Home MTA Economics On appeal, NY state court OKs MTA payroll tax

On appeal, NY state court OKs MTA payroll tax

by Benjamin Kabak

While most of the country had its eyes trained on the Supreme Court down in D.C. on Wednesday, New York’s Appellate Division in the Second Department issued an opinion that should pique the interests of transit advocates throughout the region. Ten months after a Long Island Supreme Court justice ruled that the MTA Payroll Mobility Tax was unconstitutional, an Appellate Division judge has overturned that ruling, guaranteeing that the MTA can continue to collect nearly $1.4 billion annually. While the ruling was expected to be a favorable one for transit, those fighting for the tax can breath a sigh of relief.

In a statement issued on Wednesday, the MTA called its transit network “the backbone of the region’s economy” and thanked the judges for the ruling. “Removal of the tax’s revenues would have had a catastrophic impact on the region’s 8.5 million daily transit riders,” the MTA said. On the other hand, Edward Mangano, the Nassau County Executive who brought the case, bemoaned the ruling. “We maintain the tax is overburdensome and just plain unfair,” he said.

As to Mangano’s second point, the Appellate Division disagreed. When Justice Bruce Cozzens issued his original ruling last year, he claimed that the Payroll Mobility Tax — and, by extension, state schemes to fund the MTA — did not serve a legitimate state function and did “not bear a reasonable relationship to a substantial State concern.” It takes only a class in basic municipal economics and not law to know how laughable Cozzens’ line of argument was, and the Appellate Division quickly dismissed it.

Citing precedent that found rapid transit in New York City to be a substantial state concern and previous cases that involving Nassau County that upheld regional funding plans because they “transcended the concerns of Nassau County alone and affected a sizable portion of the State as a whole,” the Appellate Division reversed Cozzens. They four-judge panel wrote:

Here, the Sponsor’s Memo for the MTA Employer Tax Law noted that continued investment in mass transit provides direct benefits to mass transit users and to the regional and state economies. Chapter 25 of the 2009 Session Laws enacting the bill announced that “[m]ass transportation services in the [MCTD] are essential to meeting the basic mobility and economic needs of the citizens of the [MCTD], the state and the region.” The 2008 report of the Commission on Metropolitan Transportation Authority Financing also observed that the benefits of the MTA’s capital program boost economic activity across the State and could create jobs in New York City and in “communities as far away as Buffalo, Albany, and Plattsburg[h].”

Thus, the MTA Employer Tax Law, which provides a funding source for the preservation, operation, and improvement of essential transit and transportation services in the MCTD, serves a substantial State concern. As such, it was not unconstitutionally passed without a home rule message. Absent constitutional inhibition, the Legislature has “nearly unconstrained authority in the design of taxing impositions.” The plaintiffs’ arguments that the MTA Employer Tax Law violates article III, § 20 of the New York Constitution, article X, § 5 of the New York Constitution, and the equal protection clause of the New York Constitution lack merit.”

In Albany, efforts to repeal or pare down the payroll tax will continue, but that’s the right approach. A legislative response is now required, and the payroll tax, imperfect but necessary, lives on as a permissible, constitutional exercise of legislative power that clearly serves a substantial state interest.

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14 comments

Chet June 27, 2013 - 8:29 am

Long Island seems to bemoan any attempt to actually fund the MTA. Maybe there is a simpler solution- set Nassau and Suffolk counties adrift. No, not physically.

Create a new agency, under the control of Nassau and Suffolk counties alone to run the Long Island RR, and their various bus systems. Long Islanders then would be completely responsible for their railroad. I’m sure they’ll be very happy with the two or three trains that this new LIRR would be able to run each day. I’m sure they’ll enjoy traffic jams that go from the city line to Montauk.

