By Joseph Spector , Albany Bureau Chief
ALBANY, NY - A tax commission formed by Gov. Andrew Cuomo recommended Thursday that the state should end a sales-tax exemption on clothes and consider lifting a gas-tax cap in favor of tax relief on low-income homeowners.
The commission, formed in 2011, sought to find ways to streamline New York's taxing structure because the state has among the highest taxes in the nation.
The commission offered ways to cut some tax breaks in exchange for property-and income-tax relief to low-income homeowners. It also proposed eliminating an energy tax that businesses have criticized.
"Today's report represents another step in that direction as we seek to simplify New York's antiquated and unnecessarily onerous tax code and to ease the tax burden on families and businesses statewide," Cuomo said in a statement.
The commission is one of two Cuomo has established to look at New York's tax system.
Another one headed by former Gov. George Pataki and former Comptroller Carl McCall is expected next month to recommend ways to cut property taxes in New York. McCall also was a co-chairman on the commission that released its findings Thursday.
Business groups offered mixed reviews of the lengthy report released Thursday. While it would limit some taxes, it would also end a popular sales-tax exemption on clothing purchases under $110.
The report estimated that lifting the exemption would be mean an additional $800 million into the state's coffers. The money could be used to offer property and income-tax breaks to lower-earning New Yorkers, the commission recommended.
It would also be used to eliminate the estate tax to 73 percent of New York, mainly middle and low-class families and small businesses.
"The commission recognizes that a broadened sales tax base will allow for greater predictability and stability of revenue collections for the state, increased revenues for local governments and a larger share of the tax burden being shifted to nonresidents," the report said.
The report suggests the state might consider tying property taxes to household incomes, called a circuit breaker and something progressive groups have wanted for years.
"We believe that this could be one of the most important and critical tax relief mechanisms in the report, and we're happy to see its inclusion," said Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, a labor-backed group.
Yet some labor groups warned that New York already has the highest income inequality in the country. Some tax breaks for businesses proposed in the report could make the gap worse, the groups said.
"Any tax reform proposals should be judged on whether they make inequality worse or better," said Michael Kink, executive director of Strong Economy For All Coalition. "Judged by that standard, the idea that New York would cut taxes for hugely profitable Wall Street banks and millionaires is just plain bad."
Ted Potrikus, executive vice president at the Retail Council of New York, said lifting the exemption would hurt stores and would make the state less competitive with neighboring states.
"It's a complete obliteration of something that people have come to love," he said.
New York currently has a cap on gas taxes. Only the first $2 per gallon is taxed, and even with the cap New York has among the highest gas taxes in the nation when local and federal taxes are included.
The commission said lifting the cap might be something for the state to discuss. It would bring in an estimated $371 million a year in new revenue.
Karin Kennett White, deputy director of the state Motor Truck Association, said New York already has the second highest trucking costs in the nation, behind only Oregon. Any increase in gas taxes could hurt commerce, she said.
Some business groups said they were encouraged by the report. They said the recommendations include a variety of ways to simply New York's tax code.
Another recommendation would be to more quickly phase out an 18-A tax, which hits businesses with a 2 percent assessment on electric, gas, water and steam usage. It is set to expire in 2018.
"It's become clear that we can and must reduce New York's crushing tax burden," the Rochester-based group Unshackle Upstate said in a statement. "We appreciate the governor's efforts and strongly believe that real tax relief must happen in 2014."
The commission was critical of one of the state's most expansive tax incentives: the $420 million a year that goes to the film industry. The report said the program should be lowered to $370 million a year.
"The commission believes that the credit should be scaled back because it does not appear to pay for itself in its current form," the report said.