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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