A group of New York business organizations is urging Mayor Bill De Blasio to cut small businesses a break on a tax they say is costing the city jobs.
The Real Estate Board of New York — along with a dozen other groups ranging from the NYC Hospitality Alliance to the US Bodega Association — has written to the Mayor asking him to amend the Commercial Rent Tax, a 3.9 percent tax on base rent applied to tenants south of 96th Street in Manhattan who pay more than $250,000 in annual rent.
A bill sponsored by council member Daniel R. Garodnick would increase the threshold to $500,000 and, according to the biz groups, provide relief for some 2,740 tax payers.
According to the business groups, the exemption threshold, which was implemented to shield small businesses, has not been updated in years, so more and more businesses are now subject to the tax.
In 2003, the city collected nearly $388 million from 5,858 businesses. By 2016, 7,705 businesses were on the hook for the tax, paying $779 million to the city — double the revenue collected in 2003 and an increase of nearly 32 percent in the number of businesses captured.
CRT revenue is forecast to continue on this upward trajectory, generating $816 million in 2017 and $848 million in 2018.
In their letter to the mayor, the businesses write, “Unfortunately, many unprofitable businesses are paying the tax. The data indicates that approximately 1,200 businesses with very low profit margins in 2012 — less than $100,000 each — earned a combined $14 million in net income but together paid $19 million in 2014 CRT tax. This is not sustainable.”
Urging the mayor to adopt the bill as part of the new city budget, the group’s note, “Raising the current CRT exemption threshold … will carve out more small businesses and be of tremendous help to their bottom lines. Over
time, the foregone revenue for the city ($50 million to $55 million per year) will be offset by new revenues generated by business expansion, job creation and economic growth.
“We strongly urge you to include action on this issue in the Fiscal Year 2018 city budget. It would send a strong message to business owners who are bearing the burden of recent mandates designed to improve conditions for many that New York is a city that also cares about them.ˮ
Several elected and governmental officials have spoken out against the tax, including Department of Finance Commissioner Jacques Jiha, City Comptroller Scott Stringer, and Manhattan Borough President Gale Brewer.