THE POLITICAL PICTURE
NEW YORK — State officials lobbying for the tax repeal have estimated an outright abandoning of the tax would cost the state $700 million in tax revenues.
But, those legislators claim, the state would get back some $300 million to $400 million in revenues generated from tax on retail services, income tax from new jobs and higher corporate taxes created by the increased retail activity.
Citing figures from the city’s Economic Development Corporation, Mayor Rudolph W. Giuliani contends the tax loss of 6 to 8.5 percent levies on an estimated $8.4 billion (spent on apparel for the year ending August 1995) would be offset by income tax and sales tax generated by 17,400 new jobs and $1.2 billion in direct and indirect spending in New York City.
Two separate tax repeal plans have been passed by the state legislature and are part of the state’s ongoing budget negotiations.
Under the Senate’s plan, entitled “Jobs for the 21st Century Business Tax Cut Plan,” proposed by Republican Majority Leader Joseph L. Bruno, apparel tax cuts would cost the state $550 million in revenues when fully implemented over four years.
The Senate’s bill includes two additional tax abatement weeks for 1997/1998 — Aug. 23-29 and Jan. 17-23, 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 2001-02.
The Assembly passed its own proposal for a state budget that includes an outright repeal of the tax on apparel in opposition to the Senate’s gradual repeal. The Assembly’s version would fully repeal the tax March 1, 1998.
Both versions would allow localities the option of dropping all or part of their sales tax on clothing and footwear costing less than $500.
Localities would individually pass resolutions to repeal their share of sales tax on apparel, which would then be approved by the state. They cannot repeal the tax on apparel without the state’s permission, according to a spokesman for the New York City Department of Finance.
“Any locality needs permission to charge sales tax. The same is true when repealing it,” the spokesman said.
Tax on apparel varies throughout the state. New York City, which accounts for more than half of the state’s retail apparel sales, charges a 4 percent municipal tax and a 0.25 percent Metropolitan Transportation Authority tax.
Gov. Pataki’s proposed budget does not include a repeal on apparel tax, although a spokesman for the Governor’s budget division said there is $50 million allotted in the proposal that could be used toward repealing the tax on apparel. There are a number of other tax cuts competing for attention as the budget process continues.