New York Gas-Tax Break Could Bust Budget, Agency Says

A gas tax holiday in New York proposed by Senate Republicans could punch a $600 million hole in the state budget, according to the Division of Budget.

The New York State Dedicated Highway and Bridge Trust Fund, which pays debt service on the New York State Thruway Authority bonds, among other things, would lose $306.2 million from the tax holiday, according to the division of budget.

If passed, the gas holiday would run from Memorial Day this month until Labor Day in September. The Senate bill would allow the state comptroller to use funds from the general fund to cover the trust fund's obligations, if necessary. According to the press release, a combined state, local, and federal gas holiday would save drivers as much as 65 cents a gallon.

"Higher prices at the pump coupled with higher costs on everyday items like milk, bread and eggs are making it more difficult for middle-class families to make ends meet," Senate Majority Leader Joseph Bruno, R-Brunswick, said in a press release. "We must take action to provide relief from these skyrocketing costs when it can help New Yorkers the most."

Governor David Paterson "has said he's open to considering the ideas under two conditions: one, that we can guarantee the savings will be passed on to consumers and two, that we find a way to pay for the $600 million dollar hole it would create in the budget," said Division of Budget spokesman Matt Anderson. "While we sympathize with New Yorkers facing higher prices at the pump thus far those two conditions have not been satisfied."

Senate majority leader spokesman Scott Reif said the Senate would propose budget savings measures in the coming days and weeks but offered no specifics on what could be cut to pay for the gas tax holiday. Providing relief at the gas pump "ought to be a priority," Reif said. The Senate could pass a bill as soon as this week, he said.

A gas tax holiday would be just another of the financial difficulties the state faces as Wall Street profits sink and employers shed jobs. Debt service in New York State will rise to $4.65 billion in the current fiscal year, up 13.4% from last year's $4.1 billion, according to an enacted budget report released last week by the division of budget. New York budget director Laura Anglin warned last week the state was entering into a recession that would last into next year.

"We're concerned the worst is yet to come for New York," Anglin told reporters at a press conference in Albany.

With potentially bigger implications for the state's finances is the question of whether or not the state, under a new law, can tax out of state Internet retailers and generate an estimated $50 million of sales tax in the current fiscal year.

Seattle-based Internet retailer Amazon.com LLC filed a lawsuit against New York in state Supreme Court on April 25 challenging the law that went into affect on April 23. The company challenged the law on the grounds that it violates the commerce clause of the U.S. Constitution because it imposed taxes on out-of-state companies that had no brick-and-mortar operations in the state.

The lawsuit challenges the notion that Amazon could be liable for collecting state sales taxes for "soliciting" business in the state through New York Web sites that post advertisements with links.

Thomas Bergin, spokesman department of taxation and finance, declined to comment on the lawsuit, which is being handled by the state's attorney general's office.

 

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER