The Independent Budget Office (IBO) today released Big City, Big Bucks: NYC's Changing Income Distribution, a detailed study of the changes in income distribution in New York City between 1987 and 1997.
IBO found strong evidence that income inequality in the city has increased, and at a faster pace than elsewhere in New York State. It also found that over half the recent increase in personal income tax revenues is attributable to filers with incomes of $1 million or more.
This study was conducted as an extension of IBO's personal income tax forecasting efforts. Based on samples of New York State income tax returns, the analysis traces the changes in shares of income of tax filers in 1997 (inflation-adjusted) dollars between 1987 and 1997, the latest available data.
"Very strong growth in personal income tax receipts has helped fuel record city surpluses," said Ronnie Lowenstein, IBO Deputy Director. "This report documents how high income taxpayers-particularly filers with incomes above $1 million-have come to account for an increasingly large share of the city's personal income tax collections."
Among the reports major findings are:
- Affluent NYC residents' share of total income grew from 28% to 41%. City residents with incomes over $125,000 comprise roughly 4% of tax filers, but their share of income grew from 28% in 1987 to 41% in 1997. The income share increase was most pronounced during the recent boom, growing from 30% in 1994 to 41% in 1997.
- Moderate- and middle-income city residents' share of total income dropped from 64% to 51%. City tax filers with incomes between $20,000 and $125,000 fell from 64% in 1987 to 51% in 1997. This largely reflects a decline in their share of the number of returns, from 63% to 56%.
- Millionaires' share of income grew from 10% to 20% between 1987 and 1997. Their income share skyrocketed from 11.3% in 1994 to 20.1% in 1997. Much of the 1994-1997 increase was due to an enormous 162% growth in capital gains income.
- Millionaires have contributed half of the recent surge in city personal income tax revenues. A little over half of the $1.2 billion growth in PIT liability from 1994 to 1997 is attributable to the 0.3% of filers with incomes of $1 million or more.
- Income inequality grew more in NYC than in other parts of New York State. The trends showing a concentration of income at the top and a decline in the middle are more pronounced in the city than elsewhere in the state.
- Between 1987 and 1997, the share of income received by affluent filers (over $125,000) outside the city grew 8 percentage points, from 25% to 33%; this is in contrast to the 13 percentage point increase in the city, from 28% to 41%.
- The share of income received by moderate- and middle-income filers ($20,000-$125,000) outside the city declined 8 percentage points, from 68% to 60%; this is in contrast to the 13 percentage point drop in the city, from 64% to 51%.
The IBO is an independent city agency whose mission is to provide non-partisan budgetary, economic and policy analysis for the residents of New York City, and to increase New Yorkers' understanding of and participation in the budget process. IBO reports can be downloaded from www.ibo.nyc.ny.us.