For years, New Yorkers have had to put up with a high sales tax when they shopped for clothing in the city. Or, if you've been able make the short trip to New Jersey or Connecticut, where there is no sales tax on apparel, you effectively find everything on sale for 8.25 percent less.
This didn't make sense for business in the city. Nothing puts New York City's clothing retailers at a greater disadvantage than a year-round sale right across the river. It's estimated that we lose $700 million annually in clothing sales to New Jersey, and a total of $3.5 billion on all purchases. And it's been estimated that by dropping the sales tax, New York City would gain 17,000 jobs.
In addition, the sales tax on apparel hurts New York City's families, especially our poor and middle class families. That is because New Yorkers who live on smaller incomes wind up paying a very high percentage of the money they earn on clothing. It is the very definition of a regressive tax.
But in the past, our City government thought that the only way for it to raise money was by hiking taxes. Now we know that to compete -- as we have been doing so effectively over the past three-and-a-half years, in which we have gained 160,000 new private sector jobs -- the City has to look hard at taxes that hinder growth and taxes that hit working families the hardest.
That's why over the past three and a half years we have been committed to reducing, restructuring, or eliminating a number of taxes. We have proven that getting rid of taxes is one of the keys to stimulating growth.
When you reduce taxes and put more faith in individuals to spend their own money wisely, the whole city benefits. When we reduced our hotel occupancy tax, which was the highest in the nation, we saw New York City's hotel occupancy rates jump to 81.5 percent -- second in the nation only to Waikiki, Hawaii -- as a result. In fact, the City actually collected millions of dollars more in taxes after the rate was reduced than it did before.
Our "Back to School" clothing sales tax exemption works for the same reason. For that first week in September, New York City will keep its business right here where it belongs because items of apparel that sell for less than $100 will not be subject to the sales tax. You might remember a similar tax-free experiment for a week in January, where we saw sales jump all throughout the five boroughs, and heard very positive feedback from retailers.
According to a phone survey conducted by the Economic Development Corporation, one clothing store owner in the Bronx said that his business improved so much that he decided to extend the sales tax exemption for an additional week and pay the tax on each purchase himself. Even stores that don't sell clothing reported increased sales during the week. And, most importantly, we were able to offer relief to shoppers all over the city. That's why I know that the sales-tax free week this September will be another tremendous success.
You should know that because of state law, this coming sales-tax-free week is different from the last one. In January, clothing purchases under $500, including shoes, were exempt from the tax. This September, the ceiling on each individual item is $100, and shoes are not included.
But the change is still a major step forward for our families and for our businesses. Because of the great response we have had in these experiments and because of our persistence in Albany, we will have another tax-free week next year, and then, in 1999, the tax on apparel will be dropped for good. I want to thank everybody, both businesses and consumers, for their enthusiasm about the tax elimination. Your increased commercial activity during weeks like this has been the best argument of all to drop the tax.
We have set up an information line, 212 788-9600, and an Internet site, http://www.ci.nyc.ny.us/salestaxfree, to answer questions about the week. Call if you have any questions, and enjoy the week of tax-free clothes shopping.