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article imageGovernor Paterson seeks $136 billion budget, non-diet soda tax

By Owen Weldon     Jan 19, 2010 in Business
On Tuesday the governor of New York, David Paterson, proposed a $136 billion budget for fiscal 2011 which is an increase of 0.5 percent from the current year. The proposal would close a $7.4 billion deficit by raising taxes on cigarettes and other items.
On April first Paterson’s plan will go into effect. Education, healthcare and state agency’s budgets will suffer cuts of more than $2.5 billion thanks to Paterson’s plan.
Paterson said that New York is facing inevitable reckoning, referencing 8 percent spending increases that have been taking place recently. He said that New York has now reached the breaking point because of mistakes such as relying on gimmicks to finance unsustainable spending increases.
Taxes and fees will be raised by $1.1 billion which includes a $465 million excise tax on syrup that makes soft drinks taste good, as well as a $1-per-pack cigarette tax that is said to raise more than $200 million and on top of all that a $216 million levy on providers of healthcare.
Paterson justified raising taxes on soda and cigarettes by saying that New York spends $16 billion a year on healthcare for people with obesity related diseases such as diabetes and people who smoke.
Paterson also said that he wants state officials to finalize new rules so that the state could collect cigarette and fuel taxes from Native American reservation stores. Other governors throughout the years have tried to unsuccessfully collect from reservation stores.
Paterson said that by allowing grocery stores to sell wine across the state would bring in about $92 million to the state because of a new franchise fee. Cracking down on tax cheats will also bring in around $221 million dollars, according to Paterson.
Thanks to the recession New York’s revenues from tax has fallen, just like most states’ taxes have fallen. State legislators wanted to raise income taxes on wealthy people last year but Paterson rejected it. State legislators rejected Paterson’s tax on non-diet sodas.
Paterson’s new plan has totaled $565 million on one-time items which is frowned upon credit analysts.
The plan will also allow the lottery to invest some of its prize fund receipts in AAA-rated municipal bonds will raise about $50 million.
Under Paterson’s proposal cuts of $1.6 billion of aid for schools will take place. About $1.4 billion would be adjusted to the formula so the money can be used to divide state dollars among the schools. Schools in wealthier districts will be hit a lot harder.
Paterson said by using more bulk purchasing and other measures will save New York $709 million.
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