Home Capital Program 2015-2019 CBC: Fund MTA capital gap with increased taxi surcharges

CBC: Fund MTA capital gap with increased taxi surcharges

by Benjamin Kabak

Let’s start with a premise that not everyone seems to accept: The MTA and Uber — along with the MTA and green taxis, yellow taxis and your favorite local car service — aren’t really competitors. While the recent spike in volume of black taxis due to Uber is problematic for other reasons, these two services aren’t competing, as Cap’n Transit recently detailed, for the same dollars these days.

That doesn’t mean, in a somewhat twisted way, Uber can’t be helpful to the MTA, but it does mean you should raise a very skeptical eyebrow at coverage that says Uber is “costing the MTA dearly.” When that coverage then that states that “dearly” means $1 million a year — which is around 0.007 percent of the MTA’s annual operating budget, you should just laugh it off as uninformed tabloid sensationalism. But I digress. Let’s talk about taxis and the MTA’s finances.

For a few years, the state has collected a 50-cent surcharge on every yellow and green taxi ride, and this money goes toward the MTA’s finances. One of the reasons revenue has dipped from $48 million annual to $47 million is because Uber has eaten into these cabs’ shares of rides. Now, as the MTA faces a significant budget gap and the state and the city will have to implement something to generate dollars, the Citizens Budget Commission, as part of its effort to promote a 50-25-25 MTA funding plan (where fares cover 50%, taxes 25% and cross-subsidies from cars 25%), has put forth a call to tax all subway rides. You can read the full policy brief right here. Here’s the meat of it in three proposals:

Expand Coverage of Per-Ride Taxicab Tax. The current 50-cent per-ride taxicab tax is intended to charge riders, who do not necessarily pay other cross-subsidies from vehicle ownership, for the negative externalities of their trips. By this logic, applying the tax to all black car trips, including DSPs, would have raised an additional $33 million in 2015. This amount would grow to between $34 million and $55 million by 2019.

Increase and Expand Per-Ride Taxicab Tax. When the taxicab tax was instituted in 2011, it represented approximately 4.73 percent of the average taxi fare. After increases in taxicab fares, the figure is 3.95 percent today. If the tax applied to black cars, including DSPs, were set at a rate, rather than an amount (50 cents), then the tax would be 3.95 percent of the fare. With black car fares averaging more than $27, their average tax would be about $1.00 rather than 50 cents. This new tax on black car riders would have generated an additional $70 million in 2015 and between $73 million and $117 million in 2019.

Transportation Sales Tax Reform. A third option is to lower the burden on black car riders and dedicate the entire tax to the MTA. The new rate could be set sufficient to close the MTA funding gap; a rate of 5.75 percent, assuming that current trends in the industry continue to 2019, would cover debt service on $2.6 billion of borrowing. While this option would require the State and City to forfeit sales tax revenue from this industry, it would fund the shortfall in the MTA’s capital plan and provide a likely growing revenue stream for this purpose from both jurisdictions.

It’s easy to misinterpret this report as an attack on Uber, as Uber is mentioned 30 times while yellow, green and livery cabs are mentioned a combined 40 times, but it’s not an attack on Uber as much as it is a challenge to allocate funds in a way that captures the negative externalities of auto trips on surface streets in New York City. To that end, one of these proposals should be implemented, and I’d lean toward the third option as it would generate sufficient revenue for the MTA to fund debt service for capital plan borrowing.

A final idea comes to us from Stephen Miller at Streetsblog. He calls upon the city and state to implement a variable surcharge on taxi rides that would mirror a congestion pricing scheme. “Ideally,” he writes, “the surcharge paid by yellow taxis, Uber, and other for-hire services would be higher in the congested Manhattan core than in outer-borough neighborhoods lacking decent transit service. While that wouldn’t be a substitute for real congestion pricing of all motor vehicle trips, it could set a precedent and demonstrate the impact of congestion-based fees on a substantial portion of Manhattan traffic.” This too seems to me like a no-brainer if we want to combat congestion while generating money for the MTA.

Ultimately, these CBC proposal and Miller’s plan are ideas that will have to be addressed by city and state politicians who have been challenged to fund the MTA’s capital plan gap. We’ll hear more about the political battles as the fall unfolds, but right now, during summer, the ideas are percolating appropriately.

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Larry Littlefield August 27, 2015 - 6:52 am

So what is their plan for the next MTA Capital Plan, the one that starts five years from now, since all the future revenues they proposed would be spent up front?

Or, given the average age of those involved with the CBC, is this the current one the last one that matters?

Come to think of it, given the average age of those involved with the CBC, is the one that already expired the last one that matters?

Russell August 27, 2015 - 8:37 am

I agree Larry. There is a lot of talk on this site about how to raise funds for the capital plan. All of them are around new types of taxes. Whether it is the MoveNY plan or this new tax on black car trips.

Instead, I think the focus needs to be on how can we cut the glut from the MTA and use these expense savings to fund new projects.

