REPEAL OF APPAREL TAX IN NEW YORK STATE CLEARS MAJOR HURDLE

Byline: Eric Wilson

NEW YORK — Watch out New Jersey.
The repeal of the state’s share of tax on certain apparel took another step forward Wednesday with the State Senate’s approval of a larger business tax cut plan that includes the gradual elimination of the 4 percent levy on clothing costing under $500.
And while the larger bill, entitled “Jobs for the 21st Century Business Tax Cut Plan,” proposed by Republican Majority Leader Joseph L. Bruno, is unlikely to be accepted as a whole by the Democratic Assembly, several prominent participants in the state’s ongoing budget negotiations said some form of apparel tax repeal will probably end up in the state budget.
The Senate approved the business tax cut package 55 to 2, with Queens Democrats Emanuel Gold and Leonard Stavisky dissenting.
“If you look at the vote, a lot of Democrats voted for it, including [Democratic Minority Leader] Martin Connor. That is a signal to the garment and apparel industry that we are not opposed to certain of these tax cuts,” Gold said in a telephone interview Wednesday.
However, Gold and Stavisky said they voted against the package because the Republican-controlled Senate has yet to propose a state budget that would explain where the tax cuts, totaling $2.5 billion when fully implemented, would come from.
“Frankly, I think the best part was the reduction of the sales tax on clothing,” Stavisky said, but he voted against the bill because it would have a $216 million impact on the state budget in its current fiscal year.
The apparel tax cuts would cost the state $550 million in revenues when fully implemented. The Senate has also passed a $3 billion school property tax relief program, which — combined with the business tax-cut package — would reduce tax revenues over the next five years by more than $5.5 billion.
“This is a one-house bill and they know it’s not going anywhere,” Gold said.
In fact, the bill is unlikely to be taken up on the Assembly floor, say legislative sources. The Assembly passed its own proposal for a state budget last week that includes a repeal of the tax on apparel that would occur at once, as opposed to the Senate’s gradual repeal. The Assembly’s version would repeal the tax March 1, 1998.
An aide to Assembly Speaker Sheldon Silver said there are two routes the houses can take to resolve their differences:
Representatives of both houses and Gov. George Pataki can form a conference committee to propose a tax-cut resolution, or the Assembly and Senate can negotiate the apparel tax repeal as a piece of the overall budget.
“At this point we’re pushing for a conference committee,” the aide said. “One way or another, the speaker wants to get this into the budget this session.”
The Senate’s bill includes two additional tax abatement weeks — one Aug. 23-29 and one Jan. 17-23, 1998, each of which would cost the state $20 million in revenues. The phaseout of the state’s share of tax would begin in 1998 and be completely eliminated in fiscal year 2001-2002. Both versions would allow localities the option of dropping all or part of their sales tax on clothing and footwear costing less than $500.
“He [Silver] believes that 1 percent does not accomplish the job of keeping jobs in New York and sales in New York,” the aide said.
An aide to Sen. Bruno countered that because the Senate is proposing a much broader round of tax cuts, gradual repeal is necessary to offset the immediate loss of revenue.
“Sen. Bruno will push for as much as possible and is very confident that a sizable portion of the plan will go through and be part of the state budget,” said the aide. As for the apparel tax repeal, “that would stand a better chance of going through in some form or another.’
The state budget, which was due April 1, has been granted an extension to May 9, the aide said.
In response to the Senate’s package, a spokesman for Pataki said the governor is interested “in proposals that cut taxes without breaking the budget.”
Deirdra Picou, deputy press secretary for budget to Mayor Rudolph Giuliani, said, “The Assembly has passed their version of the apparel tax reduction. Now the Senate has passed their version. This is a good sign. We think it bodes well for the final budget.”

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