NY WFTC blog post

Fixes #2307

src/posts/articles/ny-wftc.md

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+In 2023, New York State Senator Andrew Gounardes introduced a proposal to combine several of the state’s family tax policies into the New York Working Families Tax Credit (NY WFTC). The expanded and fully refundable NY WFTC would provide up to $1,822 per child once fully implemented. Using PolicyEngine, we analyzed the potential impacts of the latest version of the proposal, [Senate Bill S277C](https://www.nysenate.gov/legislation/bills/2023/S277/amendment/C), for tax years 2025 through 2029. We measured the bill’s effects on the New York state budget, household income, poverty, and more.
+
+_See how the Working Family Tax Credit would affect your household with our [personalized calculator](https://policyengine.org/us/household?focus=intro&reform=72622&region=ny&timePeriod=2025&baseline=2)._
+
+## What is the NY WFTC?
+
+New York currently offers multiple family tax benefits to its residents. These include:
+
+- [The Empire State Child Credit](https://www.tax.ny.gov/pit/credits/empire_state_child_credit.htm) (ESCC), which matches 33% of the federal Child Tax Credit (CTC) amount as it existed prior to the 2017 Tax Cuts and Jobs Act expansion ($1,000, therefore a maximum NY benefit of $330), also includes a minimum benefit of $100 for lower-income families.
+
+- [New York’s Earned Income Tax Credit](https://www.tax.ny.gov/pit/credits/earned_income_credit.htm) (EITC), which matches the federal EITC by 30%.
+
+- [New York’s Dependent Exemption](<https://govt.westlaw.com/nycrr/Document/I50e79907cd1711dda432a117e6e0f345?viewType=FullText&originationContext=documenttoc&transitionType=StatuteNavigator&contextData=(sc.Default)&bhcp=1>), which allows households to exempt $1,000 per dependent from their taxable income.
+
+Senate Bill S277C would introduce the WFTC, immediately replace the ESCC, and shrink the NY EITC and dependent exemption over the course of five years.
+
+The fully refundable WFTC would initiate at a level of $550 per child under 17, rising yearly until reaching $1,600 in year five (adjusted for inflation). The new credit would also begin phasing out above a threshold at a 2% rate. For example, if a filer’s adjusted gross income exceeds the threshold by $1,000, their credit would be reduced by $20. The threshold in year one would be $75,000, or $110,000 for joint filers. However, the thresholds would be lowered throughout the first five years, finally settling at $28,462/$56,924 in year five. The benefit would phase out until reaching $0 in the first year, but beginning in year two, a minimum benefit of $100 would be established. Additionally, in year four the NY WFTC would become available to 17-year-olds.
+
+As the NY WFTC phases in, the New York EITC would phase out over five years, to the extent that it overlaps with the WFTC. Households with no children can continue to claim a 30% match for the childless EITC assuming they are within the income range. Moreover, families with older dependents who are eligible for the EITC but not the WFTC also continue to receive a 30% match.[^1]
+
+Similarly, in year two, the bill would limit the dependent exemption to dependents not qualifying for the NY WFTC. In year four when the NY WFTC is expanded to 17-year-olds, they will no longer be eligible for the dependent exemption.
+
+Table 1 displays how each policy changes by year, with 2025 as the first year of the bill’s implementation.
