Governor David Paterson must lie awake at night, thinking up new and creative taxes to impose on New Yorkers in a time of economic downturn. Soda, beer, wine, manicures and movies. Nothing’s off the table. His latest proposal is a tax on home remodelling. This comes at a time when people are already hesitant to spend money on home improvements.
Now, a long list of home improvements are sales tax-free if they are performed by a contractor everything from kitchen remodels to something as small as installing a new furnace or garage door.
The provision works like this: If you buy the material and a contractor performs the work, the homeowner does not pay sales tax on the contractor’s labor.
If the work and materials are supplied by a contractor, both are sales tax-free for the homeowner; the contractor has paid sales tax on the materials.
The proposed change would essentially tax the materials twice, and for the first time, charge sales tax on the contractor’s labor.
New York cannot afford the old exemption as it tries to plug a $15 billion hole in the budget, a spokesman from the governor’s budget office said. Paterson has also proposed taxing movies, manicures and non-diet soda, among other things.
There still would be a tax exemption for construction, but it would apply only to new construction, complete additions or complete re-construction. Read full story.
Obviously this will increase the cost of any home remodel job for New Yorkers. But has anyone stopped to think that this new tax will encourage New Yorkers to hire contractors working under the table? Will this decrease business for tax-paying contractors?
Tax-paying home remodelling contractors already have competition from contractors who don’t declare income. Many of the contractors working under the table also lack liability and workers’ compensation insurance. Won’t this new tax exacerbate the situation?
While I applaud the governor’s efforts to close the budget gap, these new taxes are not the way to do it.
