Home MTA Economics A deeper dive into the payroll tax ruling

A deeper dive into the payroll tax ruling

by Benjamin Kabak

A Nassau County Judge, elected on the Conservative party ticket last year, dropped a bombshell on the New York Metropolitan region early Wednesday evening when he issued a short and sloppy ruling declaring the MTA Payroll Mobility Tax unconstitutional. The tax, which leads to approximately $1.2-$1.4 billion in annual revenue for the perennially cash-starved agency, has been unpopular outside of New York City, but the alternative — higher fares and much less service — is worse. Now we’re left on the precipice of such a reality.

The decision itself — which you can read right here — is short and on shaky legal grounds. Supreme Court Judge R. Bruce Cozzens, Jr., divorces New York State economic conditions from reality and comes to the conclusion that the tax, as challenged by Nassau County, required a home rule message. Here’s the kicker paragraph:

It is not contested that the counties within the MCTD would be affected if there were a decrease in the capability of the MTA. However, it is hard to see how the residents in Buffalo or other upstate areas would similarly be affected. If this matter really is a substantial state concern, than the legislature could have reasonably taxed every county within the state under a general tax law to meet the MTA deficit. Instead, it chose to only tax those counties within the MCTD. This is because it is only the counties within the MCTD that are affected by the continuance of development of the MTA. By the actions of the legislature itself, it has been shown that the MTA payroll tax is only an issue that is of concern to the residents within the MCTD. Therefore, the budgetary crisis of the MTA is not a substantial state concern and the exception to the home rule message requirement does not apply in this case…The court finds that this law does not bear a reasonable relationship to a substantial State concern.

Setting aside the fact that there is no one central government in the Metropolitan Commuter Transportation District that could issue a home rule request for a multi-county tax, Cozzens is charitably off his rocker if he thinks MTA funding isn’t a substantial state concern. Well over half the state’s population is centered in the MCTD and without the MTA, the entire’s state region would grind to a halt. We’re not asking Buffalo to fund the MTA (even though perhaps we should), but the impact of losing transit service downstate would definitely be felt upstate.

Meanwhile, from the perspective of precedence, this ruling, if upheld, could be disastrous. Various other taxes endorsed by the state are levied only in the MCTD, and those have stood for years or, in some cases, decades. Sales taxes, mortgage recording taxes, franchising taxes, fuel taxes — all of these could fall under similar logic to that issued in this misguided ruling. The MTA would be facing a multi-billion-dollar deficit that it would likely be flat-out unable to cover without defaulting on many of its outstanding fiscal obligations.

So where do we go from here? As transit advocates are calling on Gov. Andrew Cuomo and leaders in Albany to do something, the MTA says it will not let the case end here. “We will vigorously appeal today’s ruling,” the authority said in a statement. “We believe this opinion will be overturned, since four prior challenges to the constitutionality of the law making the same argument have been dismissed.”

In my mind, it is indeed likely to be overturned, but the short-term losses are unclear. Cozzens’ ruling simply declared the law unconstitutional; he didn’t stay his own opinion for the politics of it to work out. The defendants will have to ask for a higher court to grant a stay if they want to continue collecting the money during the appeals process, and then they’ll have to go through such a process. It’s not going to take a day, a week or even a month.

This is just another partisan jab at the MTA by a judge elevating politics over the law. It’s another sign that transit will never be on an adequately secure position vis-a-vis funding, and it’s another sign that Albany isn’t doing its part. In my thread earlier, some commenters suggested cutting LIRR service to cover the deficit. The MTA won’t do that, but such a doomsday future is one step closer today than it was yesterday.

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65 comments

Alex C August 23, 2012 - 12:34 am

Cozzens likely drives where he needs to go in a Mercedes-Benz or has a personal driver. In his view, the MTA doesn’t need to exist since he never needs to use its services. That being the case, I’m sure he won’t mind what many commenters suggested in the previous post: shutting down LIRR or cutting it to almost-non-existance.

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Al D August 23, 2012 - 8:59 am

And then he’ll wonder why the roads in Nassau got so much more crowded suddenly!

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pete August 23, 2012 - 1:48 pm

And they he will get an unmarked car to flash lights for him, his job is essential to public safety.

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aestrivex August 23, 2012 - 12:53 am

“In my thread earlier, some commenters suggested cutting LIRR service to cover the deficit. The MTA won’t do that, but such a doomsday future is one step closer today than it was yesterday.”

Yes, they won’t do that, and I know they won’t do that, but that is what they *should* do if we lived in a sane world where this ruling wouldn’t have been made anyway.

