Home Asides Election Day issue watch: MTA payroll tax

Election Day issue watch: MTA payroll tax

by Benjamin Kabak

As Election Day is finally, mercifully upon us and New Yorkers head to the polls to elect a whole bunch of newly ineffective state representatives, one issue near and dear to our transit-loving hearts could be in play. If the right people win election, the MTA’s payroll tax could be in jeopardy. This tax, passed as part of the 2009 funding plan, isn’t popular, and even Democratic gubernatorial nominee Andrew Cuomo says he will reassess the tax if elected. GOP comptroller nominee Harry Wilson called it a “job-killing” tax, and Republicans running for state office may try to overturn it on the first day of the next legislative session in Albany.

Yet, as Judy Rife of the Times Herald-Record explored yesterday, the payroll tax is seemingly a necessary evil. Without it, the MTA would be facing a truly disastrous economic crisis as the authority’s budget would be another $1.3-$1.5 billion hole. “The payroll tax has proven to be crucially important to the MTA,” MTA spokesman Aaron Donovan said to Rife. “Its existence prevented service cuts and fare (and toll) increases from being even worse, and it is reducing the funding gap in our five-year capital plan.”

Streetsblog’s Noah Kazis offered a race-by-race analysis of the payroll tax, and it’s clear that, while their constituents pay just 25 percent of the total tax revenue collected, suburban representatives are up in arms over the tax. Yet, no one has proposed an adequate way to fund transit. Be it congestion pricing, East River Bridge tolls or another yet-to-be determined source of income, the state simply cannot do away with the payroll tax without replacing it and the billions it generates for the MTA.

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Chris November 2, 2010 - 1:27 pm

I think you’re wrong there – eliminating the payroll tax would certainly be devastating for the MTA, but the state can certainly do it and it would probably be a point-winner for the majority of the state’s legislators. I would expect legislators to come up with a scheme that puts more of the burden onto commuters specifically, which is fair enough. The question is will that be done through higher fares or bridge/tunnel/congesition fees.

IanM November 2, 2010 - 1:48 pm

“I would expect legislators to come up with a scheme that puts more of the burden onto commuters specifically, which is fair enough.”

That’s very possible, but I disagree strongly that it would be “fair enough”. How much of transit commuters’ tax dollars go toward roads that their suburban neighbors, and not them, use? A lot. So it’s not at all fair at to ask commuters to fully fit the bill for transit themselves, without support from state tax money.

That’s the sort of logic that would support me saying “Hey, I don’t have kids, so why are my taxes going to support public education? The parents should pay for that themselves!” Wrong. We pool money together to support things like education and infrastructure because they’re good for the region’s society and economy as a whole.

IanM November 2, 2010 - 1:52 pm

Actually, maybe a better analogy would be if road users were charged directly for the building and upkeep of the infrastructure they’re using. So, think a $10 charge every time you get in a car and use a road. Any road. Fair enough, right?

Chris November 2, 2010 - 3:27 pm

Of course (assuming that you’re actually thinking of charges on a usage basis, not a per trip basis). And clearly the spread of EZPass & similar systems will ultimately lead to the tolling of many more roads, since it can be done so much more cheaply.

Generally speaking the goal of transit advocates should be to get the full cost of transit and the full cost of road realized onto the user. Otherwise, the fact that transit is much, much cheaper won’t enter into user’s decisionmaking and transit is left to compete only on the basis of speed and pleasantness – where it has much tougher hill to climb.

IanM November 3, 2010 - 10:58 am

That’s a pretty scary proposal. Yes, that would definitely push the incentives in the right direction (toward transit), but it would also make getting around debilitatingly expensive for all but the most affluent. There are good reasons for subsidizing infrastructure with tax revenue – it evens the playing field and makes transportation available to (almost) everyone. We just need to send more of those public funds to transit and less to roads.

My analogy was meant as a joke – that scenario would make life pretty miserable for anyone who couldn’t afford those charges (most people), and bring many aspects of the economy to a screeching halt. Infrastructure exists as a service to the public, not as a luxury for the very wealthy. Doing away with public-funded transportation altogether simply because you prefer one form of transportation over another is a disastrous idea – cutting off your nose to spite your face, and so on.