+
+**Table 1: New York’s Family Tax Policies by Year After Passage of S277C**
+
+|        Tax Year        |          Empire State Child Credit          | NY EITC for filers with WFTC-qualifying dependents |              Dependent Exemption               | WFTC Maximum Benefit | WFTC Minimum Benefit | WFTC Phase-out Thresholds |
+| :--------------------: | :-----------------------------------------: | :------------------------------------------------: | :--------------------------------------------: | :------------------: | :------------------: | :-----------------------: |
+| **2024 (Current Law)** | 33% Match of 2017 CTC; $100 Minimum Benefit |             30% Match of Federal EITC              |           $1,000 for All Dependents            |         N/A          |         N/A          |            N/A            |
+|        **2025**        |                 Eliminated                  |                     25% Match                      |           $1,000 for All Dependents            |         $550         |      No Minimum      |     $75,000/ $110,000     |
+|        **2026**        |                 Eliminated                  |                     20% Match                      | $1,000 Only for Non-WFTC Qualifying Dependents |        $854\*        |         $100         |     $65,000/ $110,000     |
+|        **2027**        |                 Eliminated                  |                     15% Match                      | $1,000 Only for Non-WFTC Qualifying Dependents |       $1,091\*       |         $100         |     $55,000/ $110,000     |
+|        **2028**        |                 Eliminated                  |                     10% Match                      | $1,000 Only for Non-WFTC Qualifying Dependents |       $1,338\*       |         $100         |     $45,000/ $90,000      |
+|        **2029**        |                 Eliminated                  |                     Eliminated                     | $1,000 Only for Non-WFTC Qualifying Dependents |       $1,822\*       |         $100         |    $28,462/ $56,924\*     |
+
+_\* Indexed for inflation from 2023_
+
+## Household Impacts
+
+The NY WFTC will affect households across the income spectrum in various ways. To understand the implications, let’s examine how each provision of Senate Bill S277C will impact specific family units during the proposal’s implementation period.
+
+Let’s begin with married college students with no earnings and a young child. This couple does not receive the NY EITC or the dependent exemption, as they generate no earnings. However, the couple currently qualifies for the $100 minimum of the ESCC. Therefore, in year one, when the NY WFTC is set at $550 and the ESCC is eliminated, their net income grows by $450. By 2029, their net income will rise by $1,722 as the WFTC reaches $1,822.
+
+Another household to consider is a single parent with one child earning near the full-time minimum wage in New York City ($33,000 per year). This family currently receives assistance from all three provisions. In year one, they will lose their full ESCC of $330 and their EITC will shrink by $139. As they receive the $550 WFTC, their net income rises by $81. In 2029, they lose their $1,000 dependent exemption, and since this household falls within the 5.5% income tax bracket, their state income taxes climb by $55. Additionally, the family becomes subject to the WFTC phaseout as the household’s income exceeds the $28,462 threshold in 2029. Overall, the single parent’s net income grows by $313 as the reduction of various policies is offset by the WFTC reaching its full value. However, this net income change is without accounting for New York City income tax. Once considering NYC taxes, the household’s change in net income falls to a gain of $299 ($14 difference) due to the changes in the dependent exemption.[^2]
+
+Finally, let’s look at a married couple with two kids earning near the median household income in New York ($80,000). Under current law, they receive the ESCC and the dependent exemptions for both children but do not qualify for the NY EITC as their income is too high. In 2025, the couple’s net income will increase by $440 as they lose $660 from the ESCC but gain $1,100 from the WFTC. In 2029, the family loses $110 from the bill’s dependent exemption change, while their WFTC allotment increases even as they become subject to the benefit phaseout, resulting in net income growth of $2,412.
+
+Below is a table displaying the change in net income of the examined households for tax years 2025 and 2029:
+
+**Table 2: Impact of Senate S277C on Various Households**
+
+|        Household Composition         |                                                      Change in Net Income for Tax Year 2025                                                       |                                                       Change in Net Income for Tax Year 2029                                                        |
+| :----------------------------------: | :-----------------------------------------------------------------------------------------------------------------------------------------------: | :-------------------------------------------------------------------------------------------------------------------------------------------------: |
+|      **Married, One Child, $0**      | [\+$450](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=49667) | [\+$1,722](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=49707) |
+|    **Single, One Child, $33,000**    | [\+$81](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=47172)  |  [\+$313](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=49717)  |
+| **Single, One Child, $33,000 (NYC)** | [\+$81](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=50368)  |  [\+$299](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=50302)  |
+|  **Married Two Children, $80,000**   | [\+$440](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=49735) | [\+$2,412](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=72622&region=ny&timePeriod=2025&baseline=2&household=49734) |
+
+Due to the reduction of the NY EITC over time in Senate Bill S277C, households receiving the EITC’s maximum benefit see the smallest change in net income compared to families with very low incomes and households above the EITC range. To visualize this trend, Figures 3 and 4 below demonstrate how net income changes for a single parent with one child based on household income for 2025 and 2029, respectively.
