Crain's New York Business reports:
Early next month the City Council will hold a hearing on revising the most unfair tax in New York—the commercial-rent tax—but the prospects of reform are very uncertain.
Manhattan Councilman Daniel Garodnick is pushing a bill to exempt businesses that pay less than $500,000 in rent from the tax, which adds a 3.9% surcharge to the rents paid by some businesses. The current limit is $250,000.
In fiscal 2016, 10,999 firms paid the tax, producing $754 million with an average burden of $68,500. As rents have risen, more renters are ensnared, as the sharp increase in the number of firms and the rent collected since 2013 shows. The Independent Budget Office projects the tax will produce $814 million in the current fiscal year and $854 million for the 2018 budget that Mayor Bill de Blasio announced Tuesday
There's more:
This tax has a tangled history. It was first imposed in 1963 when the city was approaching statutory limits on the property tax. In that era, the first response to any revenue need was to get it from businesses. No one seemed to understand that landlords passed the cost of property taxes along to tenants, but that was the world back then.
The current state of affairs can be blamed on former Mayor Rudy Giuliani and former Assembly Speaker Sheldon Silver. In the 1990s, the CRT was high on Rudy's list of taxes ruining the city, and he pledged to eliminate it. He started by ending it everywhere but in Manhattan south of 96th Street and exempting smaller companies, but the effort eventually stalled. In the aftermath of Sept. 11, Silver demanded it be eliminated for much of downtown to lure companies back to the area. The tax does not apply in some other parts of Manhattan as well.
There's nothing like rent-seeking to get some people to pay a tax.
