David Yassky

Yassky Small Business Tax Cut Backed By Bloomberg

Council Member David Yassky praised Mayor Bloomberg following his State of the City address today for proposing that a tax stifling New York’s small businesses be returned to hardworking business-owners.

In June, Yassky called on the City to offer relief for small businesses and freelancers who are taxed twice by the Unincorporated Business Tax (UBT) for the privilege of doing business in New York.  The mayor today asked that $114 million of the expected budget surplus for FY2007 go toward tax breaks for small businesses burdened by the UBT. 

“It is hard enough to keep a small business running in New York City without taxing them twice,” Yassky, chair of the Council’s Small Business committee said.  “Decreasing their tax liability by offering a credit against the UBT will allow City businesses to grow and diversify our economy.”

More than 30,000 small businesses and thousands of freelancers end up paying more than a billion dollars a year in unfair taxation because of the UBT—a levy meant to prevent out-of-state businesses from skipping out on the City tax.  Local businesses owners, however, are taxed twice because the owners’ income is taxed first as business income and then as personal income.  Last year, Yassky had proposed money be set aside in the City’s budget to offer some relief from the UBT in the form of a tax credit.  He also called on New York State to overhaul the UBT. 

The New York City Unincorporated Business Tax is a 4 percent tax that anyone operating an unincorporated business in New York City must pay in addition to regular City, State and local income taxes.  Individuals begin to be liable for UBT once they earn more than $45,000 a year in taxable income.  Considering the incredibly high cost of living in New York, these income triggers are remarkably low, according to a report by freelancers’ union Working Today.

Consider the following hypothetical example: Tom has one major client from whom he earned 85% of his $90,000 income in 2005.  The rest of his income came from a couple of gigs he picked up via referrals from his major client.  Using the standard deduction, Tom is liable for $3,272 in UBT for 2005, or nearly $300 a month in added taxes.  His social security tax liability comes to $12,515 for 2005, or $6,258 more than he would pay as an employee.  In short, Tom paid nearly $10,000 in taxes, almost 12% of his income, that he would not have paid if he were an employee rather than a freelancer.