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July 17, 2007

DiNapoli: Counties Relying More on Sales Tax Revenues

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Counties in New York State generated more revenues from sales taxes than property taxes in 2005, according to a report issued today on county finances by New York State Comptroller Thomas P. DiNapoli. Sales tax revenue accounted for 26 percent, or $4.6 billion, of all county revenues in 2005 compared to 25 percent, or $4.4 billion, for property taxes.

“There’s been a shift in New York State,” DiNapoli said. “Counties are relying more heavily on sales taxes than property taxes. Keeping property tax increases under control is a good thing. But county and local governments should understand that sales tax revenues are tied to the health of the economy. If the economy turns downward, counties won’t generate the sales tax revenues they’re counting on.”

Between 1995 and 2005, county sales tax revenue increased about 84 percent, or 6.3 percent on an average annual basis. This growth was driven by local sales tax rate increases in most counties. Fifty-one of the 57 counties outside of New York City have received state legislative approval to have local sales tax rates that exceed the 3 percent rate allowed under law. Five counties, Allegany, Erie, Nassau, Oneida and Suffolk, have rates exceeding 4 percent Oneida County has the highest local rate in the state at 5 percent. Forty-three counties share a portion of their sales tax revenues with other municipalities located within their borders.

DiNapoli’s analysis, the “Financial Report on Counties,” provides a detailed overview of county finances, including a county-by-county breakdown of financial trends. Other findings of the report include:

  • County Spending Outpaced Revenues. County revenues totaled $17.5 billion in 2005, an increase of 16 percent from 2000 to 2005, while spending increased 21 percent over the same period, reaching $18.7 billion in 2005 (the latest year for which information is available).
  • Medicaid Cap Reduced Property Tax Increases. County property taxes only increased by approximately 3 percent in 2006, about half as much as the prior five years, because Medicaid costs went down after implementation of the Medicaid cap.
  • Little Growth in Aid. State aid accounted for about 15 percent of total county revenues, which has remained relatively unchanged over the last decade. In 2005, counties received $2.7 billion in state aid. Federal aid represents nearly 11 percent of total county revenues. Up 23 percent since 1995, federal aid is primarily used for reimbursement for social service expenditures.
  • Near Tax Limits. Four counties, including Montgomery (98 percent), Allegany (94 percent), Cortland (92 percent) and Chenango (87 percent), have exhausted more than 80 percent of their taxing limits, which makes these counties more vulnerable to fiscal problems if property values decrease.

Click here for a copy of the report, including a county-by-county breakdown.



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