Home MTA Economics The aftermath of the payroll tax court ruling

The aftermath of the payroll tax court ruling

by Benjamin Kabak

As hyperbolic as it sounds, it’s no stretch to say that the MTA’s world was rocked by Judge R. Bruce Cozzens, Jr.’s shocking ruling Wednesday overturning the payroll tax and a slew of other fees and taxes that support the MTA. After four other cases were tossed out, a Nassau County judge elected to his position on the same party line as key payroll tax opponents fulfilled the wishes of suburban politicians and torpedoed up to $1.8 billion in annual MTA money — or over 16 percent of the agency’s budget. The ruling left transit advocates fretting, and many wondering what comes next.

So what does come next? First up, the MTA isn’t going to see its revenues decrease in the short term. According to agency officials and Gov. Cuomo, the state will continue to collect the tax while suffering through the appeals process. “There won’t be any disruption in the MTA funding,” the governor said yesterday. “We believe the ruling is wrong and we believe the ruling is going to be reversed.”

Meanwhile, as State Senators such as Jack Martins, a Nassau County Republican who won election on an anti-MTA platform, gloated like a child over the court ruling and Westchester politicians from both parties celebrated, the MTA issued dire budgetary warnings. “The payroll mobility tax drives the entire economy of New York,” MTA head Joe Lhota said. “Without the MTA, New York would choke on traffic.”

And how do you solve a potential a $1.8 billion gap? Through cuts and fare hikes of course. As Lhota said during a press conference, “Without the payroll mobility tax, the MTA would be forced to balance its budget with a combination of devastating service cuts and ever-increasing fare hikes.” As a comparison, the MTA’s draconian budget in 2010 resulted in only around $90 million in savings from service cuts, and a fare hike generates around $50 million in added revenue per one percent increase. To cover this potential funding gap, the MTA would need a fare hike of nearly 30 percent. That’s far far worse than the payroll tax.

Downstate, Mayor Michael Bloomberg, who had already washed his hands of the MTA-related mess in Albany, did not have kind words toward those who had earlier torpedoed his congestion pricing plan. Again on Friday morning, he took to the airwaves to call for a renewed effort.

“Is there a plan in place? Let me see if I can work out a plan for you,” he said Thursday. “Why don’t we toll people, I got it! Let’s toll people coming into the city, OK? Because then it wouldn’t be anything outside the city, there’s no jurisdictional issues, and we could use the money to improve mass transit! And that would get fewer people on their cars and more people on the subways. The subways would be bettter, more reliable, more pleasurable, and it would be paid for by people coming in and out. That’s a good idea isn’t it? I think so. But wait, now my recollection … I betcha the legislature thinks they have a better plan. So my suggestion is you address your question to those people who think they have a better plan.”

It’s still stunning to think that a supposedly impartial state judge thought the MTA budget not a “substantial state state concern” and somehow twisted home rule jurisprudence to create this ruling. Still, that’s where we are. The MTA and New York State will “vigorously” pursue an appeal, and the money will still flow. But politicians have won a talking point without actually finding an adequate solution.

It’s unlikely an appeals court will uphold this ruling, but if they do, as Joe Lhota said yesterday, “it would be a catastrophe for the entire region, and for the entire state’s economy that depends on it.” The payroll mobility tax is far from an ideal solution for MTA funding, but until politicians are willing to take a serious look at transit support in the region, it’s what we have. No one can afford to lose it.

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Christopher August 24, 2012 - 11:41 am

It’s weird too that a STATE AGENCY would not be a “substantial state concern” would that indicate that any and all parts of the state government is at the whim of some judge to decide if it’s worth funding or not.

There was an interesting post yesterday about funding for WMATA from my friend Richard at his blog in DC. He doesn’t think a payroll tax could be done in that region … so he’s got some other options. Thought it was worth looking at for what other funding options for a “mobility tax” as he calls it could look like.

Richard Layman August 24, 2012 - 2:10 pm

I don’t know NY State law, but I would expect that creating this transit district is legal.

But I will have to update that entry that Christopher mentions…

Bolwerk August 24, 2012 - 2:24 pm

It’s probably legal under the same laws that give NYS the power to create municipal governments, including NYC.

Alex August 24, 2012 - 11:46 am

If the MTA is not a “substantial state interest”, does that mean we can uncouple it from state control so reps from Buffalo and Ithica and Oswego don’t get a say in how to run our transit system?

And if the counties don’t have to pay the tax, can’t we just severely curtail LIRR and Metro North service while jacking up fares high enough to make up the difference? I wonder how fast some of those suburban polls would change their tune when their constituents can’t afford to get to work anymore or only have a choice of 1 train per hour at rush hour.

Nathanael August 27, 2012 - 11:19 pm

Just so you know, there are no state senators from Ithaca at all; it was gerrymandered to have no representation whatsoever.

