Splinter Group of Senate Dems Want MTA Payroll Tax on Chopping Block

The Independent Democratic Conference, shown here, has included reform and possible repeal of the MTA payroll tax in its agenda. Photo: New York State Senate.
The Independent Democratic Conference, shown here, has included possible repeal of the MTA payroll tax in its agenda. Photo: ##http://www.nysenate.gov/press-release/independent-democratic-conference-2011-agenda##New York State Senate##

The fate of the payroll mobility tax, which brings in $1.34 billion a year to the MTA, just grew a little shakier. The four members of the State Senate’s new Independent Democratic Conference, who split off from the minority Democrats last week, have come out with their agenda and included in it is a call to “reform” the tax and even consider eliminating it. Any cut to the mobility tax would spell disaster for transit riders.

When the payroll tax originally passed in 2009, the vote was along strict party lines. Every Democrat voted for it and every Republican against. With the Republicans now in control of the Senate — led by the fiercely anti-payroll tax Dean Skelos — the mobility tax’s future in that chamber already seemed uncertain. But the possible support of the independent Dems could provide a repeal effort with bipartisan cover and some real momentum.

Here’s what the four members wrote in their platform:

MTA Tax Reform: Gross mismanagement is blamed for 1/3 of the MTA’s current fiscal debt. Our goal is to conduct a comprehensive forensic audit of the MTA to find areas of waste and corruption and determine the need and the efficacy of the current MTA tax.

It’s the phrase “determine the need” that’s most threatening, with its suggestion that there may be no need at all. Remember, the transit agency’s capital program — which covers expansions and badly-needed repairs — is a staggering $10 billion short and the agency just went through a painful round of service cuts, fare hikes and layoffs to make its operations budget add up. Even a deal that exempts the suburbs from the payroll tax but not the city would cause some combination of more service cuts, higher fares, and deferred maintenance.

One person who may be responsible for the conference’s anti-payroll tax stance is freshman senator David Carlucci, who represents Rockland County. Carlucci ran on a promise to repeal the payroll tax, which is extremely unpopular in the New York City suburbs. Explaining why he broke away, Carlucci named payroll tax repeal as a key disagreement between himself and the main Democratic conference.

Bronx Senator Jeff Klein, the conference’s unofficial leader, included the payroll tax in a list of what he considered the Democrat’s failures while in the majority. He and the other two incumbent senators in the conference, Diane Savino and David Valesky, voted for the payroll tax in 2009.

Any repeal of the payroll tax would also have to make it past the Assembly and the governor’s veto pen, so it’s at greater threat from a grand bargain than a direct assault. The bigger concern, therefore, is that the independent Dems are in some way affiliated with Governor Cuomo. During the campaign, Cuomo said that “we must revisit” the payroll tax.

  • Considering how these politicians have direct oversight over the MTA through various legislative committees, how many times are we going to have to hear someone “threaten” a forensic audit? Just deliver one already or STFU.

    I think that these Senators aren’t going to like it when the audit reveals that far, far less than 1/3 of the MTA’s fiscal problems are due to “gross mismanagement,” and then the Senators might actually have to take responsibility for some of their conduct.

  • PaulCJr

    If this happens kiss more metro and bus lines good bye.

  • I got your forensic audit right here.

  • And that News editorial only includes Senators representing the City; Valesky voted to take the $143 million from the MTA too. The bill is either A4022 or A40023, I can’t tell because the language is so murky. Regardless, it looks like Valesky voted with the majority on every floor vote in December 2009.

    Savino was looking promising at one point. At least she talks about funding transit.

  • Emily Litella

    HUHH, good god y’all!

  • J:Lai

    You know, the payroll tax does suck. I would say good riddance.
    It discourages something we want (employment) for a very uncertain contribution to transit. Given the propensity to divert this revenue to the general fund, I don’t see much reason to support this tax.
    Frankly, it would be better to eliminate the tax and raise the fare.

  • bystander

    We need to show Albany what the city would be like without good transit.

    It’s time for a rider strike. For the next week anyone with a car should drive into the city and anyone without a car should stay home.

    Ironically it will be a completely gridlocked ghost-town.