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Erik August 23, 2012 - 7:16 am

Well, the MTA and public transportation should receive more money from general funds. The right-wing (and neoliberal) idea that it needs to be self-funded through revenues is ridiculous. It should HAVE revenues, yes, but it’s a critical public service. The day that we assess road maintenance charges via miles driven as measured by EZPass monitoring, or the day that we enact a real gaz tax to cover the real costs of road maintenance, is the day I’ll stop complaining about this mismatch.

Maybe this ruling will make state leaders wake up to the fact that they can’t just have band-aid solutions and transit needs to be taken seriously at the state level. I know, it sounds impossible, but maybe this will move it closer, “overton window” style, if the alternative is as drastic as serious reductions on LIRR service, which is already WAY too crowded.

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Anon August 23, 2012 - 7:33 am

Secede. Instead of electing our own Mayor we should be electing our own Governor.

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Al D August 23, 2012 - 9:03 am

How about our own President? (And I’m not kidding)

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al August 23, 2012 - 11:21 am

That’s problematic. NYC thrives as the alpha finance (and to a lesser degree business) city in the US. Governor is more appropriate as it will force NY State to finance Metro North and LIRR like Connecticut’s agreement to partly finances the New Haven Branch.

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Alex C August 25, 2012 - 12:48 pm

That would give Ray Kelly and his private-army-for-the-rich known as the NYPD a little too much power. I’ll pass.

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Will August 23, 2012 - 8:29 pm

NYC should secede. Let NY State eat there own. We are tired paying for the people up north but when we need extra need all that we get is the middle finger

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al August 24, 2012 - 10:47 am

The northern and western reaches of the Catskills and Delaware systems reach far out.

http://ecolibrary.org/images/f.....DP4507.jpg

Either these rural and suburban counties secede with us, or we need to get an agreement on water rights. That is the fly in the ointment.

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AG August 28, 2012 - 8:07 am

exactly… there is no such thing… we all need each other to varying degrees. NYC needs the Hudson Valley up to the Catskills for drinking water. Also – with no Erie Canal – NYC wouldn’t have become the principal port city in the US (and world)… which was probably even more important than Wall St. decades ago.
what is really needed is common sense in making decisions… but unfortunately we see from elected officials and their appointees… that is lacking.

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Gary August 23, 2012 - 7:38 am

This is what happens when incompetent tea party loving buffoons get elected.

The biggest thing to come if this will be the increased notoriety of this clown. Assuming the Cuomo admin wants it, his ruling will be stayed and then overturned.

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Eric F August 23, 2012 - 8:49 am

“Various other taxes endorsed by the state are levied only in the MCTD, and those have stood for years or, in some cases, decades. Sales taxes, mortgage recording taxes, franchising taxes, fuel taxes”.

Wow. So the MTA is funded by a panoply of indirect taxes, built into the cost of everything we do, and here’s just another new one to add to the mix. Perhaps, rather than lobby incessantly for additional logs to be thrown into the MTA fire, you might want to address whether funding this “critical” agency by the imposition of tax after tax after tax on unrelated activities is a sensible, ethical or sustainable policy. Or is that too “tea party” for you?

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AK August 23, 2012 - 9:14 am

Ben and many others on this board have long asserted that the hodge-podge of taxes/fees that make of the MTA budget is illogical and that a far better method of funding– from general revenues, commuter taxes, congestion pricing, bridge tolls, etc.– would be far more efficient and effective.

But when pols are unwilling to actually address the problem in a substantive way, you can’t blame the MTA or transit advocates from scraping the barrel for any revenue they can get.

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Bolwerk August 23, 2012 - 9:55 am

Let’s be clear about what is funded by that “panoply”: pensions, rent seeking, entitlements, and patronage. It doesn’t get much more “Tea Party” than that – unless you want to talk about the “panoply” funding the road system, which you always uncritically ignore when complaining about how the government funds transportation.

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Eric F August 23, 2012 - 10:25 am

The solution to pointing out cumulative, sclerosis-inducing transit taxes is not to say “But, but but roads!!!”, but to address it on its own merits. I have no problem with taking highway funding from a transparent revenue source or sources, I have no idea where you get this equivalence idea from. It’s especially odd because among the economy-killing indirect taxes used to fund the ever-escalating subsidy needs of the MTA are tolls on bridges and taxes on car and gas purchases. You know, on those drivers supposedly being subsidized. In fact, when people talk of road subsidies, it usually drifts pretty quick into an incoherent diatribe about how such subsidies include various soft, hard to quantify, emotional issues like military spending and obesity, which leads me to believe that the hard dollar flows are probably minimal if they exist at all.

