Albany County legislators may consider a boost in sales tax to balance a multi-million dollar budget deficit and stave off looming layoffs.
County Chairman Daniel McCoy said raising the sales tax by 0.5 percent would bring in an estimated $28 million in revenue to patch $40 million budget shortfall.
The increase would require approval from the state Legislature and would sunset after two years, according to the proposal that was introduced this week.
“It’s a short-term solution,” he said Thursday.
County Executive Mike Breslin’s proposed $549.5 million budget anticipates $40 million in lost revenues next year. This includes a $7.1 million decline in sales tax revenue, $8.3 million lost in federal aid for the nursing home and the expiration of $5.2 million in American Recovery and Reinvestment Act funds, among other shortfalls.
Without an increase in revenues, Albany County may have to cut 511 jobs. The budget deficit could also result in the closing of a the county nursing home and a 15 percent tax increase.
McCoy said the purpose of the temporary increase would be to buy legislators time to investigate efficiencies without decimating the county work force and reducing services.
He said the increase would lessen the tax burden on residents since a sizeable percentage of consumers come from outside of Albany County.
“Almost 40 percent of sales tax revenue comes from out of the county,” he said.
The proposal was forwarded to the county’s Audit and Finance Committee during the legislature’s meeting Monday. McCoy said the proposal might not be the best solution, but it’s better than allowing Breslin’s devastating cuts to take effect if the budget remains unchanged by next month.
“My answers might not be right, but at least we’re trying to come up with a solution,” he said.
Albany County now maintains an 8 percent sales tax and would be the first in the greater Capital Region to push beyond this percentage.
The proposed increase would also widen the disparity between Albany County and Saratoga County, which has a 7 percent sales tax.
Not surprisingly, area business leaders aren’t offering much support for the proposal. Mark Eagan, the president of the Albany-Colonie Regional Chamber of Commerce, said the sales tax increase could result in consumers traveling outside of the county to make major purchases, which could ultimately affect sales tax receipts.
“If people are going to make a large purchase and they know taxes are going to be higher in one place over another, they’re going to shop with their feet,” he said.
Eagan said legislators should also realize they can’t simply raise revenue to balance their budget.
He said budget planners need to start making tough decisions, which include determining the services that are not essential.
“In this economy we’re having, they need to look at government and see how they can cut budgets,” he said.
Ken Huge, the general manager of Colonie Center, was not familiar with the proposal to raise the county sales tax and didn’t want to speak specifically about it. But he said he can see both sides of the issue.
On one hand, he understands the need to ease the tax burden on county residents already smarting from the lingering recession. But on the other had, he sees how the increase could drive at least some business away from the county.
“I don’t think anybody likes to pay any more taxes than they already do,” he said. “But unfortunately, that’s where we are right now.”