  • HK

    Agree with J:Lai – people and businesses are being taxed out of the region, plain and simple. The answer to the problems is not more blanket taxes.

    As an example, every business in Suffolk County pays the MTA payroll tax when some areas are essentially bereft of transit (North Fork of the East End comes to mind). Same is true for parts of Orange and Rockland with extremely limited service.

    Between astronomical property taxes, high sales and income taxes, high gas taxes (not saying these are bad, just saying), and the numerous other costs in the area, it’s a wonder people here are still making it.

  • J. Mork

    Bystander — sounds great, but you spelled “bike” wrong!

  • I’m no fan of the MTA payroll tax, either. I’d enthusiastically dump it and replace it with the revenue system that the payroll tax was an emergency band-aid to cover for: congestion pricing.

    Revive the Kheel Plan, anyone? We’ll trade the suburban counties: pass a congestion pricing authorization and we can eliminate the MTA Tax!

  • The payroll tax sucks primarily because it’s such an inefficient tax: multiple forms just to generate a few hundred million. If I were a cynic, I’d think it was tailor-made to whip up resentment against “the MTA.”

    I can’t agree with HK that it’s plain and simple that people and businesses are being taxed out of the region. I’m perfectly satisfied with the amount of taxes I pay, and I’d even be willing to pay more, if I got some really good transit out of it.

  • vnm

    For J:Lai and the other folks who are ready to pooh-pooh the payroll tax:

    $1.3 billion is a pretty “certain” number. Yes, it was originally supposed to be $1.5 billion. It came up short, $1.3 billion instead of $1.5 billion, and that shortfall was the main reason for the worst service cuts in a generation and the first layoffs of transit workers that most people can remember. Imagine instead that the $1.3 billion became $0. What do you think that would do to the $104 MetroCard? Also, to clarify, as the Streetsblog graphic repeatedly shown on a number of posts has illustrated, the $143 million that Albany stole from transit riders came from other forms of subsidies (long lines tax, sales tax, corporate franchise taxes, petroleum business taxes, etc.), not the payroll tax.

    Savino notwithstanding, there hasn’t been any major groundswell of anti-payroll tax rhetoric in the city, where nearly everybody rides the subway or bus. All the rhetoric has been from the suburbs, where a relatively small fraction of people ride the commuter rails. I’d gladly let the suburbs have a reduced payroll tax burden (i.e., 0.34% becomes 0.14% rate in suburban counties) in exchange for bridge tolls that raise an equal or larger amount for transit. The vast majority of payroll tax revenue comes from the city anyway. This might help solve the $10 billion capital program gap. What’s more, bridge tolls would likely be collected directly by the MTA, like its current tolls, and thus wouldn’t be “subject to appropriation by the Legislature,” to use the language of Albany.

  • Larry Littlefield

    The payroll tax allowed the state legislature to send the transit system into ongoing long term decay rather than a sudden collapse, thus avoiding responsibility for what they have done.

    I would have preferred the sudden collapse. As should everyone who plans to be here five years from now and afterward, when most members of the state legislature will be retired to Florida.

  • John

    Reply to Bystander ( Jan 10, 2011 comment #7 )

    I agree that it’s a great idea..
    Unfortunately, the cops and politicians would say
    a gridlocked ghost town is a good thing..

    Only such idiots would take something like
    1) bumper to bumper traffic fill with fumes and smoke OR
    2) streets without pedestrians nor any vibrant street life
    and say only positive stuff about that….

  • J. Mork

    We pretty much did that in December 2005 when there was a transit (worker) strike. Except people without cars didn’t stay home. There were tons of bikes, and 5th Avenue was closed to non-emergency motor traffic. It didn’t seem to have any long term effect on Albany’s perception of the value of transit.

  • JK

    If you want healthy public transit you have to support the Payroll Mobility Tax. There is no replacing the $1.3B a year it’s bringing to the MTA. The best congestion pricing plan would net less than $600m a year. You can dwell in whatever fantasy world you want, but most of us are reconciled to keeping the MTA running within the constraints of the less than perfect political world we are stuck in. Klein, Savino et al are being irresponsible blow hards by trotting out this tiresome “Blame the MTA” crap yet again. It’s yet another distraction from Albany’s utter failure to put the MTA or state finances on a sound footing.