Now, if you want to have a representative portion of the cost realized onto the user, that’s another matter. I would fully support a plan that helps users see how much cheaper transit is, as long as it’s still reasonably affordable. But asking them to pay the full costs defeats the idea of public transportation.

Chris November 3, 2010 - 2:17 pm

Fair enough, and if we want to subsidize moving around as a general proposition, we can do so. Just hand people a check for X dollars for every passenger-mile of travelling they accrue each year. You could keep a log of your daily travel and append it to your 1040.

However, I’m not sure you’re right that increasing the cost of transportation would be debilitiating. Certainly we would expect people to consume less transportation, but presumably they would adjust to this by living much much closer to their everyday destinations. Working tens of miles from your place of residence is, generally speaking, a choice, and not a socially or environmentally friendly one. People should pay to make that decision. Equally, higher costs would greatly increase the benefits obtained from environmentally and socially friendly practices like carpooling, etc.

Finally, there are indigent people for whom the additional costs would be genuinely unbearable (as opposed to simply forcing some hard choices). However, we shouldn’t be artificially depressing the cost of public transit as a system of silent social welfare. The general tax revenue saved by taking away the “subsidy for moving around” could be directed into additional tax credits/tax rate reductions for the working poor and additional benefits for seniors and the disabled. Who would then face the same opportunity as everyone else to save money by engaging in friendly practices like living in dense developments.

IanM November 3, 2010 - 4:31 pm

Actually, your first idea sounds fine in theory, if it were workable. Ideally, we could just distribute electronic farecards that worked universally on all transit systems and roads, and bill people at the end of the month. But again, not going to happen anytime soon.

Incentivizing denser development is also a good thing, but I think the big factor you’re missing is real estate – it costs more to live in dense urban centers. A lot more. Cheap transportation is part of what keeps people from living in dense developments, but the cost of living in dense developments is a much bigger part. Take NYC, for example, one of the few places with flat transit rates: it costs $2.25 to get from the UWS to Midtown, and $2.25 to get from Brownsville to Midtown – but the difference in the cost of housing is astronomical.

Almost invariably, the lower-income the user, the further they tend to live from city centers, the further they have to travel to get to work, and, under most systems outside the MTA, the more they have to pay. Exaggerating that inequality even more by letting transportation costs rise seems like a bad idea.

Tax breaks and benefits to counteract that sound fine, but what it would really take would be big housing subsidies so that the middle and working class can afford to live in urban centers next to the wealthy. Why are either of those preferable to subsidizing transit? Makes a lot more sense to me to just keep our current system of publicly funding transportation, but just spend in such a way that’s more in line with the actual costs of roads vs. transit.

Alon Levy November 4, 2010 - 2:25 am

Most subways have the fare weakly depend on distance – for example, the range might be $1-2. This is how it ends up working in most cities in Japan, Korea, and China. European cities tend to prefer flat fares systemwide, sometimes with the exception of a small number of far out stations; the New York analogy would be charging extra to go to the Rockaways.

It’s also not true that “the lower-income the user, the further they tend to live from city centers.” New York has an income donut: the central areas are rich, the areas just beyond them are poor, and the areas further beyond are rich or middle-class. Going north on the 1, you reach the rich UWS, then poor West Harlem and working-class Washington Heights, and then rich Riverdale.

Andrew November 4, 2010 - 11:00 pm

And the wealthiest borough of all is Staten Island.

Yet poor Harlem subway riders are subsidizing Staten Island four-leg transfers and express buses.

That doesn’t make sense. Charge a rational price – one that is in some way connected to the cost of providing the service – and then give subsidies, as necessary, to those who need them (i.e., based on need).

The subway started out with a flat fare only because a flat fare is easy to implement.

CuriousLurker November 2, 2010 - 4:43 pm

Can somebody explain to me the difference between the pre-1999 commuter tax and this MTA payroll tax?

Chris November 2, 2010 - 5:08 pm

Mainly, the payroll tax applies to people who live in the city, rather than commuters.

Chris November 2, 2010 - 5:08 pm

I should say, all workers, including residents, rather than only commuters.

Is Cuomo aiming at the MTA’s payroll tax? :: Second Ave. Sagas January 21, 2011 - 1:56 am

[…] on the payroll tax than what we heard during his campaign. In late October, Cuomo threatened to reassess the tax, and the MTA had to issue a spirited defense of the dollars. “The payroll tax has proven to […]


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