past.
I will discuss local government expenditures in the next couple of posts.
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