Insurance Tax Increase among New York Governor’s Budget Proposals

After opposing higher taxes for months as counterproductive, New York Gov. David Paterson reportedly plans to increase taxes on insurance policies, on non-diet sodas under an “obesity tax,” reviving the state sales tax on clothing, and changes in funding of hospitals and health care providers that could shift more health costs on individuals and employers.

Errol Cockfield, spokesman for Gov. David Paterson who is scheduled to release his budget proposal today to the Legislature, wouldn’t deny the tax proposals first reported in the Albany Times Union Sunday.

The obesity tax would raise $404 million, according to the report. Additional costs for most New Yorkers would require new license plates — to trigger new fees. Action on a law passed by the Legislature would require the collection of sales taxes on cigarettes sold by Indian tribes, according to the report.

Paterson’s budget proposal is also expected to include his idea for about a $600 increase in tuition — about 15 percent — for state residents attending the State University of New York and City University of New York.

Paterson’s proposal would also reportedly lift the limit on how much state tax can be charged for gasoline. The state’s tax was limited to 8 cents per gallon. A new state tax could be tied to the price of gas, allowing state revenues to rise with the price of gas.

Much of the reported spending plan is similar to the budget cuts Paterson proposed in November for a special session of the Legislature to plug about a $2 billion deficit in the current year. The Legislature failed to act then.

Paterson projects an additional deficit of about $12.5 billion for the 2009-10 fiscal year that begins April 1.

His November proposals included deep cuts in health care funding, including nursing homes, but he backed off cuts in school aid amid strong opposition by the New York State United Teachers union and its powerful supporters in the Senate and Assembly.

Health and school aid are the two largest areas of state spending along with the state work force. Paterson has called for what he considers a hard freeze on hiring, allowing only essential public safety and health hiring and requiring an additional level of approval for approval of almost all hiring and spending.

The current state budget is about $120 billion.

Dan Weiller, spokesman for Assembly Speaker Sheldon Silver, wouldn’t comment on the proposals. There was no immediate response from the Senate’s Republican and Democratic leaders, or from the Healthcare Association of New York, a lobbyist in the industry.

The association released a statement Sunday that said 80 percent of its hospital members are considering drastic cutbacks because of state cuts previously announced.

“As the financial condition of hospitals continues to degrade, there will be very little choice than to eliminate jobs in order to protect core services, further weakening already fragile local economies and threatening the level of care and service the public demands,” said the association’s president, Daniel Sisto. “For years, New York hospitals have been victims of government cut after government cut. As a result, we have the second worst operating margins in the country, and have been placed in a position to fail as we try to navigate through the worst economy in generations.”T