Oh, and yeah. To balance the budget, the MTA can simply eliminate service to every county whose yahoo politicians are saying good things about this. Certainly, eliminating Westchester and Nassau service would do marvellous things for the LIRR and Metro-North budgets. Enjoy, ya right-wing yahoos.

Alex C August 24, 2012 - 12:28 pm

Their politicians are celebrating this? Oh, that’s right, of course they are. They’ve made it clear they want mostly-lower-and-middle-class NYC to pay for their suburban commuters’ rides. Despicable. Really, the MTA needs to man up and present to them by Monday what kind of cuts would happen in terms of LIRR and Metro-North (NY portion, CT stays as is). Don’t fool around with this. These morons won’t realize what a $1.8 billion cut is until you show them.

Noah August 24, 2012 - 12:55 pm

Simple solution, fairs to stations for MNRR and LIRR should be based on the tax. If an upstate region or a Long Island area doesn’t want to pay the tax then there should be a substantial fair hike for their residents. NYC residents should not receive a fare hike on their subways when revenue issues have to do with LI and Upstate. Or we just go with a no fare system and rely on taxation, then perhaps it would be a greater state concern when taxes are levied for transit.

Bolwerk August 24, 2012 - 3:16 pm

That’s not simple. That’s onerous and confusing. Not to mention divorced from reality, since drivers would simply drive to a station where they can pay a lower fare. Some will do it despite the fact that it might cost them more to do so.

I don’t think the payroll tax is the best idea, but the naysayers (a) aren’t offering a better solution and (b) are the reason we need it in the first place.

Noah August 24, 2012 - 3:26 pm

It’s not onerous or confusing, it would be a few lines of code. You’re right people would probably try to drive to a station that is cheaper, but I have no vision that this would be a final solution. Rather it would teach people what the tax affords them. People in other municipalities paying the tax would obviously complain due to increased congestion at their stations and areas would be forced to adopt a uniform tax scheme. But why should NYC subway users have a fare hikes when outer areas aren’t paying their fair share? If people not from the city refuse to pay a tax to create a slightly more equitable taxation scheme then perhaps they should pay more. People will say the the city benefits though from reductions in car commuters, which is where congestion pricing should come in.

My ultimate goal as I said before is a free system, supported through a statewide transit/mobility tax. Such a tax would put money into regional and municipal transit systems, increasing investment throughout the state. Congestion pricing would also be necessary and desirable.

Bolwerk August 24, 2012 - 3:55 pm

How do you decide how/where to use those few lines of code?


Nice idea, but conceptually difficult. Anyway, this ruling probably won’t stand, and all these revenge fantasies will be for naught.

I really wouldn’t want a free system. I think people will be more respectful toward the system as long as they have to pay to use it, and it is perfectly fair for people to pay for what they use.

Noah August 24, 2012 - 4:19 pm

I was thinking something more akin to a county based multiplier,

if(Origin.County() == “Nassau” || Destination.County() == “Nassau”)

Though perhaps county information would need to be added to station information.

You might be correct about a completely free system, and then I would go with my second favorite, Kormanoff’s plan. Free buses, with time based subway fares and vehicle fees to decrease traffic at peak hours. The off peak subway fare would be much cheaper, with about the same peak fare. Vehicle fees would obviously be more.

Bolwerk August 24, 2012 - 5:17 pm

The “free buses” part of Komanoff’s plan makes even less sense to me. The buses are the most expensive part of the NYC transit system.

Noah August 24, 2012 - 5:34 pm

I think his main logic for free buses is simply that time is money, not for the transit system, but for users. So in his calculations by making buses free you reduce congestion and ride times. This is because buses would no longer need to wait for fare collection. I think another unintended rational is that buses often serve more transit poor areas and function as links to the subways, and in our current fare structure there is a free transfer involved, so revenue loss is minimized.

Another solution that could also work, which I also should be implemented on SBS, is to have fare collection on the buses, in say the back. This is how it works in Melbourne and other cities at least with their light rail. They can just put a pre boarding machine on every SBS bus. You get on and either pay or validate your fare card and are generally given a receipt as in pre boarding. And just as in now, there are fare enforcement officers to check that people are paying. This gets rid of the lines at the driver allowing the bus to leave right away, and alleviates current problems of SBS where if you are running for a bus you can’t now just jump on.

Bolwerk August 24, 2012 - 7:09 pm

I think that is a fair point, but indeed it can be solved by POP. If anything, it can improve collections while improving boarding times.

And yes, on-board collection is definitely a good idea. It makes more sense than station collection, since it can centralize TVM maintenance.

It’s probably safer for drivers, too, since the vulnerable guy in a seat isn’t stuck doing collections.

Alon Levy August 24, 2012 - 11:50 pm

The limited-stop buses here do not need to wait for fare collection, either. The locals could do the same, and quite possibly will when the smartcards come online next year.

Bolwerk August 24, 2012 - 2:21 pm

CP for mass transit is well and good, but not very much can reasonably be spent on suburban rail. They should still come up with their own funding mechanism for the services they use.