I ride the subway everyday and take Metro North relatively frequently. Here’s one suggestion, how about we get rid of the workers in the station during rush hour that just stand there with a flashlight. They aren’t doing anything to speed up our trains!

I’m 23 years old now, and all I see in the future are more and more taxes to fund this merry go round. Tough decisions need to start happening rather than bowing to unions, contractors and other political interests. I already know all the social security tax I’m paying is going to a “trust” that will broke by the time I retire. My generation cannot take more and more taxes to fund these ridiculously overpriced government projects.

Ben, let’s say we raise a new tax to fund this capital plan. How are we going to raise $20 billion for the next one in 2020? And how about the 2025 one that will probably need $40 billion? Don’t you think we need to focus on the expense side?

adirondacker12800 August 27, 2015 - 11:38 am

I already know all the social security tax I’m paying is going to a “trust” that will broke by the time I retire.

No it won’t. If we don’t do anything at all it won’t pay you as much as you expect. There’s lots of things we can do in the next 45 years to correct that.

Larry Littlefield August 27, 2015 - 12:26 pm

“There’s lots of things we can do in the next 45 years to correct that.”

Liberal: there is no problem because we can just make younger generations pay higher taxes on work income than older generations paid. Starting in a few years, after the entire 1960s generation has retired.

Conservative: there is no problem because we can just make younger generations accept lower benefits than older generations have received. After all, we are getting them used to it by paying them less while they are working.

Nathanael September 2, 2015 - 11:20 am

We can fund it by taxing the billionaires.

Actually we can fund everything by taxing the billionaires. They have so obscenely much money now that we wouldn’t need to tax anyone else for several years.

Sounds good to me.

Bolwerk August 27, 2015 - 1:08 pm

There basically is no social security crisis. The problem can be fixed with a few more dollars on everyone’s social security withholdings per paycheck, preferably with a higher or no cap for high income contributions. Republikans (and other neoliberals) don’t want to do this.

And fuckers here keep exaggerating the capital plan “crisis.” The real crisis is political. Financing a capital plan, even a flawed capital plan, is pro-economic growth. Over time debt payments for a capital plan are subject to inflation, and over time the real economy grows.

Russell August 27, 2015 - 1:31 pm

I don’t want to delve into politics too much but frankly the whole “let’s raise taxes and raise the age that you can receive benefits” is just another way to lessen the benefits my generation receives. Regardless of political standing the fact that our national debt has gone from $4 trillion to $18 trillion in the last 20 years is scary.

Going back to my point about the MTA though – there has to be some way to start reducing some of these expenses. I don’t understand why the unions get pension plans while the rest of us are stuck on crappy 401k’s with shitty matching. I don’t understand why there are people standing in the stations during rush hour yelling at people to use all doors and signaling with their flashlights when everyone is onboard (such a waste IMO).

I think that’s the hard topic that needs to be addressed. We need to look at ways to keep the MTA running properly but cut some of the glut. Don’t get me wrong, as a frequent transit user I want to see the subways expanded, real SBS, and capacity increased. I just think we talk too much about increasing a tax here and there and don’t spend enough time pressuring the MTA to cut the glut.

Larry Littlefield August 27, 2015 - 2:10 pm

“Regardless of political standing the fact that our national debt has gone from $4 trillion to $18 trillion in the last 20 years is scary.”

The national debt is just part of the problem.


Larry Littlefield August 27, 2015 - 2:15 pm

By the way, if you are going to follow the above link and read it, be sure to note the date — mid-March.

And follow the link at the bottom and watch the video, predicting what would happen with China and what its effect would be.

Justin Samuels August 27, 2015 - 2:27 pm

MTA unions fought hard for their pensions for starters. The work is difficult and it takes quite a bit of time to train people. Also the MTA likes employee stability. They want their employees to stay. Unlike a low level office job where they just get a new assistant/clerk that they repeatedly replace.

Larry Littlefield August 27, 2015 - 2:33 pm

Pensions funded over a career are much less devastating than pensions awarded retroactively.

Retroactive increases are devastating, including that 2000 pension increase in NY (and the 1999 increases in NJ and California).

But at least the strike for 20/50 failed, and the TWU doesn’t have the massive disability fraud culture you have on the LIRR. That’s why debt is more of an issue for the MTA than pensions.

NYC teachers got their retirement age cut from the promised 62 to 55, after 25 years rather than 30, in 2008. And that has really crushed the schools. Also transit — extra money the city is paying for schools, despite higher class sizes, is money the city won’t contribute to the MTA capital plan.

Bolwerk August 27, 2015 - 3:30 pm

Defined benefit plans are actually cheaper than defined contribution plans if they’re managed properly.

Bolwerk August 27, 2015 - 3:22 pm

National debt is quasi-irrelevant here. No reason to raise the age you receive benefits either. Quite literally a few dollars a week in higher withholdings is enough. If we can dump the income cap, maybe that wouldn’t even be necessary.

