"Local Government Tax Policy: Measuring the Efficiency of New York City's Tax Mix".

• Position: Brief Article - Abstract

Berg, Janine; Marlin, John Tepper; and Heydarpour, Farid

Public Budgeting and Finance, Summer 2000, pp. 1-14.

Diversification of revenue sources is at the foundation of good financial management. The authors examine the efficiency of tax mixes using the City of New York as a case study. New York was chosen because it is subject to a state mandate which forbids the city from incurring more than a $100 million operating deficit (NYC had a total budget of $34.929 billion in 1998). If it does, the city faces assumption of its financial management responsibilities by the state Finance Control Board. Also, since New York City is a major financial center, it is subject to a significant degree of volatility in its revenue structure. Given that, New York has a strong interest in maintaining stability in its tax structure along with the natural need for growth in revenues. New York has four main sources of tax revenue: 1) property tax, 2) sales tax, 3) personal income tax, and 4) business income tax. It was found that the income taxes tended to have higher growth potential, but were more volatile, while the property and sales tax were less volatile and had lower growth potential. The authors identified a...