Bill review: A05435 - Increases Top Two Income Tax Brackets (NY)

[PavelMakarchuk]

Bill Review: A05435 - Increases Top Two Income Tax Brackets

Reform ID: ny-a05435
State: NY
Bill text: https://assembly.state.ny.us/leg/?default_fld=&bn=A05435&term=2025&Summary=Y&Actions=Y&Text=Y
Description: Increases the personal income tax rate on taxable income between $5M and $25M from 10.30% to 10.80%, and on income over $25M from 10.90% to 11.40%. Also updates the supplemental tax incremental benefit to reflect the higher rates.

Merging this PR will publish the bill to the dashboard.

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What we model

Provision	Current	Proposed
NY Income Tax Rate ($5M-$25M bracket)	10.30%	10.80%
NY Income Tax Rate ($25M+ bracket)	10.90%	11.40%
NY Supplemental Tax Incremental Benefit ($5M bracket)	$32,500	$57,500

Key results

Metric	Value
Revenue impact	$120,011,304
Poverty rate	25.79% to 25.79% (+0.00%)
Child poverty rate	24.32% to 24.32% (+0.00%)
Winners	0.0%
Losers	0.1%

Decile impact (relative change in net income)

Decile	Change	Avg Benefit
1	+0.00%	$0
2	+0.00%	$0
3	+0.00%	$0
4	+0.00%	$0
5	+0.00%	$0
6	+0.00%	$0
7	+0.00%	$0
8	+0.00%	$0
9	+0.00%	$0
10	-0.03%	$-222

District impacts

District	Avg Benefit	Winners	Losers	Poverty Change
NY-1	$-26	0%	0%	+0.00%
NY-10	$-60	0%	0%	+0.00%
NY-11	$-29	0%	0%	+0.00%
NY-12	$-130	0%	0%	+0.00%
NY-13	$-3	0%	0%	+0.00%
NY-14	$-9	0%	0%	+0.00%
NY-15	$-9	0%	0%	+0.00%
NY-16	$-19	0%	0%	+0.00%
NY-17	$-15	0%	0%	+0.00%
NY-18	$-10	0%	0%	+0.00%
NY-19	$-4	0%	0%	+0.00%
NY-2	$-7	0%	0%	+0.00%
NY-20	$-14	0%	0%	+0.00%
NY-21	$-3	0%	0%	+0.00%
NY-22	$0	0%	0%	+0.00%
NY-23	$-1	0%	0%	+0.00%
NY-24	$0	0%	0%	+0.00%
NY-25	$-4	0%	0%	+0.00%
NY-26	$-4	0%	0%	+0.00%
NY-3	$-22	0%	0%	+0.00%
NY-4	$-0	0%	0%	+0.00%
NY-5	$-0	0%	0%	+0.00%
NY-6	$-0	0%	0%	+0.00%
NY-7	$-28	0%	0%	+0.00%
NY-8	$-2	0%	0%	+0.00%
NY-9	$-30	0%	0%	+0.00%

Reform parameters JSON

{
  "gov.states.ny.tax.income.main.joint.brackets[7].rate": {
    "2026-01-01.2100-12-31": 0.108
  },
  "gov.states.ny.tax.income.main.joint.brackets[8].rate": {
    "2026-01-01.2100-12-31": 0.114
  },
  "gov.states.ny.tax.income.main.single.brackets[7].rate": {
    "2026-01-01.2100-12-31": 0.108
  },
  "gov.states.ny.tax.income.main.single.brackets[8].rate": {
    "2026-01-01.2100-12-31": 0.114
  },
  "gov.states.ny.tax.income.main.separate.brackets[7].rate": {
    "2026-01-01.2100-12-31": 0.108
  },
  "gov.states.ny.tax.income.main.separate.brackets[8].rate": {
    "2026-01-01.2100-12-31": 0.114
  },
  "gov.states.ny.tax.income.main.surviving_spouse.brackets[7].rate": {
    "2026-01-01.2100-12-31": 0.108
  },
  "gov.states.ny.tax.income.main.surviving_spouse.brackets[8].rate": {
    "2026-01-01.2100-12-31": 0.114
  },
  "gov.states.ny.tax.income.main.head_of_household.brackets[7].rate": {
    "2026-01-01.2100-12-31": 0.108
  },
  "gov.states.ny.tax.income.main.head_of_household.brackets[8].rate": {
    "2026-01-01.2100-12-31": 0.114
  },
  "gov.states.ny.tax.income.supplemental.incremental_benefit.joint.brackets[4].amount": {
    "2026-01-01.2100-12-31": 57500
  },
  "gov.states.ny.tax.income.supplemental.incremental_benefit.single.brackets[3].amount": {
    "2026-01-01.2100-12-31": 57500
  },
  "gov.states.ny.tax.income.supplemental.incremental_benefit.separate.brackets[3].amount": {
    "2026-01-01.2100-12-31": 57500
  },
  "gov.states.ny.tax.income.supplemental.incremental_benefit.surviving_spouse.brackets[4].amount": {
    "2026-01-01.2100-12-31": 57500
  },
  "gov.states.ny.tax.income.supplemental.incremental_benefit.head_of_household.brackets[3].amount": {
    "2026-01-01.2100-12-31": 57500
  }
}

Versions

• PolicyEngine US: 1.555.2
• Dataset: 1.61.2
• Computed: 2026-02-12

[PavelMakarchuk]

Fiscal Note: https://assembly.state.ny.us/leg/?default_fld=&bn=A05435&term=2025&Memo=Y

[PavelMakarchuk]

⚠️ DO NOT MERGE — Data Limitation

The revenue estimate of $120M is unreliable for this bill. Investigation of the underlying dataset reveals:

Dataset Issues

• Zero $25M+ AGI records in the Enhanced CPS dataset — the bill's $25M+ bracket (10.90% → 11.40%) has no data at all
• Top income capped at ~$6.3M — the highest AGI in the entire NY dataset is $6,263,051
• Only ~3-4 unique income values above $5M, all clustering between $5.6M and $6.3M
• Classic CPS top-coding behavior — the survey doesn't capture ultra-high earners

Expected vs Actual

• Sponsor's fiscal estimate: "up to $3B/year" (source: sponsor's memo)
• Our estimate: $120M (25x lower)
• Root cause: CPS microdata severely underrepresents the $5M+ income population that this bill exclusively targets

IRS SOI Context

Per IRS SOI data, NY has approximately:

• ~19,400 returns with $5M+ AGI
• Total income for $5M+ filers: ~$300-400B
• The CPS captures almost none of this tail

Action Needed

This bill cannot be published to the dashboard until the dataset limitation is addressed. Options:

1. Wait for improved microdata that better represents ultra-high earners
2. Apply a top-income calibration/imputation step
3. Mark as not_modelable with explanation

The parameter mapping itself (15 parameters, including supplemental tax) was verified as mathematically exact against 5 test households.

[PavelMakarchuk]

⚠️ Marking as draft — data quality concern

This PR should not be merged until the impact data is verified. Converting to draft to prevent accidental publication to the dashboard.