Living in one of the country's most expensive cities, New Yorkers have grown to appreciate the recent tax exemption on clothing and shoes that cost more than $110. Well, that's all over now.
The city council OK'd Mayor Michael Bloomberg's proposal to hike the sales tax from 8.375 to 8.875 percent – an 0.5 percent jump – as part of an overarching plan to generate $887 million for the city to close the $1 billion deficit in next year's budget. The sales tax deal also reinstates the tax on clothing and shoe purchases of $110 or more. Clothing under that mark will still be tax-free.
Bloomberg had wanted to impose the tax on all clothing sales, but backed off to push the deal through last night. He also dropped his proposal to charge a 5-cent fee for all plastic shopping bags, according to The New York Times.
It's not just clothes and shoes that are getting smacked with the tax, however. Prepare to pay more for everything beginning on July 1.
Under the plan, a $25,000 car would cost an extra $125 on top of the $2,094 sales taxes on it already, according to The New York Post. Families that bring in $35,000 a year would have to shell out $74 more in sales taxes a year, according to a Times report of Independent Budget Office estimates. Households that earn $125,000 would have to pay $237 more and ones that make $500,000 would be out an additional $687.
While New Yorkers may not be happy with the plan, Bloomberg says the city had no choice. Given the city's $5 billion loss in tax revenue and the current economic climate, the mayor said difficult decisions had to be made about balancing the budget.
"While we have been forced to make some unpopular choices, this package has a silver lining -- significant tax relief for 44,000 local businesses that will help create and retain jobs for New Yorkers and grow the city’s economy," Bloomberg said in a statement. "After a lot of collaborative work with the City Council, we now need the state legislature to act quickly."
The tax plan will help keep the city competitive in the long run, said Council Speaker Christine Quinn, for whom the deal is considered a major victory.
Quinn had vigorously opposed Bloomberg's earlier proposal, cautioning that a sales tax hike on clothing under $110 could push the city backward "because it places an unfair burden on those who have the least."
The tax revenue is short about $160 million from Bloomberg's original proposal, but the city will likely bridge the gap through new taxes or spending cuts, reports the Times. It's not clear where the cuts could come from, but they may involve laying off more than 13,500 city workers and slashing budgets at city agencies, including the police and fire departments, according to the Gotham Gazette. Business tax plans have also been proposed to close loopholes in the tax code and bring in $167 million.
Albany still needs to approve the deal before it can become law.