Paterson considering delays in tax refunds

Governor Paterson's proposed budget amendments include something New Yorkers may not like too much come tax time.

The governor is proposing temporarily withholding taxpayers state tax refunds as a way to help the State deal with its growing budget deficit. Paterson's proposal would allow the State to hold onto state tax refunds until sometime after the next fiscal year which begins on April 1st. The governor says withholding refunds from taxpayers the will generate $500 million for the State.

Legally, the State can hold onto your tax refund for up to forty five days past April 15th. State Assembly minority leader, Republican Brian Kolb, says the State has no right to treat taxpayer money as an interest free loan.

"It's a dumb idea. I think it is irresponsible to the taxpayers that have paid their taxes on time that have filed their taxes on time to basically withhold money because government can't manage it's budget. It is totally reprehensible and quite frankly absurd," Kolb says.

The governor is also proposing to freeze $200 million in business tax refunds.

More on this story from the Associated Press:

Some New Yorkers could see a delay in the arrival of their state income tax refund checks if Gov. David Paterson decides it's the best way to make sure the state has enough cash.

The state limits the amount of tax refunds it pays in the first three months of the year to $1.75 billion. Paterson is considering reducing that to $1.25 billion because the state must roll $1.4 billion into next year's budget to close this year's budget gap.

"The reason we have to consider delaying payments is that the Legislature has been unwilling to work with the governor and fully address our current-year deficit," said Morgan Hook, a Paterson spokesman. "We have heard shouting against the governor's proposals but not a whisper about where they would make reductions."

The delay is still under consideration, said Matt Anderson, a spokesman for the state Division of the Budget. But Republican Assembly Minority Leader Brian Kolb lambasted even the thought of postponing refund checks.

"It shouldn't even be considered," Kolb said. "This is the people's money ... If we have to make other provisions to take care of our state budget, then we need to do that."

Another part of that consideration would delay $880 million in other payments. No final decision has been made about which ones to delay - it could be some combination of delayed tax refunds or delayed school aid, local government, health care or other assistance. But budget officials say it's certain that something will have to be delayed.

If the $880 million is delayed, the state would still make $20 billion in aid payments in March.

Kolb said Paterson has a tough decision to make but said any other delayed payments would be preferable to delayed tax refunds.

"His decisions weren't popular in some corners of the world in holding back money for school aid, and if that's what he needs to do again, so be it," Kolb said.

So far the state has paid out $293 million in tax refunds this year. The state pays about $6 billion in personal income tax refunds each year.

The state has until June to pay the refunds before they start accruing interest.

Paterson is expected to make a decision in the next few weeks.

(Copyright 2010 by The Associated Press. All Rights Reserved.)

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