Posts
A month after imposing a property tax increase, Mayor Michael R. Bloomberg is expected to call for a $900 million increase in the city’s sales tax on Friday, as the city confronts a loss of revenue due to the economic downturn.
New York City already has one of the highest sales taxes in the nation, at 8.375 percent, and retailers are likely to fight the increase.
City officials declined to offer specifics. But according to a budget plan discussed late last year by administration officials, the city could generate almost $900 million by increasing the sales tax to 8.75 percent. Under that plan, the city would also do away with the current exemption on some clothing purchases.
Mr. Bloomberg’s proposal, which will be unveiled in his annual budget address on Friday, requires approval from the City Council and the State Legislature, which is now considering whether to raise a range of taxes to close its own $15 billion gap.
Mr. Bloomberg’s budget address will be the last one before November, when he will ask voters to return him to office for a third term. As such, every decision will be viewed through a political prism, and raising taxes is hardly the standard recipe for election victory.
Still, Mr. Bloomberg has never been shy about such moves, whether it is raising property taxes or banning smoking in restaurants and bars. And the notion of raising the sales tax does not come as a complete surprise, since Mr. Bloomberg took the unusual step in November of offering a midyear budget update, spelling out potential measures to generate revenue, the sales tax increase among them.
At first blush, some city officials briefed on the plan did not reject Mr. Bloomberg’s suggestion out of hand. City Councilman David I. Weprin, chairman of the finance committee, took some solace in the fact that the mayor did not plan to propose an increase in the personal income tax — as he had suggested in November — or another increase in property taxes.
“It’s certainly not a good-news budget, but it’s seems to be a responsible approach to closing the budget gap, and it’s a reality that we on the Council have to deal with,” he said.
Mr. Weprin warned that much could change between now and the July 1 start of the fiscal year and that the budget deal must be agreed on by the mayor, the Council and the Legislature.
Indeed, city officials said that it was unclear, as of Thursday night, just how Mr. Bloomberg planned to generate the extra revenue in sales taxes: Would he repeal the sales tax clothing exemption? And would he increase the sales tax permanently? Or would he do what has been done before, and increase a portion of it temporarily?
The menu of budget options Mr. Bloomberg and his aides released in November called for a sales tax increase to 8.75 percent, generating almost $900 million. If that approach is approved, this is how the increase would affect New Yorkers, according to a consumer spending analysis by the city’s Independent Budget Office: An individual who makes $35,000 a year would pay an extra $55. Someone making $125,000 would pay $140 more a year. And someone making $500,000 a year would pay an additional $247.
In addition to the sales tax increase, Mr. Bloomberg would eliminate the $400 property tax rebate, for an approximate savings of $250 million. He also planned to renew his call for Albany to approve legislation that would charge customers a nickel for each new plastic bag they use at most stores.
So far that measure has not gained great traction with the public, despite supporters’ claims that it is both environmentally friendly and good for the city’s bottom line. There may be other taxes or fees as well.
The tax increases are part of a broader package of tough-love measures that Mr. Bloomberg intends to outline on Friday.
He plans to slice another $1 billion in spending and will also unveil various proposals to overhaul the city’s pension system, reduce capital spending and require city employees to contribute toward their health care.
That might be a tough sell with labor unions, but the mayor plans to warn that if unions do not cooperate, the work force could shrink by as much as 23,000 through attrition and layoffs.
One of the criticisms of Mr. Bloomberg’s stewardship of city finances has been his lack of progress in taking on the more difficult structural issues that keep city spending high, like pension costs. He has also been generous in extending pay raises to city employees.
The budget also relies on an expected $1 billion in federal Medicaid assistance, which was included as part of Washington’s stimulus package.
Officials said on Thursday that the proposed budget would probably be smaller than this year’s because revenues have decreased.
The taxes and cuts underscore the approach Mr. Bloomberg has taken to deal with something he was all too familiar with shortly after taking office in 2002, but was not during the boom years of Wall Street: enormous budget deficits.
This year, Mr. Bloomberg cut spending by $1.5 billion, and the increase in property taxes approved last month was expected to generate $600 million.
In December, Mr. Bloomberg and the Council also approved an increase in the hotel tax, to 5.875 percent from 5 percent per room, or about $3 a night.
Edward Skyler, the city’s deputy mayor for operations, said on Thursday that the mayor will be looking for help in solving the budget deficit from unions and legislators from Albany to Washington.
“We all will have to do our part to get through these tough times,” Mr. Skyler said.
No comments:
Post a Comment