STORES HAIL NYC PLAN TO CUT TAX ON APPAREL
Byline: David Moin and Mark Tosh
NEW YORK — Retailers love it.
Mayor Giuliani’s proposal to remove the city’s sales tax on apparel priced under $500, say retailers here, is just the lift they need to become more competitive with stores in New Jersey, where there is no tax on most apparel.
“I think it’s a great idea,” said Beth Ravit, president of Authentic Fitness Corp.’s retail division. “It has the potential to strengthen New York City retail.”
Authentic Fitness has six stores in Manhattan. Its merchandise is generally priced under $500.
“Any actions the city can take to encourage customers to shop in the city is really good for everybody — the customer, the retailer and the city,” Ravit added.
Thelma Koch, manager of the Town Shop at Broadway and 82nd Street, said the mayor’s proposal sounds like a good idea, but wondered whether the city could afford it.
“I’m for it if it’s going to improve my business, but I’m against it if it’s going to penalize the city,” she said.
A spokeswoman in the mayor’s office said the move would cost the city about $300 million annually in lost revenue, but the shortfall could be made up in other ways.
“We feel that it would stimulate more commercial activity,” the spokeswoman said. “The mayor [reduced] the hotel occupancy tax and subsequently the hotel industry has done well.”
On Thursday, Mayor Giuliani pitched the idea to the state legislature in Albany. The next step in the process, according to the spokeswoman, is for a bill calling for the tax change to be introduced in the state legislature, but a date has not yet been determined.
In his weekly radio show Friday on WABC, Giuliani quoted an estimated increase of “up to 25 percent” in sales if the plan goes through. “This is a tremendous increase,” he said. “When business improves like that, you need more sales clerks…more everything. That means more jobs and more people buying things we do tax,” Guiliani noted.
Assembly Speaker Sheldon Silver (D., Manhattan) has endorsed a state-wide elimination of the state’s portion of the sales tax on apparel.
“The politics are there,” said Tom Cusick, president of the Fifth Avenue Association. “I am going to predict that it will go through.” The clothing tax cut is “clearly targeted to neutralize the draw of New Jersey — to have a level playing field,” Cusick said. Stores such as Old Navy and Macy’s would benefit more than Bergdorf Goodman or Saks Fifth Avenue.
“Customers of high-end retailers are less focused on whether or not to shop across the river to save a few dollars on tax,” Cusick said. “The more average shopper calculates that tax amount.” The city’s hotel tax has been reduced to 15 percent and is believed to have spurred the hotel business here. Retailers are certain that if the apparel tax is cut, it will spur business.
“If it has one tenth of the success that decreasing the hotel tax had, it would be a boon to the city,” Cusick said.
“This could help create a more appealing environment in the city for retailers seeking to come in,” observed Ted Marlow, president of Henri Bendel.
Many retailers have thought twice about moving in the city, because of the higher real estate and operating costs here. Cutting the sales tax could make them think again.