No, I’m not talking about the Chicago Bears (”13 men on the field”) during their impressive comeback at Green Bay on Sunday night. I’m talking about the GOP presidential primary – nine candidates participated in the most recent debate.
Nothing confuses potential voters more than hearing candidates argue about prospective tax plans and disjointed and irrelevant references to past tax and spending history (we all know that the presidency is worlds apart from state and local politics). Nonetheless, Mitt Romney and Rudy Giuliani were happy to exchange barbs while their colleagues looked on.
Giuliani claimed, “I cut taxes 23 times. I believe in tax cuts.”
Romney countered by claiming that he exercised the line item veto 844 times while Governor of Massachusetts.
The sparring continued with Romney pointing fingers at Giuliani’s support of the New York commuter tax. Giuliani, in turn, pointed at New York City’s healthy economy and said, “The point is that you’ve got to control taxes. I did it, he didn’t. … I led, he lagged.” Romney’s response? “I did not increase taxes in Massachusetts. I lowered taxes.”
And so it went, largely, with confusing statistics and rhetoric. All candidates seemed to agree on only one thing: that spending in Washington has become unmanageable.
As of Saturday, New York City shoppers got a break: they no longer have to pay city sales tax on clothes and shoes.
Mayor Bloomberg proposed sales tax relief in June and it went into effect on September 1 – just in time for the Labor Day shopping weekend. The measure eliminates a 4% city tax on clothes and shoes. Shoppers still have to pay a 4.375% state sales tax for items costing $110 or more. But no one is complaining.
Let me demonstrate what this means to you and I.
Take this little dress here… It’s a BCBG print dress (not to those of you wondering what to do for my birthday: on sale at Macy’s). No sales tax means this dress is now a steal at just… $99.00! You save $3.96 in city sales taxes and you don’t pay the state sales tax (since it’s under $110). Ok, in print it doesn’t look all that great. But just imagine if you bought me ten such dresses. Now you’re talking tax savings.
Or…
If I (or someone I love) were to splurge on a pair of Jimmy Choo shoes – such as these – the savings would be almost $30.
So, the more you spend, the more you save. Wait a minute… You don’t think Mayor Bloomberg thought…? Naah.
The U.S. Supreme Court issued a ruling last week that made some New Yorkers very happy… And could have serious worldwide tax implications.
The Supreme Court ruled 7–2 that American courts may hear matters involving foreign governments and property taxes. The ruling now clears the way for New York City to collect the so-called “pillow tax” from diplomatic missions and consulates to the United Nations.
Under New York State law, property which owned by a foreign government is exempt from tax if it is used exclusively for diplomatic offices or as housing for an ambassador or a senior minister. The “pillow tax” is the common term for property tax that New York City hopes to collect from nations using missions to the United Nations for non-diplomatic purposes, such as providing living quarters for certain staff.
The ruling is important from a tax policy (and foreign policy) standpoint because confers jurisdiction on American courts for matters involving property tax which “run with the property” rather than with the person or country. Previously, missions and consulates were believed exempt from property tax. In cities like New York, that exemption resulted in the loss of millions of dollars.
New York initially filed the suit against the Indian and Mongolian missions to the United Nations; taxes for those countries alone involved more than $25 million. Those governments argued that they were exempt from paying the tax because of diplomatic sovereignty granted in under a 1976 federal law, the Foreign Sovereign Immunities Act. However, in writing for the majority, Justice Clarence Thomas declared, “Property ownership is not an inherently sovereign function.” The Supreme Court decision upheld the ruling issued last year by the United States Court of Appeals for the Second Circuit, in Manhattan.
The Supreme Court’s decision will likely encourage Washington, D.C. and others to now aggressively seek taxes from consulates and other diplomatic property.
So what does that have to do with you? Well, the potential fall-out from this ruling has many lawyers, advisors and policy-makers on edge. The ruling could result in strained relations with other foreign countries depending on how zealously New York City, Washington, DC and other American cities chase to collect taxes. Good for the folks in those cities because it is money in the coffers, but bad for future relations.
Even worse? What if those countries turn the ruling on its ear and claim similar lack of exemption for American consulates and diplomatic missions abroad? What if those in India demand that the US pays the pillow tax? What about our other friends? Chances are that New York just opened up a big can of tax worms – the fallout from this ruling will be worth watching.
