New York Mayor Bill de Blasio has signed into law a measure that is likely to save thousands of dollars in taxes for hundreds of Manhattan businesses next year.
Nearly 2,700 shops will be saving an average of $13,000 as a result of the law which is the first change made in 16 years to the borough’s commercial rent tax.
Speaking at a news conference on the occasion, de Blasio said that it was a message to small businesses that “City Hall has your back.”
Law Repealed For Other Areas Previously
Businesses located between Murray Street and 96th Street in Manhattan currently pay around 3.9 percent tax on their annual rent when it goes beyond a certain threshold. The rent tax came into effect in the 1960s but had been replaced in all other boroughs of the city barring this area.
Under the new law, the rent threshold for businesses having up to $5 million of annual income has been raised from $250,000 to $500,000 , which means that now around 1,800 shops will not be required to pay the tax after the law comes into effect in June 2018.
Those businesses having between $5 million to $10 million in annual income or those who pay $500,000 to $550,000 in rent each year will receive tax discounts of varying amounts.
New Law Hopes To Protect Small Shops in Manhattan
The law is intending to reduce the financial burden of independently owned small shops in Manhattan, where it’s much more expensive to operate a business than in other areas of the city. According to studies, small shops have been leaving the borough in droves in recent years.
de Blasio stated that the tax had affected small business located in a part of the city having some of the highest rents, and that it “hit people in a way that made it really hard for them to keep their businesses going” .
The reforms will reduce tax revenue to the extent of $36.8 million for the city in the 2019 fiscal year.
The city has additionally slashed fines on small businesses by nearly 40 percent and is looking to introduce a state law which will stem the flow of stores leaving the area, de Blasio said.
According to some critics, the city must pass commercial rent control laws in order to address the basic issue causing the rents to rise, rather than altering the rent tax alone. City officials have expressed concerns about the legal challenges for such legislative changes.