+
+**Figure 3: Change in Net Income for a Single Parent with One Child Based on Household Income (2025)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*akFoHkFToD4jLwih)
+
+**Figure 4: Change in Net Income for a Single Parent with One Child Based on Household Income (2029)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*_Dg7chnu3CO0Q79Y)
+
+In addition to their change in net income, each household’s marginal tax rates would change. Below are the changes in these rates in 2025 and 2029 for the same household example above.
+
+**Figure 5: Change in Marginal Tax Rates for a Single Parent with One Child Based on Household Income (2025)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*Z9l-Ni6MGISH_Tu1)
+
+**Figure 6: Change in Marginal Tax Rates for a Single Parent with One Child Based on Household Income (2029)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*bL2a37ZlTWQyQ8a8)
+
+For both years, the household’s marginal tax rates will increase as income is below $14,000 due to the NY EITC’s phase-in reduction. However, marginal tax rates decrease as the household’s earnings fall into the NY EITC’s phase-out range. Furthermore, small increases in marginal tax rates occur as households enter new state income tax brackets due to dependent exemption changes.
+
+Using PolicyEngine’s microsimulation capabilities through 3 years of pooled data (2021–2023) from the Current Population Survey (CPS), we can estimate the impact of Senate Bill S277C on the state of New York.[^3]
+
+## Statewide Impact in 2025
+
+[PolicyEngine estimates](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2025&baseline=2) that the NY WFTC would in 2025:
+
+- Cost $650 million
+
+- Lower poverty by 1.1% and child poverty by 3.3%
+
+- Increase net income for 30% of New Yorkers
+
+**Figure 1: Winners and Losers from the NY WFTC by Income Decile (2025)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*jRjNv_ApjbG60hWv)
+
+In 2025, the NY WFTC would benefit 30% of New York residents as the initial maximum benefit of the NY WFTC ($550) exceeds the existing Empire State Child Credit ($330). This translates to an increase in average net income [across all income deciles](https://policyengine.org/us/policy?focus=policyOutput.winnersAndLosers.incomeDecile&reform=72622&region=ny&timePeriod=2025&baseline=2) and a reduction in [poverty and child poverty](https://policyengine.org/us/policy?focus=policyOutput.povertyImpact.regular.byAge&reform=72622&region=ny&timePeriod=2025&baseline=2) of 1.1% and 3.3%, respectively, applying the Supplemental Poverty Measure. Furthermore, higher-income households are unaffected in 2025 as the WFTC’s minimum benefit and Senate Bill S277C’s changes to the dependent exemption do not come into effect until 2026.
+
+## Statewide Impact in 2029
+
+[PolicyEngine estimates](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2029&baseline=2) that the NY WFTC would in 2029:
+
+- Cost $3.0 billion
+
+- Lower poverty by 6.0% and child poverty by 15.5%
+
+- Increase net income for 33% of New York residents
+
+**Figure 2: Winners and Losers from the NY WFTC by Income Decile (2029)**
+
+![](https://cdn-images-1.medium.com/max/2000/0*JohuFoEPyZwxCc2v)
+
+Once the NY WFTC phases in completely for tax year 2029, a greater percentage of New York residents will see their net income [increase by more than 5%](https://policyengine.org/us/policy?focus=policyOutput.winnersAndLosers.incomeDecile&reform=72622&region=ny&timePeriod=2029&baseline=2). However, fewer New Yorkers will benefit in 2029 than in 2025 due to the elimination of New York’s EITC for families with children eligible for the NY WFTC. Additionally, the reduction in [poverty and child poverty](https://policyengine.org/us/policy?focus=policyOutput.povertyImpact.regular.byAge&reform=72622&region=ny&timePeriod=2029&baseline=2) grows significantly as the maximum benefit of the NY WFTC rises. Deep child poverty would [drop by 24.4%](https://policyengine.org/us/policy?focus=policyOutput.povertyImpact.deep.byAge&reform=72622&region=ny&timePeriod=2029&baseline=2) in 2029 as well. To see the impact of Senate Bill S277C for all years of implementation, see the table in Appendix A.