As a Staten Islander who watches much of the Verrazano Bridge toll go to subsidize other parts of the MTA puzzle and has no train to any where off this island, I have not only no sympathy for Long Islanders, but I do have complete and utter derision about their “woe is me” attitude when it comes to mass transit- from this tax, to complaining about service yet not supporting a third LIRR track on one of the routes, and of course the stupidity about changes in service to Penn Station once the East Side Access project is complete.

Never have two counties been so lacking in common sense about such a simple need.

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Dom June 27, 2013 - 11:05 am

That would make sense except for the fact that the LIRR is designed to take Long Islanders into the City. Maybe we only hand over the portion that’s within Nassau and Suffolk.

As to the “woe is me” attitude, you nailed it. It seems to be a deeply ingrained part of Long Island political culture. Election campaigns there are usually a race to the bottom to see who can whine the loudest about the poor, put-upon Long Islander. It even seeps into casual conversation. Ask any Long Islander how they’re doing and you get an earful about how awful things are, how everyone else is getting an unfair advantage, but at the same time, “what can you do about it?”

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Chet June 27, 2013 - 11:16 am

Well, my suggestion was more sarcasm than real.

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Tower18 June 27, 2013 - 11:17 am

That’s exactly the point. If you made Long Islanders fully in charge of the LIRR, separate from the MTA, their political class would barely be able to scrape together enough money to run a few trains a day on each branch. Then the people would riot, and realize that you can’t have it both ways.

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SEAN June 27, 2013 - 3:52 pm

Riot? LongIslanders would move out, as it’s the reflexive response to every problem there. You don’t see that in most other NYC suburbs.

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Larry Littlefield June 27, 2013 - 12:05 pm

“As to the “woe is me” attitude, you nailed it. It seems to be a deeply ingrained part of Long Island political culture.”

There is a whole “what about my needs” generation. We’ve got whiners who represent people from the suburbs in Albany too, though their districts happen to be located in within NYC boundaries.

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jackson182937 June 27, 2013 - 8:13 pm

That’s easy to say if you have no idea how high our other taxes are on the island. We have some of the highest property taxes in the state. This payroll tax is a burden to business and my guess is you don’t own your own and the tax does not affect you.

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Tower18 June 28, 2013 - 11:41 am

Talk to your local government if your property taxes are too high, they set the rates locally. If Nassau County’s property tax is too high (it is), don’t blame NYC or Albany.

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Larry Littlefield June 27, 2013 - 9:28 am

So I guess that means the legislature can increase the Payroll Mobility tax to 1/2 percent, bond the increase, and spending the revenues for the next 30 years in just five. Again.

Here’s what’s great about that tax.

The retired don’t pay it, because their income isn’t wages.

The rich don’t pay it, because they take their income in the form of capital gains.

And unionized public employees don’t pay it, because they use their clout to make sure it isn’t passed on to them in the form of lower wages. The serfs get tax increases and service cuts instead.

Only the people who don’t matter pay it. Then again, I suppose, those are the people who use mass transit.

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JebO June 27, 2013 - 10:20 am

I, too, would rather see bridge tolls or congestion pricing as a more equitable MTA funding solution.

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Larry Littlefield June 27, 2013 - 10:57 am

If you want mass transit both would be required, thanks to the past decisions of Geneation Greed. That’s what no one is focusing on. “What will we get” for X,Y and Z?” No, the question is what will you lose without it.

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Alex C June 27, 2013 - 12:36 pm

Based on this, seems to be applying that tax to capital gains would be a good idea. Never happen though, for obvious reasons.

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Larry Littlefield June 27, 2013 - 2:03 pm

They can’t even get rid of the “carried interest” scam on the federal level.

And at the state level there are bills introduced each year to exempt retired public employees, already exempt from state and local income taxes, from property taxes as well.

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Karm June 27, 2013 - 7:42 pm

It might not be politically correct in this day and age… but the facts are that the rich pay the majority of taxes in NYC.

That said – many ppl pay the tax that don’t even use mass transit… and that was their short sighted argument. The fact is they benefit because the regional economy is what it is because of mass transit.

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