New york announces billions in tax increases and cuts

Because the financial crisis threatens to plunge the state into a gross budget deficit, Governor Paterson has presented a radical budget proposal

Due to the financial crisis, the budget situation of the state of New York has drastically worsened. Taxes coming from Wall Street have dwindled and will continue to dwindle for the time being. With over 100 new taxes, they want to plug some of the gaps.

Governor David Paterson. Picture: state.ny

Democratic Governor David Paterson declared that they are facing the largest budget deficit in the state’s history, as the deficit is 1.7 billion this year and will grow to 13.7 billion in 2009 and 2010. In order to close the budget holes, Paterson presented a budget proposal that, in addition to billions of dollars in cuts, mainly in the health, social, educational, and environmental sectors, includes, above all, numerous tax increases. This brings into focus a new aspect of the Change that won Obama the election.

"Record revenue from Wall Street has allowed the state for years to spend more money in unsustainable ways", Paterson said yesterday. "With the financial industry in the midst of an unprecedented crisis, we must fundamentally reevaluate what our state is allowed to spend. Change is inevitable … Just like thousands of families in New York, our government needs to tighten its belt and rein in spending."

Spending to be capped at 121 billion for next budget. While this is 1.1 percent more than the outgoing budget, it is the smallest increase since 1996. While billions are being saved in many places and thousands of employees are being laid off, affecting mainly the less well-off, Paterson also wants to make Wall Street pay more. Gains from hedge funds and managerial income will now be exempt from income tax for those who do not have their primary residence in New York. Since many hedge fund managers are not U.S. burgers, new tax revenue is expected here, he said. However, hedge funds could then also increasingly relocate their headquarters to Connecticut. Millionaires will also be able to deduct less from their taxes, which is expected to generate 140 million in additional revenue.

Four billion is also expected to spool into state coffers with a variety of often small tax increases. The tax on non-diet soft drinks, for example, is to be raised by 18 percent to combat obesity. The tax on beer and wine will be increased by 24 percent, and wine will also be allowed to be sold in grocery stores. More taxes will be imposed on cable and satellite services, which will also make television more expensive. More taxes are planned for massages, haircuts or visits to gyms. Luxury goods should be taxed as high as cigarettes and cigars.

Interesting is the "iTunes tax" in the amount of 4 percent. It will be levied on videos, music and images downloaded from the Internet, but will also affect all other digital goods that are sold:

Close Digital Property Taxation Loophole. Imposes state and local sales tax on purchases of prewritten software, digital audio, audio-visual and text files, digital photographs, games, and other electronically delivered entertainment services to achieve tax parity. For example, with the passage of this bill, a book, song, album, or movie would be subject to sales tax no matter if it was bought at a brick and mortar store or downloaded online.

4 percent more tax is added to tickets for the cinema, sporting events and concerts. Cabs, rental cars and buses will be taxed more heavily (plus increases in tolls on roads and bridges and tickets for buses and subways). Other fees to be increased as well. Money will also be collected through more gambling cars or the introduction of a lottery.

Many US states are now in a similar situation. The budget proposal for New York has yet to be approved by the legislature, but it may be seen as a prospect of the change that many Americans will face.

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