To estimate how much New York City would collect from a 2% income tax increase on individuals earning more than $1 million in 2026, we need to consider several factors. I'll break it down into steps:
1. Estimate Number of High-Income Earners
We can start by estimating how many people earn over $1 million in New York City.
- According to IRS and other tax data, roughly 50,000-60,000 tax filers in NYC reported income over $1 million in recent years.
- For our calculation, let’s assume about 55,000 individuals will qualify for the tax increase by 2026.
2. Estimate Average Income of Millionaires
For those earning over $1 million, the actual income can vary widely. While some people may just be slightly over $1 million, many others earn significantly more. A rough estimate suggests that the average income for individuals in this group is around $3 million per year. This is a reasonable assumption based on New York City's income distribution for high earners.
3. Calculate Additional Tax Revenue from 2% Increase
Now, let’s calculate the additional tax revenue NYC would generate:
- Average income per person: $3 million
- Tax increase rate: 2% (this would be the tax applied to income above $1 million)
- Number of high-income earners: 55,000
Taxable amount: Since the 2% tax only applies to income over $1 million, the taxable income for each individual would be:
Taxable income per person
=
3
,
000
,
000
−
1
,
000
,
000
=
2
,
000
,
000
Taxable income per person=3,000,000−1,000,000=2,000,000
Tax per person:
Tax
=
2
,
000
,
000
×
0.02
=
40
,
000
Tax=2,000,000×0.02=40,000
So, each of the 55,000 high-income earners would pay an additional $40,000 per year.
Total additional revenue:
Total revenue
=
55
,
000
×
40
,
000
=
2
,
200
,
000
,
000
Total revenue=55,000×40,000=2,200,000,000
4. Total Additional Revenue:
The city would collect $2.2 billion in additional revenue per year from this 2% increase on individuals earning more than $1 million.
