Paterson said $1.3bn in new taxes and fees he proposed in December are now off the table, to be replaced with federal stimulus aid.
“Now that enhanced federal funding is available, our highest priority must be to provide targeted relief to those who need it most during the economic crisis – average New Yorkers struggling to make ends meet,” Paterson said.
The Democratic governor has been criticised for proposing new taxes and fees on New Yorkers to help close a $14bn budget gap for the next fiscal year, which starts 1 April. Paterson had argued that the taxes and fees were needed because the state had few other options and didn’t want to raise income taxes.
But Paterson said that when he tours the state, residents complain often about the proposed taxes and fees: “We’re trying to alleviate the burden on everyday New Yorkers,” he said.
The eliminated taxes and fees amount to about one third of the more than $4bn in new revenue generators that he proposed earlier to help close the budget deficit. Higher taxes and fees that will remain include levies on utility bills, health insurance policies and health care institutions.
The removal of some of the fees and taxes would seem to enhance the likelihood that lawmakers will approve an increase in income taxes on wealthy people, possibly for households making at least $250,000 a year. The measure has strong support in the assembly and some support in the senate.
Paterson has said he opposes the idea, calling it a job-killer, but has indicated he’s willing to be flexible.
The decision to eliminate some of the taxes got support from business leaders, but was roundly attacked by fiscal watchdogs and health care groups. “People can choose not to download iTunes without a negative impact. We don’t want them to be forced to choose not to have health insurance,” said Paul Macielak of the state Health Plan Association, which represents health insurers. They would pay about $434m more in the next year under the budget plan.
“It’s puzzling how the state will eliminate taxes on soda and haircuts, but leave in place a proposed gross receipts tax on hospital patient care,” said Daniel Sisto of the state Health Care Association, which represents hospitals and nursing homes.
Assessments and taxes on health care facilities are set to rise about $1.1bn. Utility assessments, which will appear on consumers’ electric bills, are set to increase by $651m. The 18-cent soda tax, which Paterson earlier had touted as a way not only to raise money but also to improve the health of New Yorkers, was to be one of the biggest revenue-raisers among the new taxes that were pulled back, estimated to bring in $404m. It was strongly supported by state health commissioner, Richard Daines.
But Elizabeth Lynam, deputy research director for the Citizens Budget Commission, noted that soft drinks companies have waged a fierce campaign against it. “It’s hard to say that sugared soda is an essential item in hard times,” she said. “That was a proposal that made sense from a public health perspective.”
Lynam said the federal aid should be used to address more fundamental issues, noting that the stimulus money will be gone in two years, yet the costs for state programmes will remain. Still, business leaders said the governor has made a good start in eliminating at least some of the proposed taxes in the budget.
“I think you have to commend the governor for rolling back these taxes, but there are still way too many taxes in there,” said Brian Sampson, executive director of Unshackle Upstate, a business group pushing for lower taxes and other measures to improve the business climate.
Rolling back the taxes is welcome, but it “doesn’t go far enough to have a real impact,” said Kenneth Adams, president of the state Business Council. “It’s a step in the right direction.”
But he said the other $3bn “has to come off the table to really increase our hopes for an economic recovery”.
Source: LoHud
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