  • Larry Littlefield

    “If you want healthy public transit you have to support the Payroll Mobility Tax. There is no replacing the $1.3B a year it’s bringing to the MTA. The best congestion pricing plan would net less than $600m a year.”

    Well there is my suggestion:

    Option 1: Taxation of pension and Social Security benefits on the same basis was work income, with the money used to pay off the debt and pension hole.

    Going forward, the MTA has to get by on fares, tolls, congestion pricing, and its pre-payroll tax dedicated taxes — with no raids. A massive “exit tax” type real estate transfer tax would get those trying to flee the states before their debts can be paid off.

    Option 2: take away all those dedicated taxes, and have the MTA shut down for a period of months. Reorganize it with huge losses for bondholders and pensioners and restart it gradually beginning with the part that can cover its operating costs — the NYC subway.

    The loss of economic activity as jobs flee the region would lead to a drastic fall in housing prices. This would impact those who wanted to sell, but eventually benefit buyers.

    Either way, NYC ends up with a more vibrant economy and better quality of life in 2030 (and perhaps 2020) than anything the state legislature is likely to allow.

  • J. Mork

    JK — the annual ridership for buses is about 2 Billion. So to get $1.3 Billion, one option is to raise the fare sixty-five cents.

    (I’m not sure how many free transfers are in there, but I guess the worse case would be to double that.)

  • J:Lai

    I used to think the bankruptcy option was too far fetched to be realistic, but now I’m not so sure.

    Reorganization to the detriment of both bondholders and pension beneficiaries might not be the worst thing . . .

    Payroll tax revenue is uncertain because in the short term, it can be appropriated by the legislature (just because this hasn’t happened yet doesn’t mean it won’t, given precedents with other dedicated taxes.) In the long term, it is a tax which serves to diminish economic activity, specifically employment.

    Yes, it is brining in $1B+ in revenue. But that doesn’t mean it is anywhere close to the best way to raise that revenue, and in many ways it is counterproductive.

  • When someone here in the ‘burbs raised the payroll tax once, I immediately replied that transit keeps the Westchester roads much clearer than they would be. Can you imagine the Hutch or Saw Mill without all those MetroNorth trains?

  • Larry Littlefield

    “The annual ridership for buses is about 2 Billion. So to get $1.3 Billion, one option is to raise the fare sixty-five cents.”

    I believe that’s the annual ridership of buses and subways. How much of the fare increase would go to suburban transit?

    I continue to think NYC would be better off testing the “you need us more than we need you so you should sacrifice” assumption, rather than going along with it. State legislators, funded by outside interests and indifferent to most people living in the city, probably don’t agree.

  • Larry, I know two people who openly advocate shutting down transit service in New York. One is you. The other is Randall O’Toole.

  • Larry Littlefield

    “Larry, I know two people who openly advocate shutting down transit service in New York. One is you. The other is Randall O’Toole.”

    I don’t know who that is. My only point is that if it is going to happen, let it happen now.

    What they want is a gradual collapse while they slink away.

  • Larry Littlefield

    Moreover, I’m sick of being blackmailed by those taking more and more out with the expectation that I and my children would be even worse off otherwise.

    I spent a long time as someone concerned with community institutions, and I see that such concern has been fruitless. The more you put in, the more others take out, others who are somehow “vested” for more and more every time the economy improves, and exempt from “shared sacrifice” every time things get worse.

  • J. Mork

    “I believe that’s the annual ridership of buses and subways. ”

    Thanks; yeah. Editing error on my part.

  • Dan

    A payroll audit is typical performed by a third party who will inspect all company payroll records. Payroll audits are conducted for a variety of reasons. Payroll auditing is done to confirm internally that payroll information is correct including audit history and deductions which do not match contribution etc. The payroll audit also ensures that payroll audit procedures are in place. Make sure that the third party that handles your payroll auditing complies with correct payroll auditing procedures to ensure proper processes and controls are in place and data security for your important payroll information.