By the way, I like trains, I just don’t like the sneaky, economy knee-capping way in which they suck down public money.

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VLM August 23, 2012 - 11:03 am

It’s especially odd because among the economy-killing indirect taxes used to fund the ever-escalating subsidy needs of the MTA are tolls on bridges and taxes on car and gas purchases. You know, on those drivers supposedly being subsidized.

It’s not an opinion that drivers are getting more in subsidies than they pay out in fees, tolls and taxes. It’s a fact. It’s a conscious policy decision that’s been made for decades, and there can be made a valid argument to support it (at least outside of densely populated urban areas). That said, if you don’t believe that’s true, then anyone arguing with you over the payroll tax is just wasting his or her time.

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Eric F August 23, 2012 - 11:09 am

Driving within NYC is not pleasant. It is a tedious, dangerous, stressful and expensive chore. Very few places do as much to serially punish and disincentivize driving than NYC. The idea that motorists are getting some sort of magic carpet ride along wide and luxuriant thoroughfares is laughable to anybody luckless enough to have to endure it on a regular basis. The rhetoric does not match the reality.

Bolwerk August 23, 2012 - 12:48 pm

I know there is more to it than this, but driving in NYC is largely unpleasant because of the political demands of motorists. Having the NYPD simply enforce the rules of the road would be a start. Tolling the bridges or having a congestion charge would probably actually save money for almost anybody who actually needs to drive in NYC and values their time at more than the price of a gallon of gas.

Where costs are high, it’s out of necessity given the status quo. The vicious parking ticket regime could be replaced by sane parking fees that mean there would always be a space, but any time someone suggests that some piece of crap like Jimmy Vacca howls until it goes away. Penny wise, pound foolish.

The high stress of sociopathic suburban drivers doesn’t do those of us who are predominantly pedestrians and transit users any favors, for sure.

Nyland8 August 28, 2012 - 9:15 am

The problem is that too many people need to live, shop and work in too small a geographical area – Manhattan – and that too many of them insist on using their cars in that process.

Years ago, while working for a company that distributed certain specialty construction materials, I had to arrange for delivery in Pittsburgh. I was told that the delivery had to be arranged in the middle of the night, because trucks were simply not allowed on certain streets during business hours M-F.

Imagine how traffic congestion issues would be changed if NO delivery trucks were allowed parked on any street in Manhattan south of 110th Street between the hours of 6 AM and 8 PM.

Of course, the downside would be even less amicable to mass transit.

Bolwerk August 23, 2012 - 12:41 pm

You’re being myopic. Yes, there is a cash flow diversion from car users to transit. But it’s not hidden in the least. Just the fact that you seem to have a cursory awareness of it would seem to prove that.

What is hidden is the reverse: the extent to which transit users actively subsidize road users. It is simply masked by the fact that it is transit-dependent areas’ income taxes that carry this subsidy. It’s the root of the entire problem you’re complaining about, too.

You know, on those drivers supposedly being subsidized. In fact, when people talk of road subsidies, it usually drifts pretty quick into an incoherent diatribe about how such subsidies include various soft, hard to quantify, emotional issues like military spending and obesity, which leads me to believe that the hard dollar flows are probably minimal if they exist at all.

It goes into hard-to-quantify incoherency precisely because it’s deliberately made hard-to-quantify. Here’s what I can tell you: highways, according to government accounts, covered about 40% of their own costs from user fees in 2010.* That’s about as good a local bus system. However, that should probably be taken with a grain of salt since many local roads/streets probably aren’t considered highways for federal funding purposes. They’re presumably paid for right out of your taxes. And then, conversely, gas tax revenues going to highways presumably are paid by non-highway users traveling on local roads.

Then, start worrying about the obesity, climate change, free parking, opportunity costs of removing land from property tax registers, and military expenditures. Each of these things no doubt has costs in the 10+ figures range.

* The NYS figure was a little better, closer to 44%

By the way, I like trains, I just don’t like the sneaky, economy knee-capping way in which they suck down public money.

And there would be nothing eyebrow-raising about this position if you actually applied it to…well, just about everything else. It only seems to bother you with trains, however.

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Eric F August 23, 2012 - 2:37 pm

Were you trying to prove my point?

Bolwerk August 23, 2012 - 3:09 pm

Your “point” being the tired delusion that drivers aren’t heavily subsidized? The supposed sneakiness of transit funding? Your completely unfounded assertion that taxes to pay for transit are “economy-killing”? You don’t seem to think they’re “economy-killing” when they go to support roads, or you think roads are funded with fairy dust.

Let’s have it. What’s your “point”?

