NYC mayor seeks tax cut to grow 400,000 jobs: source

Morning commuters walk through a snow covered Times Square in New York, January 15, 2009.

NEW YORK (Reuters) - New York City's economy could gain 400,000 new jobs over the next six years under a new tax plan that Mayor Michael Bloomberg will propose on Thursday, according to a source familiar with the mayor's speech.

The independent mayor, who is seeking a third term, will detail his program in his annual State of the City address, focusing on how local governments can cushion themselves from the national recession, explained the source, who requested anonymity.

Abolishing or at least slashing the city's unincorporated business tax is a centerpiece of Bloomberg's nine-point plan to encourage economic growth, he added.

This will help jobless people who want to start new enterprises -- those now being laid off and the 225,000 individuals who economists say will lose their jobs in the next two years, explained a city official who also requested anonymity.

Bloomberg already has warned that thousands of retail workers could lose their jobs as consumer spending shrinks. His new tax cut would help freelancers, such as makeup artists who lose their department store jobs, try to make a living doing private make-overs, the official explained.

The program, which aims to shift the city's economy away from its traditional reliance on Wall Street, also will help about 17,000 people who already have small businesses.

These people often must pay both the unincorporated business tax and personal income tax on the same earnings, explained the source who requested anonymity.

The city's economy has tumbled along with the decline of Wall Street because the financial industry is a major taxpayer, and in a flush year spurs lots of hiring by hotels, stores, law firms and the like.

Bloomberg faces a series of billion-dollar deficits in the next few years. He aims to free the city from relying on banks and brokerages which seem unlikely to stage swift recoveries.

The new tax cut plan is "revenue neutral," meaning it will neither raise nor cut revenue because it will also close tax loopholes, the source explained, but offered no details.

The source warned against expecting any big new spending initiatives although the mayor, known for his environmentalism, will propose some capital for new green projects.

The mayor has vowed not to let the city revisit the 1970s when near-bankruptcy cost thousands of city workers their jobs.

(Editing by Phil Berlowitz)