Also, is there any serious chance this will survive appeal? It almost seems like the least of this decision’s problems was that it was illiterate.

Jipsy August 24, 2012 - 2:56 pm

Seriously, the payroll tax is a bad idea. Liberals would rather blame conservatives judges but what liberals SHOULD be doing is looking at the bunker busting payroll/pension loving unions. And Bloomberg is right. We should have congestion pricing in the city. Liberals should quit bragging electing union loving politicos to legislature then we can have this discussion.

Alex C August 24, 2012 - 3:08 pm

What? We tried the congestion pricing, the “America-loving” conservatives hated the idea because it would be an inconvenience to their suburbanite sheep. If you’re going to troll, put some effort into it.

Bolwerk August 24, 2012 - 3:42 pm

Jipsy is another political illiterate battling against reality. The unions are the single biggest conservative constituency left in the USA. They were against CP themselves, even though it would have secured the MTA’s finances and their jobs. Why? Actually using public transportation is beneath them, just like it’s beneath other conservatives like Richard Brodsky, Christine Quinn, or John Liu.

Spendmore Wastemore August 24, 2012 - 4:16 pm

” Actually using public transportation is beneath them”

True. Of the MTA employees I’ve known, all but one drove everywhere. That one preferred his drug habit over his job and is now a former MTA employee.

Stu Sutcliffe August 24, 2012 - 4:53 pm

I assume that you’re joking, but you don’t know a lot of MTA employees, do you?

Spendmore Wastemore August 24, 2012 - 4:09 pm

“And if the counties don’t have to pay the tax, can’t we just severely curtail LIRR and Metro North service while jacking up fares high enough to make up the difference?”

No, don’t just jack them up.
Plan A. Raise fares on lines that don’t pay tax enough so that the fares + local contributions reach break-even. That’s roughly double. If ridership falls so much that break-even is impossible, go to

Plan B:
Halt all service outside the 5 boros unless it’s otherwise paid for Connecticut kicks in for MNR, so that section might continue.

I think people will change their tune when a commuter rail ticket is $20 each way, or they can’t get to work, period.

Nathanael August 27, 2012 - 11:21 pm

Suffolk County might well kick in for LIRR service. Connecticut is definitely paying for its part of MNRR. Who knows, City of Yonkers might volunteer to pay; maybe Poughkeepsie would pony up some of its property taxes.

AK August 24, 2012 - 4:23 pm

I don’t begrudge Ben for reporting on this ruling, but I want to reiterate that there is NO WAY this ruling is upheld on appeal.

As Adam Lisberg of MTA said, there were many identical lawsuits filed, all of which were dismissed. If anything, the lesson is that ELECTING judges (including NY Supreme Court judges) is a joke and that appointed judges with life/near-life tenure (like Appellate judges in NY) are far more likely to render decisions approximating “justice”.

Nathanael August 27, 2012 - 11:26 pm

Appointed judges can be just as disastrous, when you’ve got an appointing President with an ax to grind; look at the complete mess which has been made of the federal courts.

I have always thought that the key feature of the Appellate judges is that they have to be elected AND appointed AND voted in amongst their peer judges.

If you can run through all three gauntlets, you aren’t a political hack. The sort of political hack who can get elected can’t get appointed and the sort of political hack who can get appointed can’t get elected. And the election to Appellate Division from amongst the other Supreme Court judges prevents the legal ignoramuses from getting elevated.

The other key feature is the 14-year terms. It’s short enough that it doesn’t tempt people to “put our guy in”, the way we see at the federal level, with absolutely crooked judges rammed onto the Supreme Court by G. W. Bush, even when it was obvious how crooked they were, because it is just so valuable to have them on there for life.

14-year terms are long enough that the judges aren’t “running for re-election”, but short enough that it’s not worth bribing, blackmailing, and otherwise abusing legislators in order to get people into those positions, like it is at the federal level, where a judicial appointment is a license to abuse people for the rest of your life.

Nathanael August 27, 2012 - 11:29 pm

Basically, I think the way to get good judges is:
1 – to give them quite a lot of hoops to jump through (because anyone who has even the appearance of a conflict of interest is not really a suitable judge),
2 – make the judicial term of office long enough that they aren’t “aiming to get re-elected / re-appointed”
3 – but make short enough that people won’t commit crimes just to get the power associated with judgeships. Lifetime appointments are way too long.

NY has struck a pretty good balance in its appeals courts.

Rob Stevens August 27, 2012 - 2:04 pm

“…the MTA would be forced to balance its budget with a combination of devastating service cuts and ever-increasing fare hikes.” — After all, we wouldn’t want to put serious work rule changes on the table. Naah!

NY could actually get with the rest of western civilization — e.g. one man subway train crews, and really cleaning out the LIRR e.g. see Ruppert, “The Gravy Train”.]


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