+
+## Conclusion
+
+Senate Bill S277C and the creation of the NY WFTC would partially consolidate New York’s family tax policies while disproportionately benefiting lower-income families. In the first year of implementation, the NY WFTC would cost $650 million while benefiting 30% of households and lowering child poverty by 4.4%. Once fully phased in, New York’s tax revenue would decrease by $3.0 billion, without any offsets. The poverty impact would rise as the state’s Supplemental Poverty Measure would drop by 6.0% and child poverty would fall by 15.5%.
+
+As policymakers evaluate reforms such as these, analytical tools like PolicyEngine offer critical insights into the impacts on diverse household compositions and the broader economy.
+
+We invite you to explore our [additional analyses](https://policyengine.org/us/research) and use [PolicyEngine](https://policyengine.org/us) to calculate your own tax benefits or design custom policy reforms.
+
+## Appendix A: Impact of Senate Bill S277C for Tax Years 2025–2029
+
+|                                                              Tax Year                                                               | Budget Impact ($ million) | People with Increased Net Income | People with Reduced Net Income | Poverty | Deep Poverty | Child Poverty | Deep Child Poverty |
+| :---------------------------------------------------------------------------------------------------------------------------------: | :-----------------------: | :------------------------------: | :----------------------------: | :-----: | :----------: | :-----------: | :----------------: |
+| **[2025](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2025&baseline=2)** |            650            |              29.9%               |              0.0%              | \-1.1%  |    \-2.8%    |    \-3.3%     |       \-9.1%       |
+| **[2026](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2026&baseline=2)** |           1,216           |              32.0%               |              0.1%              | \-2.3%  |    \-4.0%    |    \-7.0%     |      \-13.1%       |
+| **[2027](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2027&baseline=2)** |           1,752           |              32.6%               |              0.1%              | \-2.8%  |    \-4.1%    |    \-8.4%     |      \-15.5%       |
+| **[2028](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2028&baseline=2)** |           2,303           |              33.7%               |              0.0%              | \-3.7%  |    \-3.9%    |    \-10.1%    |      \-15.3%       |
+| **[2029](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=72622&region=ny&timePeriod=2029&baseline=2)** |           3,034           |              33.3%               |              0.0%              | \-6.0%  |    \-6.2%    |    \-15.5%    |      \-24.4%       |
+
+[^1]: In addition to the discussed exceptions for the NY EITC under Senate Bill S277C, [households with both WFTC qualifying dependents and older dependents](https://www.nysenate.gov/legislation/bills/2023/S277/amendment/C) would continue to receive their full EITC until year five (2029), at which point they would receive the more generous WFTC for dependents who qualify and the EITC only for older dependents who are outside of the WFTC qualifying ages.
+
+[^2]: Since the household loses its dependent exemption, its taxable income in NYC rises, thus creating a higher tax liability of $16. Additionally, the NYC school credit is tied to AGI, and for the examined household the credit’s value increases by $2, contributing to an overall net income difference of $14 compared to if the household was outside of NYC.
+
+[^3]: Statewide impacts assume full take up and no behavioral responses.

src/posts/posts.json

@@ -1054,5 +1054,14 @@
     "authors": ["pavel-makarchuk"],
     "filename": "family-first-act.md",
     "image": "family-first-act.jpg"
+  },
+  {
+    "title": "The New York Working Families Tax Credit",
+    "description": "A comprehensive analysis of the proposal from New York State Senator Andrew Gounardes.",
+    "date": "2025-01-21 09:00:00",
+    "tags": ["us", "policy", "featured", "us-ny"],
+    "authors": ["david-trimmer"],
+    "filename": "ny-wftc.md",
+    "image": "ny-wftc.webp"
   }
 ]