This chapter presents a framework for evaluating the tax policies of the city of New York. 1 It is divided into five sections. The first examines the central but contested issue of the extent to which municipal tax policy affects local economic performance. The second section reviews how municipal tax revenues and the local economy have changed since the 1960s. A discussion of the standards that may be used in evaluating tax policy is found in the third section. The fourth section applies the standards to the major local taxes. The final section discusses the implications for New York City's municipal tax system.
Discussions about the role of tax policy in stimulating or stifling economic growth often are polarized by extreme positions. Some instinctively reject any tax increase proposals out of hand, pointing out that New York City's municipal taxes already are the highest among U.S. cities and claiming that any increase will erode the city's economic competitiveness. On the issue's other side usually are the recipients of local services, often in alliance with the municipal employees who deliver them, who maintain that the city's economy is strong enough to withstand the current level of taxes as well as tax increases designed to finance better services.
The views of taxpayer and service groups clash because often they have different interests in local tax policy. However, analysts with no immediate self-interest are divided on the extent to which local taxes and economic