NYC-WTC_000195490

NYC 9/11 Public Portal Document

The 2002 Executive Budget tax reduction proposals are as follows:

• 25 percent cut in the personal income tax surcharge: The personal income tax paid by City residents is subject to a “temporary” 14 percent surcharge that is imposed on the base rate. This proposal calls for; an additional 25 percent reduction in the 14 percent surcharge on July 1, 2001 and renewal at the reduced rate in 2002 with an average benefit to taxpayers of $80. The 14 percent surcharge wa's previously cut and restructured on January 1, 2001 with a 50 percent reduction in the surcharge on taxable income below $50,000 for single filers, $90,000 for joint filers and $60,000 for head-of-household filers. The reduction in the surcharge averaged 25 percent. The 14 percent surcharge was originally enacted in 1991 and has required periodic renewal since 1993, It is currently scheduled to expire on December 31, 2001. The proposal will save City resident taxpayers $180 million in 2002, $191 million in 2003, $207 million in 2004 and $226 million in 2005. i: p * Elimination of the commercial rent tax: Currently all commercial tenants in the other boroughs and I tenants paying under $150,000 in annual rent in Manhattan are completely exempt from the commercial rent tax. The exemption was recently increased from $100,000 to $150,000 effective December 1, 2000, saving taxpayers $19 million annually. Tenants paying over $150,000 annually in rent pay a 3.9 percept effective tax. Additionally, tenants with rents between $150,000 and $190,000 receive a partial credit that lowers their liability, This proposal eliminates the tax completely by the end of fiscal year 2003. Beginning June 1,2001, the effective rate will be reduced to 2,6 percent from the current 3.9 percent rate. Thereafter, the effective tax rate will be further reduced to 1.3 percent on June 1, 2002. The commercial rent tax will be completely eliminated on June 1, 2003. These actions will save taxpayers $121 million in 2002, $270 million in 2003, $432 million in 2004 and $470 million in 2005, when fully implemented.

• Extension of co-op and condo property tax relief: An abatement program was implemented in 1997 to reduce the disparity in property tax burden between owners of cooperatives and condominiums (Class 2) and single family homes (Class 1), This program allowed a partial H abaUment of Class 2 real property taxes over a three-year period starting in 1997. In 1999, the abatement was equal to 17.5 percent of the fax for residential units with ah average assessed value I I over $15,000 and 25 percent of the tax for residential units with an average Assessed value of less than $15,000. It was extended in 1999 through 2001. This abatement program will be extended at the ■I 2001 level, with total benefits to taxpayers of $185 million in 2002, $194 million in 2003, and $204 li million in 2004 and $214 million fa 2005. i • PIT credit for “S” corporations: Effective January 1, 2002, resident shareholders of subchapter S I f corporations will be eligible for a sliding scale credit against the personal income tax for their i distributed share of the subchapter S corporate tax liability. The structure of the credit will be similar to the current credit for owners of unincorporated businesses enacted in 1997. Total savings to resident City taxpayers will be $26 million in 2003, $53 million in 2004 and $56 million in 2005.

• Earned income tax credit: Effective January 1, 2003, the City will allow a refundable earned income tax credit (EITG) against the City personal income tax of up to five percent of the current Federal EITC for tax years 2003 and thereafter. This credit will benefit an estimated 600,000 taxpayers^ with an average credit of $80. The savings to City taxpayers will be $48 million in 2004 and thereafter. The refundable portion of the credit will be paid through the expenditure of TANF funds.

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