Albany ponders rival plans to close budget deficit

ALBANY - State leaders yesterday pushed rival plans for raising money to close the budget deficit - but wouldn't rule out ending a tax exemption on clothing and shoe purchases of less than $110.

Gov. David A. Paterson touted proposals to tax sugary beverages and permit grocery stores to sell wine, both of which have been rejected by the legislature. There also was talk in the Capitol of new levies on coal-fired and nuclear power plants and scrapping some tax deductions for multimillionaires.

The flurry of ideas to bring more cash into New York's treasury comes as Paterson and lawmakers rush to finalize a budget deal before the Monday deadline set by the governor. This year's budget is now 86 days late.

Asked about lifting the sales-tax exemption on apparel and footwear, Paterson said Thursday, "There is no plan. There's a lot of conversation about it."

He added, "if there were any taxes at all, I would suggest the ones in my original budget." He was referring to a levy on sugary soda and similar beverages that would raise $800 million a year for obesity prevention.

The governor estimated he and leaders of the legislature's Democratic majorities are still several hundred million dollars apart on a deal to close the $9.2-billion deficit.

The tax break on clothes and shoes was first instituted in 2000 but suspended from June 1, 2003, through March 31, 2006, because of a budget crisis related to the Sept. 11, 2001, terrorist attacks. Paterson lobbied for a second suspension last year but backed off in the face of public criticism.

Assembly Speaker Sheldon Silver (D-Manhattan) Thursday expressed reservations, saying, "I don't really want to do it . . . but if the governor thinks it's the only way to close the gap we may have to do it." Silver added resuming the state's 4 percent sales tax on clothing and shoes "is not a raise in taxes, that's a temporary suspension of a sales-tax exemption."

State Senate chief John Sampson (D-Brooklyn) was even more lukewarm. "I really have some concern when you are talking taxes and fees."

Legislative sources told Newsday the exemption likely would be restored in some form for 2011-12, and tax holidays would occur around Labor Day for back-to-school shopping and during Christmas.

Separately Thursday, Paterson and legislative leaders disagreed about whether they should include in the budget a promised $1 billion in additional Medicaid funds from Washington.

The governor said the money may not be forthcoming.

Silver replied, "Clearly, there's a good chance we will get the money. . . . If we don't get the money we will deal with it at that time."

Sampson said Mayor Michael Bloomberg had included the Medicaid dollars in his budget so Albany can do so as well.