Spitzer wants to close ‘loopholes,’ raise fees

Gov. Eliot Spitzer proposed eliminating “tax loopholes” and increasing state fees to raise $1.9 bill

Gov. Eliot Spitzer proposed eliminating “tax loopholes” and increasing state fees to raise $1.9 billion Tuesday in an attempt to help close New York state’s $4.4 billion budget deficit.

Although Spitzer called for no additional revenues from increases to broad-based taxes, his proposals may increase the taxes and the fees paid by some New York citizens and businesses.

State budget

For answers to frequently asked questions about Gov. Eliot Spitzer’s state budget proposal, click here. To view a detailed briefing book on the plan, click here (Adobe Reader required to view file). To view other budget documents, click here.

Matthew Maguire, the director of communications for research and lobbying organization the Business Council of New York, said his organization was pleased that Spitzer proposed holding the growth of state spending to 5 percent more than last year. He said the Business Council is uncertain of the impact of proposed changes in the state’s tax law and fee increases.

“We’re still trying to assess the implications of the tax loopholes. As a rule, we are wary of proposals to increase taxes under the marketing banner of closing loopholes,” Maguire said.

Some the highlights of Spitzer’s proposals to increase fees and change the tax code include:

u Vendor registration: Spitzer proposes all 600,000 active sales tax vendors re-register with the state and pay a $50 registration fee. The proposal is expected to raise $12 million for 2008-09, enable the collection of back tax liabilities and improve sales tax collection by $4 million annually.

u Merging of fuel taxes: Proposal would combine the Petroleum Business Tax, the Motor Fuel Tax and the state sales tax on fuel into one tax and transform local sales tax rates into an equivalent excise tax rate. The proposal indexes all of the taxes based on the petroleum producer price rate index. Spitzer expects the change to provide the state with $13 million in additional revenue for 2008-09 and a total of $56 million when fully effective.

Fiscal policy staff for Assembly Minority Leader Jim Tedisco, R-Schenectady, said the change in the petroleum taxes would cost the average New York state resident $11.59 in the first year if implemented.

Michael Doyle, the executive director of the New York State Petroleum Council, a division of the American Petroleum Institute, said merging the taxes has been considered in the past but never enacted.

“New York has a very complicated taxing scheme for motor fuel and there is a number of different taxes that are applied. This appears to be an effort to simplify that,” Doyle said. “I can’t predict whether gas prices will go up from this.”

u Registering E-commerce retailers: According to Spitzer this change would affect Internet companies such as Amazon.com who claim not to have a presence in New York state but do solicit sizable sales from New York citizens. The change would require Amazon.com and some others to collect sales and use taxes. The proposal is expected to raise $47 million in 2008-09 and $73 million in 2009-10.

Spitzer said the change will address a competitive disadvantage brick-and-mortar retail stores often complain to the state about.

u Reclassification of credit card companies doing business in New York: Spitzer proposes subjecting out-of-state credit card companies to New York taxation on the revenue they collect from New York merchants and consumers. This measure is expected to generate $95 million in 2008-09 and $75 million when fully effective.

New York Bankers Association spokesman Karen Jannetty said her organization is not yet certain what impact the changes will have to credit card companies or consumers.

u Taxing flavored malt beverages at low liquor rate: Change would raise taxes on certain malt beverages currently taxed at the beer rate to the low liquor rate. This change is expected to generate $15 million in 2008-09 and $18 million when fully effective.

u Taxing little cigars at cigarette rate: Spitzer wants to classify “little cigars” as cigarettes for tax and stamping purposes by both the state and New York City. The change is expected to bring in $3.6 million 2008-09 and $4.8 million annually thereafter.

Categories: Schenectady County

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