NEW YORK, NY — New York Mayor Michael Bloomberg and Council Speaker Christine Quinn agreed on a plan to raise $887 million by increasing the city sales tax rate and repealing an exemption for clothing purchases of less than $110.
The proposals, requiring Legislature approval, would boost the sales tax to 8.875 percent from 8.375 percent. The plan also would apply the charge to electricity and natural gas purchases from non-utility companies, according to Bloomberg.
The mayor and Quinn also said they want the Legislature to reduce the burden on 44,000 local businesses by ending the city’s tax on non-corporate entities, such as proprietorships. Their plan also would base company taxes only on sales and stop including property and payroll in the formula.
“With tax revenues down $5 billion, the economic crisis provided us with only a menu of onerous options to balance the city’s budget,” Bloomberg said in a statement. “While we have been forced to make some unpopular choices, this package has a silver lining — significant tax relief for 44,000 local businesses that will help create and retain jobs.”
Wall Street, which accounted for about 12 percent of revenue in 2007, may lose more than $47 billion and 47,000 jobs, the city budget office has predicted.
Sales Tax Plan
The mayor first proposed the sales tax increase May 1 when he presented a $59.4 billion budget that included eliminating 13,500 municipal jobs, mostly through attrition, to close a $4 billion gap. The mayor and council must agree upon a final budget by June 30, the end of the current fiscal year.
The unincorporated business tax double-charges thousands of businesses and discourages recently fired New Yorkers from free- lance work or starting their own businesses, Bloomberg and Quinn said.
Eliminating the tax for 11,000 businesses with incomes of less than $100,000, and reducing it for 6,000 earning up to $150,000, would result in combined savings of $25 million annually for those enterprises, the two said.
Another proposal would generate $167 million in new revenue in the fiscal year beginning July 1, aligning city tax laws with those in other states and ending tax burdens that Bloomberg and Quinn said stifle job creation.
Using only sales to compute the corporate tax would relieve companies located in multiple jurisdictions from the obligation of determining how much of the income should be attributable to earnings in the city.
Taxes for more than 27,000 New York City businesses will fall under the change, saving a combined $2.7 billion while it is phased in over 10 years, the mayor and council speaker said.
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.