Governor Paterson’s proposed “obesity tax” on sugared soft drinks has already captured most of the media attention among the $4 billion in new taxes and fees in Governor Paterson’s budget.  But by far the largest single element in Paterson’s revenue package is a $652 million increase in the state’s existing “assessment” on utilities.  Any such increase will ultimately be borne by utility ratepayers, adding $652 million to what are already some of the highest energy costs in the nation.

The assessment, authorized under Section 18-A of the Public Service Law and dating back to the 1930s, was established as a nominal charge to support the operations of the state Public Service Commission.  Since the 1990s it has been expanded to provide dedicated funding for units of nine additional state agencies — including some far afield of energy policy, such as the Office of Real Property Services and the Department of Homeland Security.

The Section 18-A assessment is currently pegged at 0.33 percent of gross receipts and raises $120 million a year.  Paterson’s budget would temporarily raise the rate to 2 percent of gross receipts, a 643 percent increase, and deposit the added $652 million in the general fund.   After three years, the assessment would subside to a new permanent level of 1 percent of gross receipts.

If adopted, Paterson’s proposal would essentially resurrect the state’s old gross receipts tax, which was phased out in 2000.  Downstate and metropolitan New York City area customers of Consolidated Edison and National Grid (formerly KeySpan), would pay the bulk of the increase.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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