Payroll Mobility Tax

When state Republicans won a partial repeal of the MTA-supporting payroll mobility tax in December based on some vague promise to “replace” the lost $320 million that should go to the authority’s coffers, I warned of the dangers of budging. By relenting even a little without identifying another source of dedicated funding, Gov. Andrew Cuomo and his allies in Albany signalled a willingness to give, and opponents of the tax were likely to demand an even greater repeal. Now, that prediction is becoming a reality.

In Brookhaven, New York, yesterday, noted payroll tax opposition leaders Senator Lee Zeldin and Assemblyman Dean Murray called upon the state to fully repeal the payroll tax for “all counties, towns and villages outside of New York City.” The new measure — essentially similar to an effort last year that did not survive Sheldon Silver’s assembly — would eliminate the tax as it is levied on municipalities with large payrolls and libraries around the area. In essence, state representatives want the state to stop levying taxes on its own governmental subdivisions.

Using the same tiresome and ill-informed rhetoric that led this coalition to proclaim victory in December for what should be viewed as a defeat, the politicians spoke at length about the need to save our small municipalities for the taxation evil that is the PMT. we are taking the next step with the Martins-Zeldin bills to exempt all municipalities outside New York City, as well as all libraries throughout the MTA region. Assemblyman Murray and I are working hard with our Senate and Assembly colleagues to even further eliminate this ill-conceived tax on jobs,” Senator Lee Zeldin said.

Martin, the Assembly sponsor, spoke to similar talking points. “Last year, we were able to repeal the MTA payroll tax for roughly 80 percent of businesses. Unfortunately, this hidden tax still hurts far too many organizations, including libraries, local governments and municipalities. It’s a job killer and the legislation Senator Martins, Senator Zeldin and I are proposing will finally rid our job creators and communities of this onerous tax,” he said.

Meanwhile, local officials too decried the bill. “The repeal of the MTA Payroll Tax for counties, other municipalities and medium to large size businesses will serve as an economic boost for the Suffolk County economy and our region,” Suffolk County Executive Steve Bellone said. Somehow, some way, the leader of Suffolk County believes that defunded transit — the thing that makes his area economically viable with New York City so nearby — will help boost his county’s economy. It defies reason.

So I have a proposal for Lee Zeldin, Dean Murray, Steve Bellone and the others who stand behind them: For every dollar they earn back by repealing the Payroll Mobility Tax, the MTA shall cut Metro-North and Long Island Rail Road service by an equal amount. If they want New York City to bear the funding burden for suburban rail — as it already does to a far greater extent than they believe — then let’s cut their service.

In a way, this is a self-defeating proposal. Cutting LIRR and Metro-North service will serve only to weaken, and not strengthen, the New York economy. That, however, is a point lost to these gentlemen, ostensibly elected to serve their constituent’s interests. As with national plans to defund transit investment, this move reeks of political folly, and only when it is too late — when the MTA must slash service and spike fares beyond an acceptable level — will voters realize that these politicians are doing them no favors.

It may cost taxpayer money to subsidize transit, but suburban counties will not be desirable destinations without its train access to the heart of the region’s job centers. Defunding that service, repealing a key source of revenue without finding a steady replacement, harms everyone, more so than the payroll tax ever will.

When Albany approved the MTA funding package last year with the payroll mobility tax as its centerpiece, I called it an imperfect compromise. It was a plan that, as state comptroller Thomas DiNapoli reported a month after enactment, would leave the MTA short some money and did not address long-term institutional problems with the way the state and city fund the authority.

Since last summer, the MTA has seen the payroll mobility tax fall short on its promised receipts by nearly $300 million, and throughout the metropolitan commuter transportation district, suburban legislatures have agitated for its repeal. Now, three Republican Assembly representatives, including New York’s first Tea Party-approved official, have launched a new attack on the payroll mobility tax. As Faith Burkins-Gimzek of LegislativeGazette.com reported yesterday, the three Republicans are just two days removed from taking office, and already, they’re trying to push through a repeal of the tax.

The legislation — currently tagged as A10011 — was presented by Dean Murray, Robert Castelli and Michael Montesano, three representatives from counties service by the MTA. It calls for an immediate repeal of the payroll mobility tax but does not allow for another source of revenue for the MTA. Without the payroll mobility tax, the authority would be out at least $1.2 billion.

While the payroll tax has been a controversial aspect of the funding package since its inception, Gov. David Paterson’s executive budget proposal recently redistributed the burden. Instead of taxing businesses throughout the 12 counties evenly, the new plan would put more of the tax burden on New York City-based businesses while relieving those in the surrounding counties. Still, Murray and his co-sponsors do not believe this proposal goes far enough.

Burkins-Gimzek has more:

Murray says businesses are being hit two-fold, because not only do they pay the MTA tax, but because schools are required to pay the tax as well, districts will have to raise property taxes to account for the revenue loss, they argue.

The bill’s memo states that the fiscal implications of the repeal on the MTA would be an annual loss of $1.2 billion in revenue. The authority recorded a $1.8 billion deficit in 2009 and a recent press release from new MTA Chairman and CEO Jay Walder announced that the authority is laying off 1,000 station agents and administrative employees.

Murray said there would be no need to raise taxes if the MTA eliminated redundant positions, collected on unpaid invoices from advertisers and targeted pension spiking, when employees rack up extra overtime in an attempt to increase their retirement benefits. He said the MTA threatened a “doomsday scenario” that without this tax, fares would be raised and services would be cut. He said that even with the tax, fares have been raised and services have been cut — “a slap to the face” to his constituents…

Castelli said “If the fraud, mismanagement and abuse was corrected they would be able to pay off the deficit with a surplus.”

Besides the sheer absurdity of Castelli’s charge that the MTA is wasting $1.2 billion, other ranking Assembly Republicans proclaimed support for Murray’s measure on more principled grounds. “Nearly a year ago, I publicly called for the establishment of a fiscal oversight control board, along with a comprehensive audit of the MTA, to increase transparency and accountability to taxpayers who paid for a nearly $2 billion bailout of this authority, which is supposed to serve in the public’s interest,” said Kolb. “Unfortunately, the MTA’s finances are still on the wrong track: there is no fiscal control board, no forensic audit, and, as a result, no real reform.”

Still, the MTA defended itself and noted that the state comptroller has been auditing the MTA. While the authority is not a lean organization by any means, it isn’t nearly as corrupt as these representatives would have their constituents believe. “The comptroller audits us on a monthly basis,” authority spokesman Kevin Ortiz said. “The rescue legislation that passed last spring already authorizes a forensic audit, and we welcome it.”

Because Sheldon Silver holds the keys to the Assembly, this legislation is dead in the water, but it shows just how deep the electeds’ distrust of the MTA runs and how little they are willing to support public transit. Repealing the payroll tax would result in losses far greater to the region than the $1.2 billion, and even if the authority shores up its accounting and waste, a repeal would leave the MTA an additional $1.2 billion in the red and effectively bankrupt. At some point, our politicians will let the MTA fail, and it will be ugly indeed. Only then will they begin to see what decades of institutional neglect does to one of the state’s most vital economic movers.