TAX NEWS - 2010

NY Tax: Legislature to adopt last piece of NY budget

New York's Legislature was ready to adopt the final piece of a 2010-11 state budget totaling about $136 billion and addressing a $9.2 billion deficit. Gov. David Paterson, however, promises to veto the Legislature's added spending that he claims puts the plan out of balance.

The Legislature's budget scheduled for votes beginning Monday, pending any vetoes, includes:

--Eliminating the state's 4 percent sales tax on clothing and shoes under $110 on Oct. 1. An exemption would resume April 1, but for clothes and shoes sold at less than $55. On April 1, 2012, the $110 exemption would return.

--Delaying some promised tax credits to employers until 2013.

--Cutting in half the tax deduction for charitable donations by about 3,500 New Yorkers who make over $10 million a year.

--Eliminating the school tax relief credit known as STAR to owners of homes valued at more than $2 million and limit a tax break for wealthy city residents.

--Increasing the tax credits available to film and television productions to $420 million, from $350 million, when they produce movies and shows from New York, most of which is in New York City.

--Counting prisoners as living in the community in which they last resided, rather than where their prison cell is located, for purposes of redrawing election district lines. That would count tens of thousands of more votes in New York City, a heavily Democratic area; and eliminate them from sparsely populated upstate areas, a heavily Republican area, where most prisons are. That could cost a Senate seat in next year's realignment.

--Allowing state and local governments to borrow from the state pension system to make their payments as employers into the pension system. The borrowing will cost 5 percent in interest payments in what critics called a one-shot gimmick.

So far, the 2010-11 budget includes:

-- $302 million cut from aid and incentives to New York City, although lawmakers say a proposal could compensate for the loss by giving the city school district more money. Other cities would also see decreases as $15 million more is cut in the rest of the state.

-- $17 million saved by suspending training of a new state police class for a second year, with savings by attrition and reassigning 90 troopers from schools.

-- $4 million saved by delaying the extensive roof renovation at the Capitol.

-- $78 million in new spending to better serve indigent defendants accused of crimes.

-- $3 million spent to keep the Buffalo Bills in Buffalo, part of a decade-old deal.

--$25 million allocated to continue free MetroCards for New York City students.

--$7 million saved by closing the Lyon Mountain minimum security prison in Clinton County and the minimum security part of the Butler Correctional Facility in Wayne County. Two northern New York facilities -- at Ogdensburg and Mineville --will remain open.

-- A $1.60 per pack increase in the cigarette tax to $4.35, the nation's highest. Chewing tobacco and most other tobacco products would also be taxed at 75 percent of the wholesale cost, up from 46 percent; snuff would be taxed at $2 per ounce, instead of 96 cents per ounce; and little cigars would be taxed like cigarettes.

-- Trying to tax cigarettes sold by Indian tribes to non-Indians. State officials say that will comply with federal law, but tribal leaders say the taxation violates treaties and their sovereignty. A stamp would be placed on cigarettes showing the tax was paid and a portion of cigarettes estimated to be smoked by tribe members would be exempt from the tax.

The tobacco actions would bring in $440 million.

-- $327 million worth of cuts in programs for the mentally disabled and social services programs, including welfare. The Legislature reversed some proposed cuts in welfare aid and assistance for low-income elderly residents as well as in summer youth programs.

-- $775 million in health care cuts. New York City area hospitals would see $250 million of the reductions. The cuts will hit hospitals, nursing homes and other health providers and programs statewide. The final cuts include $6 million for stem-cell research.