Brooklyn's Progress
February/March 2007

BY LYNDA LANE-LABRADOR

In his "State of the City" address, New York City Mayor Michael Bloomberg outlined his proposal for a tax relief package for the city totaling $1 billion.  Highlights include cutting property taxes by 5 % and eliminating the city sales tax on shoes and clothing under $110.

Some argue the proposed 5 % property tax cut will largely be offset by the high value of New York’s real estate, and the tax cut lasts one year. 

Meanwhile, one might assume the news about the tax breaks for clothing and footwear would leave retailers jumping for joy. But, this bit of tax relief news was met with mixed reaction.

Alex Yubov, a manager at Paradise Shoe Store in Flatbush says sales are even better. The tax roll back allows his customers to shop more freely.  Not having to pay the extra few dollars on top of the purchase price is a relief to them.

"The roll back helps us. Our customers don't have to think twice when buying now. When the taxes are added, they would ask about the extra $2 to $3 dollars they would have to pay. Now they don't have to worry about that.

“I have customers say, ‘There's no tax right?’ when they go pay for shoes because they know of the news but not sure when it ends.” 
 
Eliminating the tax makes clothing and shoe sellers in the five boroughs more competitive with those in New Jersey, where all clothing is exempt from the sales tax. In Connecticut, clothing under $50 is exempt from the state’s 6% sales tax.

For Borough Park clothing store owner, Paul Cooper, who likes to be known as “Mr. Cooper,” the tax is neither here nor there.  He has slow sales. He sells hip hop style clothing in an area that has changed. He has owned City Chic (formerly Zeko's Men's Wear), since 1989.

"The neighborhood used to be mostly Black and Hispanic. Now it is mostly Jewish. Most of the residents don't have a need for this type of clothing, so I have old customers still coming in and people who happen to pass by the store."

Mr. Cooper says the Mayor might be on the right track by rolling back taxes to drum up sales activity but asks whether or not it matters when people can't afford to buy.

"Bloomberg is trying to make every business busy with the sales tax," Mr. Cooper said. “But, what good is it when they are taxing the little guy with payroll tax, end of the year tax and they tax him again to buy a jacket? They hit him in the head with the taxes."

Meanwhile, New York State Governor Eliot Spitzer’s 2007-2008 Executive Budget includes a plan to close certain “loopholes,” which will result in increased taxes for businesses.

Some of the elements of the proposal include:

• Combined reporting. Under the proposed budget, the income of companies in other states could be taxed in New York if subsidiary, related or parent corporations are doing business in the state. The Budget Division estimates that proposal will cost taxpayers $215 million annually.
• Changes to taxes on banks and real estate investment trusts ($181 million). Bank-related changes include an increase in the tax on employee wages, so banks’ tax liability would increase when they increase employment.
• Elimination of a deduction for production costs incurred by manufacturers, research, software, film and production companies ($35 million).
• An increase in the tax on health-insurance policies ($75 million).

The Business Council of New York State, Inc. testified against the proposals. The Brooklyn Chamber will take up the issue during its Annual Lobbying Trip to Albany. To read more about the proposed cuts visit the Business Council Web site at http://www.bcnys.org/.