New York's legislative leaders and Gov. Paterson are contemplating a series of tax hikes and the elimination of sales tax exemptions to close their budget deficit.
That means that people who up til now bought clothes of less than $100 without sales tax would start paying sales tax on those transactions. Given that New Jersey imposes no sales tax on clothes, it would be quite easy for New Yorkers to cross into New Jersey and buy those items tax free. It's an immediate savings of up to 8.375% if you're in New York City should the state reimpose the tax.
Since sales ultimately goes to retailers' bottom lines, the sales tax hike will likely result in lower corporate tax revenues in New York, but slightly better profits for those across the border in New Jersey - particularly in places like Newport Mall, Jersey City and the Route 4/Route 17 corridor.
The legislative leaders think that this will bring in $690 million in revenue. I think it will fall well short of that because it will be another drag on already anemic spending by consumers - their dollars simply aren't going nearly as far and they have less of them to begin with.
Gov. Paterson thinks that the state could get roughly 10% of the money necessary to close the budget from tax hikes. The state faces a $9 billion deficit and they're hoping to raise $1 billion in taxes. That actually works out to 11%, so that's not bad for government work.
It would also seem that the Governor remains open to imposing a soda tax, with the claim that it would improve the health of New Yorkers, but which is imposed clearly to help close the massive deficit due to overspending. That too would be another hit on consumers at a time when they can ill-afford cost increases.
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