As New York finds itself in the worst economic crisis since the Great Depression, a new study concludes that a proposal to limit the capital improvement sales tax exemption for new residential and commercial remodeling projects in Governor Paterson’s 2009 budget will eliminate 2,145 jobs across New York state.
The study conducted by the Housing Policy Department of the National Association of Home Builders (NAHB) also found that the Governor’s budget proposal will cause a reduction of $233 million in income for workers and small businesses in New York and reduce other tax revenues by $40 million for the State and local governments.
This provision, included in the Governor’s proposed budget, narrows the definition of capital improvement for purposes of the sales tax exemption in that building a new building would constitute a capital improvement, as would adding a whole new addition to a building or totally reconstructing a building. But merely adding a new door or new windows would not amount to a capital improvement. This effectively eliminates targeted stand-alone improvements unless performed in the larger context of a new addition or reconstruction.
New York has an aging housing stock which needs continuing upgrade and refurbishment. Capital improvements to real property are essential for building maintenance and safety.
“Now more than ever this exemption is needed with new home construction plummeting to record lows and home builders and their employees trying to find a market in the remodeling business,” said NYSBA Executive Vice President Phil LaRocque. “This change will cost the home improvement consumer an additional 8 percent at a time when the public is reluctant to invest anything in their home. This budget proposal is contrary to everything that Washington is trying to accomplish with the federal stimulus package.”
The capital improvement sales tax exemption was enacted as a positive inducement for homeowners and commercial building owners to maintain their property. It is also a recognition that, once improved, the property either retains or increases its assessed value for purposes of the real property tax. Properties that are not maintained lose their value and diminish real property tax collection.
NYSBA believes that this bill is a tax increase on homeowners and businesses which discourages investment in home and commercial property at a point where the state’s economic policy should be encouraging such investment.
“Clearly, the state needs to cut spending and to find additional revenue, but this does not constitute a well-conceived proposal,” concluded LaRocque.
A copy of the study is available at www.nysba.com
The New York State Builders Association (NYSBA) is a not-for-profit trade association comprised of 16 local affiliates across the state. Chartered in 1951, NYSBA represents 4,000 single and multi-family builders, remodelers, developers, and associate member firms, ensuring that their interests are represented at the State level. These members perform over $5 billion in single and multi-family new and rehab residential construction annually and employ over 250,000 across New York State.