New York’s Hidden Tax Hike: How Bracket Creep Quietly Raises Bills

For years, New York taxpayers have been paying more in state income taxes than they realize not because rates were raised, but because lawmakers allowed inflation indexing to lapse. This “bracket creep” has quietly eroded deductions and pushed more income into higher tax brackets, creating what amounts to a stealth tax increase.

What Happened

• In 2016, New York lawmakers ended the practice of automatically adjusting income tax brackets and standard deductions for inflation.

• Without indexing, the standard deduction has stagnated at $8,000, even though it should have risen to roughly $9,223 by 2023 to keep pace with inflation.

• The result: taxpayers have lost more than $1,000 cumulatively over the past seven years, simply due to inflation pushing incomes into higher effective tax burdens.

  
  

Why It Matters

1. Low- and middle-income households bear the brunt. Bracket creep reduces take-home pay most noticeably for families with limited disposable income.

2. Affordability crisis compounds. With New York already struggling with high living costs and out-migration, bracket creep adds financial pressure.

3. Policy credibility is at stake. Tax increases by inaction—rather than open debate—erode trust in the fairness of the tax system.

Looking Ahead Restoring inflation indexing to New York’s tax brackets and deductions would be a straightforward fix. It would prevent future stealth tax hikes, preserve purchasing power, and improve transparency. Whether lawmakers act could have long-term consequences for the state’s competitiveness and population trends.

Takeaway for CPAs and Business Owners For practitioners, this development highlights the importance of reviewing client withholding and estimated tax payments. Even small hidden increases can affect cash flow planning for households and small businesses.

What’s Next? Unless corrected, bracket creep will continue to silently raise taxes each year. For business owners and tax professionals, staying ahead of these state-level nuances is critical for planning and compliance.

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