Comptroller: NY Sales Tax Collections on the Rise

Thomas DiNapoli said the higher sales tax collections "are a good sign for the economy, but continued caution is warranted."

By Michael Gormley
|  Tuesday, Feb 21, 2012  |  Updated 6:08 PM EDT
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Comptroller: NY Sales Tax Collections on the Rise

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In another sign of slow economic recovery in New York's communities, sales tax revenue last year matched or exceeded pre-recession levels of 2008 in most parts of the state, according to a report released Tuesday.

State Comptroller Thomas DiNapoli said sales tax collections grew by 5 percent last year, raising that revenue in many parts of the state above 2008 levels. But DiNapoli noted that Tuesday's figures reflect continued slow recovery, which is even slower than in 2010.

He said the higher sales tax collections "are a good sign for the economy, but continued caution is warranted," DiNapoli said. "New York's economy has improved over the past two years, but growth has been sluggish and unevenly distributed throughout the state. The degree to which local governments depend on sales taxes varies, but it is an important source of revenue for many."

He also said sales tax revenue could become even more important to local governments as they adjust this year to a 2 percent cap on the growth in local property taxes imposed by Gov. Andrew Cuomo and the Legislature. The law effective this year includes an override provision by school district voters or local government boards.

The state sales tax rate is 4 percent, but counties and cities can set their own rates, usually 3 percent to 4 percent. Counties then distribute some county sales tax revenues to municipalities.

For counties increasingly dependent on their own sales tax revenue, DiNapoli reports a 4.1 percent increase in county collections in 2011 over the year before. That's up nearly $7 billion.

Counties have regained the lost money from a nearly 6 percent drop in 2009.

New York City's revenue grew by 6.1 percent to nearly $6 billion last year. Adjusting for local economic factors, that's lower than the 2010 growth rate of about 10 percent.

"It means we're not out of the woods yet," said Stephen J. Acquario of the New York State Association of Counties. "We're still struggling with the effects of recession."

Acquario also notes that the sales tax revenue is boosted by a temporary increase in spending for construction following the flood damage in many parts of the state. Further, the state Legislature has refused requests to counties to increase the local sales tax, months after the Legislature and Cuomo increased the income tax on millionaires, part of which provided a small but rare break for middle-class families.

In addition, local governments lost about $1 billion in sales taxes during the recession and now must content with a cap on property tax growth. Further, Acquario said there is a still a fear jobs won't return even with a recovery.

"That's been a deep, long lasting and serious recession that hit this state and it is quite serious and alarming to just now be at pre-recession levels," he said.

The strongest gain — 8.6 percent — was in the Southern Tier, pushed by construction after last summer's flooding. Construction and repair after tropical storms Irene and Lee also contributed to 19 percent growth in sales tax revenue in Schuyler County.

However, communities hit by the late summer storms in the Mohawk and Schoharie valleys, the Catskills and Southern Tier continue to try to recover from damage to homes, schools and services that far exceeds the sales tax revenue. In all, the storms are blamed for more than $1 billion in damage to upstate New York, little of which was covered by individual or business insurance.

Assemblyman James Tedisco is a co-sponsor of a bill that would exempt flood victims from sales tax.

"It's good news for our state's economy that revenues appear to be on the upswing, but I don't want to see state government profiting off of the misery of thousands of New Yorkers who sustained terrible losses," said Tedisco, a Republican representing Schenectady and Saratoga counties. "Let's continue to help these struggling families and small businesses get back on their feet."

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