The Business Council of New York is punhing to tax some investors' municipal bond interest as an alternative to the petroleum business tax included in the state's fiscal 1992 budget.
The tax proposal is part of a three-part revenue package offered by the council, a trade association representing businesses and industry. The alternative minimum tax, the group claims, would generate about $150 million in revenues in fiscal 1992. The revenue package, however, has not been introduced by any members of the state Legislature.
The two other items in the package are a 1% across-the-board increase on those entitles and commodities subject to the current petroleum business tax and an increase of driver's license and vehicle inspection fees. The suggested 1% petroleum tax increase is lower than the Legislature's tax increase in the fiscal 1992 budget and does not include all the entitles affected by the current tax. The council's proposed petroleum tax increase is expected to yield about $130 million, while the fee increases are expected to generate $90 million, the group states in a memo.
The state Legislature's budget includes a plan to increase the rate of the state's petroleum business tax, charged to companies importing petroleum products into the state, to 12 cents a gallon on gasoline and diesel fuel from 7.6 cents. The Legislature's petroleum business tax would generate about $369 million.
In drafting a final fiscal 1992 budget, which was due on April 1 but not passed until 65 days later, lawmakers rejected Gov. Mario M. Cuomo's request for a 10-cent-a-gallon increase in the state's gasoline tax. They replaced it with the petroleum business tax increase.
But business groups across the state decried the tax increase, saying it would have a negative impact on manufacturing and other industries, as well as energy producers.
In a memo proposing the new revenue sources, the business council says, "repeal of the commercial and industrial energy taxes, before the Legislature concludes its business for the summer, is absolutely essential.
"Each day brings forth more companies which are learning how the energy taxes will adversely affect their competitive position--in many cases creating the very real threat of lost jobs in the not-so-distant future," the memo says.
The memo outlined the details of the alternative minimum tax plan, saying, "An alternative minimum tax for New York would be paid only in the alternative that it was higher than the regular tax and would apply only to those with income greater than $200,000."
The business council said the formula would be based upon subtracting federal adjusted gross income items that are not constitutionally taxed by the state from the items that would be affected by the proposed tax. The New York taxpayer would then add to the proposed tax formula interest payments from qualified New York municipal bonds which are excluded from federal taxation.
The formula would also include exploration and development costs of oil and gas extraction which are now deducted from federal gross income; Social Security and Tier 1 railroad retirement benefits; unrealized appreciation on donated long-term capital gain property; and passive losses attributable to rental real estate which was used to offset active income in the federal adjusted gross income items.
This produces the New York alternative minimum taxable income which is then compared to the New York modified adjusted gross income. If the alternative minimum tax exceeds the modified adjusted gross income by 25%, the excess falls subject to an alternative minimum tax rate of 2.5%.