Yes, I piss off union sycophants all the time by pointing out that classism. Either everyone should get a state-run defined benefit plan or nobody should. It was a mistake just to make it effectively mandatory only for government agents.

Yes, operating expenses are probably where to look to control costs, but that means changing payrolls and work rules. So instead everyone gets hysterical about the capital plan.

But spending more does not necessarily mean higher income or sales taxes.

adirondacker12800 August 27, 2015 - 5:31 pm

There’s lots of ways to raise the money. Make the tax on short term capital gains really painful. (Taxed the same as earned income for instance.) Has the side benefit that it makes things like arbitrage much less attractive. Fraction of a percent on stock trades, makes it a bit less attractive to trade so often. The free market zealots would freak out – eliminate the corporate income tax and replace it with a VAT. No more hiding profits overseas on stuff you sell in the U.S. And no more making lots of profit and ending up not paying taxes.
Get health care costs down to only 50% more than what the rest of the world pays and use half of the savings for retirement benefits. …Decide that the F35 is a really bad idea and build three different planes that do the jobs better at half the cost… tax motor fuel high enough that it pays for the road system…

Nathanael September 2, 2015 - 11:26 am

The capital gains tax break is a tax break for multimillionaires and billionaires. It’s unconscionable. It’s used by billionaires to generate more money to bribe Congress with, so it’s corrupting our entire government.

Capital gains should be taxed just like any other income.

Restoring the tax on stock trades (which is *still on the books*, but is ‘refunded’ to the crooked brokers) would eliminate all the messed-up high-frequency trading which is making the stock markets non-functional. As a side effect, it would raise billions of dollars, and it would raise it by taking it away from a bunch of crooks.

Single-payer health care would save 50% of our health care costs while improving quality.


Nathanael September 2, 2015 - 11:23 am

The national debt is a joke, a fantasy.

Let me explain it this way: we could print $18 trillion in crisp new $100 bills, use it to pay off the “national debt” (which is mostly in the form of Treasury bills and Treasury bonds paying roughly 0% interest), and absolutely nothing would change for the real economy. Voila, the national debt is at $0.

People need to understand this.

You can only get into trouble with “national debt” if
(a) the country borrows in a currency which it can’t print, like Mexico borrowing in dollars
or (b) there’s a risk of inflation due to full employment, which hasn’t been a risk since the 1980s and the irresponsible Reagan era.

Larry Littlefield August 27, 2015 - 9:57 am

“I’m 23 years old now.”

Then I strongly recommend looking at the big picture. Most people your age don’t, but they can’t expect their parents to look out for them anymore. Not collectively, no in this culture. My children are about the same age.


It isn’t just the unions. Its past tax cuts too. It’s pension increases, and underfunding. It’s federal old age benefits increases, and underfunding. It’s more for Generation Greed to be paid for later by someone else. The MTA is one little part of it, even at the state and local government level.

Rob August 27, 2015 - 10:28 am

Personally, I use taxis for two reasons.

One, I’m running late and going somewhere that it is complicated to get to quickly using transit. Really, transit is often faster than a taxi, but if my trip involves multiple transfers I am more likely to use a taxi so that I at least feel as if I am getting there faster.

The other is when I get to a station and there is construction work, delays, or just generally crappy service. I’m thinking specifically about when I get to a station and see that I have to wait 15 minutes for a train. I hoof back up to street level and flag down a cab or use my Uber app.

In both cases, transit is my first choice, so I’m spending the fare as part of my cab ride and the MTA is losing that revenue. However, as I buy a monthly card, it really is a moot point for me, but it does take away those pay-per-riders who are in the same situation.

Alex August 27, 2015 - 12:42 pm

But the claim is that Uber specifically is eating away at transit rides. In reality, they’re eating away at taxi rides. The existence of Uber may result in a few people shifting away from transit, but overall what you’re noting is something that’s existed for a long time and isn’t new, it’s just shifting to a different service. That doesn’t mean the MTA shouldn’t try to improve, but it’s not some intractable problem the way the tabloids are presenting it.

Ryan August 27, 2015 - 10:40 am

One of the reasons revenue has dipped from $48 million annual to $47 million is because Uber has eaten into these cabs’ shares of rides.

Uber is a taxi service and should be taxed and regulated accordingly. That’s the real problem here – that everyone is all too happy to roll over for these libertarian manchildren and buy into the argument that a taxi service you call from an app on your phone is somehow a ‘technology’ company and not a fucking taxi service.

Tax fucking Uber, and we suddenly don’t have this problem about how Uber is vulturing away money from taxi-based revenue streams with its illegal – and, yet, amazingly, legitimized – operation.

Nathanael September 2, 2015 - 11:28 am

Yeah. I have no problem with the existence of Uber, but it is a taxi service and should be regulated as such.

Now, I also think the “transferrable medallion” system is totally ridiculous and broken and that that’s not an appropriate way to regulate taxis, but that’s another matter…


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