Alex C August 23, 2012 - 3:47 pm

Something something TAXES EVIL TEA PARTY 2012.

Eric F August 23, 2012 - 4:33 pm

You stole my slogan!!!! I was hoping to ride to the assumption of the mayoralty with that one. Now I’ll need to think of something else. Maybe I’ll use something visual, like a cowboy sucking down a 16 ounce soda.

Actually, a mere .34% wage tax is clearly a neocon plot. We need to update that sucker to at least 20-30% of payroll to really get the MTA moving again.

Will August 23, 2012 - 8:38 pm

Jesus paid his taxes

Bolwerk August 24, 2012 - 5:02 am

What bracket was he in?

Will August 27, 2012 - 7:24 pm

He was give all my money bracket.

AG August 28, 2012 - 8:15 am

You are correct Eric F… it is VERY hard to quantify the costs associated with being addicted to oil around the world. That is an unseen subsidy paid by everyone… including ppl who will never drive on a road in the United States. As an aside… do you really think roads are anywhere close to “paying for themselves”??? There is a reason places with the most dynamic transit systems have the highest economic productivity. Roads are most certainly necessary… but so is mass transit.

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Streetsblog New York City » Today’s Headlines August 23, 2012 - 8:59 am

[…] Ben Kabak Breaks Down the Insanity of the MTA Payroll Tax Ruling (2nd Ave Sagas) […]

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Al D August 23, 2012 - 9:02 am

If Nassau County is so opposed to the MTA, then all LIRR service can skip Nassau County! Can you imagine how happy Suffolk residents would be? Less crowded trains and faster commutes to NYC.

And it’s not as if there would be much of a gap in service. I’m sure that plenty of express bus services would be popping up in place of LIRR, privately funded by the riders.

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Eric F August 23, 2012 - 10:31 am

Or maybe they could cut the rate of disability pensions (triple tax free!) for LIRR workers from 100% to something closer to 99% and save some bucks that way. Is it true that the first guy to break the 4 minute mile was an ex-LIRR employee collecting a disability pension, or is that just an unfounded rumor?

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Benjamin Kabak August 23, 2012 - 11:01 am

The LIRR pensions are all federal funds. NY taxpayers are paying for that only in the sense that it comes out of the federal pot. It doesn’t impact MTA funding levels.

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Eric F August 23, 2012 - 11:11 am

Good point.

It’s still quite a scandal that very little has been done about, however.

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Anon August 23, 2012 - 2:55 pm

BK you should check out Stringer’s comments at the recent PCAC meeting..
“Introduction of Manhattan Borough President Scott Stringer to discuss his proposals for funding mass transit in the MTA Region”
http://www.pcac.org/nyctrc/mee.....g-minutes/

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Eric F August 23, 2012 - 4:37 pm

He wants to add to the .34% wage tax, a new .45% commuter tax. Awesome! Why do your good ideas always involve upping an existing tax, creating a new tax or banning something?

Bolwerk August 23, 2012 - 5:05 pm

The money for the big government socialist entitlements you demand have to come from somewhere. Like I said, the roads you drive on aren’t paid for with fairy dust. Unfortunately, those of us who work tend to bear the brunt of those costs. 🙁

epc August 23, 2012 - 9:08 am

By his logic the MTA should likely be dissolved.

Let’s go with it, dissolve the MTA, turn NYCT over to NYC to run as a city department, for better or worse, focussed on city residents.

Offer the LIRR to the highest bidder, no restrictions on fares of course. If Nassau & Suffolk want to own the LIRR have at it.

Same for Metro North.

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Larry Littlefield August 23, 2012 - 9:53 am

Give the city back the TBTA while you are at it.

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Will August 27, 2012 - 7:27 pm

I agree. Lets how some Private Companies that don’t care about labor cost destroy the some poor joes wealth with there cuting ways.

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BoerumBum August 23, 2012 - 10:07 am

Set up border tolls at all roads passing from Nassau to Queens and suspend service on the LIRR.

Call the whole thing the “Supreme Court Judge R. Bruce Cozzens, Jr. Nassau County Liberation Act”

See his political clout disappear.

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Eric F August 23, 2012 - 11:01 am

I like the dystopian atmospheric of guard towers, barbed wire, dogs and the like sealing off the golf courses and little league fields of Nassau, but couldn’t they just raise the fares to make up for the tax revenue?

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al August 23, 2012 - 11:30 am

No guard towers, just the same technology as high speed tolls and red light cameras.

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al August 23, 2012 - 11:31 am

LIRR provides service to Eastern Queens.

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BoerumBum August 23, 2012 - 12:40 pm

Any way to run the LIRR only within Queens? Or jack up the fares for cross-border runs?

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Alex C August 23, 2012 - 12:48 pm

Terminate Port Washington trains at Douglaston; Babylon trains at Rosedale (or maybe into Valley Stream); Main line at Queens Village and Belmont.

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Adam August 23, 2012 - 8:52 pm

Nah, I like the idea of shutting down all Nassau stations indefinitely and letting Suffolk reap in the faster service. 🙂

Let’s not drag Suffolk down with Nassau.

Alex C August 23, 2012 - 10:23 pm

Alright then. Accounting for that (plus, Suffolk tried to *join* in to have the MTA run their buses a while back so they’re cool):

Port Washington to Douglaston (this would require a new switch east of station)
Babylon/Montauk trains run straight through between Rosedale and Amityville

Main/Ronkonkoma trains run straight through between Queens Village and Pinelawn and Cold Spring Harbor.

Run a shuttle bus from the Lawrence stop on Far Rockaway to Far Rockaway A stop.

Long Beach, Far Rockaway, Oyster Bay, Hempstead and West Hempstead branches abandoned.

See how they like that.

Adam August 23, 2012 - 12:27 pm

$12.00 to get to the Belt and Cross Island from the Southern State, hell, they can afford it.

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BoerumBum August 23, 2012 - 12:41 pm

Nah… $12 is equivalent to a bridge crossing. Why not $40?

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Eric F August 23, 2012 - 4:40 pm

You may want to revise that hostility based transportation plan. The idea that the rich live in Nassau, and Williamsburg, Park Slope and Tribeca are full of the working poor hasn’t been true for at least a decade.

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BoerumBum August 23, 2012 - 5:35 pm

I don’t care if Long Islanders are rich or not. I just want them to realize that they can’t follow this “Go it alone” mentality. If they don’t need NYC, let them try to carry on without it… And when it is over, and they realize that they need us more than we need them, only then will we allow them to beg for the reinstatement of the MTA payroll tax.

Will August 27, 2012 - 7:30 pm

I agree just have a bodre patrol and if they cross we will call them illegal aliens. Lol

Will August 23, 2012 - 8:42 pm

Let occupy movement do it. Im to busy with actual work. they will show these tea partiers

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guest August 23, 2012 - 1:45 pm

I think NYC should simply secede from New York State. These anti-urban tax revolts will obviously never play in the boroughs but that doesn’t mean they aren’t going to stop. If NYC stopped remitting tax money to the state you’d be left with something akin to Romania or another second-world country. Show some gratitude!

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Alex C August 23, 2012 - 3:50 pm

They won’t show any kind of “gratitude” as long as upstate politicians keep ignoring NYC’s actual middle and lower-class demographics and keep suggesting it’s 100% super rich CEO’s living here. Upstate they think we’re taking their money for fun, not because our population needs public transit to earn money and pay taxes.

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Bolwerk August 24, 2012 - 5:38 am

NYC’s pols ignore the needs of the working/middle classes on their own. However, the major force dragging the state down are the suburban pols, not upstate. Cozzens represents a vast culture of entitled auto-dependents who want other people to pay their costs. It’s as simple as that. That the payroll tax is what sustains his auto-dependency doesn’t factor in.

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Nathanael August 24, 2012 - 12:12 am

Unfortunately, if that happened Ithaca, Auburn, downtown Syracuse, downtown Binghamton, and the other upstate urbanists would be kinda screwed.

Get your downstate legislators to get us high-speed rail to NYC, and we might be able to get more people upstate to vote for mass transit in NYC. You realize we don’t get down there very often?

The suburbs of NYC, however, I have zero respect for. Can you give them to NJ or Connecticut please?

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Marc August 24, 2012 - 12:01 am

I understand but disagree with the court’s ruling. But, what I don’t get is why this is being couched as “the MTA lost” and “the MTA will appeal.” This is a funding stream established by the legislature, which passed it, and the governor, who signed it. As far as I am aware, Tax and Finance collects it. Why is any of this on the MTA? I realize some of the decision is grounded on a view of the MTA’s purpose and functions. But, it is the responsibility of the AG to defend this is court and the politicians that, in their wisdom, chose this funding stream for transit to defend it in the press, not the MTA.

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Nathanael August 24, 2012 - 12:15 am

Personally, I’d be OK with statewide income tax funding of the MTA. And everything else. NY has frighteningly regressive local taxes.

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AG August 28, 2012 - 8:24 am

Where would Nassau County be without all the taxes the high earning transit riders into NYC bring back to Nassau????

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