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Malcolm Smith

Eight Senate Democrats Join GOP in Vote to Repeal MTA Payroll Tax

9:38 AM EDT on June 16, 2011

In a 40-22 vote last night, the State Senate voted to phase out the payroll mobility tax, which generates about $1.5 billion per year for the MTA. The Senate proposal would eliminate the tax entirely in suburban areas while reducing it in New York City. Though the bill is expected to go exactly nowhere in the Democratic Assembly, it's a sign of the intense opposition to the payroll tax among Republicans and in the suburbs, as well as the collective delusion about the state of the MTA's finances.

Under the bill, sponsored by Long Island Senator Lee Zeldin and Majority Leader Dean Skelos among others, small businesses and schools would first be exempted from the payroll tax. By 2014, the seven suburban counties of the MTA region would be exempt while the New York City payroll tax would be cut by more than a third.

In addition to every member of the Republican majority, the bill garnered the votes of eight Democrats. Every Democratic state senator from outside New York City voted to repeal the payroll tax. Shockingly, so did Queens Senator Malcolm Smith, who while majority leader in 2009 was responsible for shepherding through the Senate the MTA funding package that had the payroll tax as its centerpiece. Every Senate Democrat voted for that bill at the time, meaning the six non-freshmen Democratic nays from last night flipped their votes (here's the roll call), whether because of a different political climate or the knowledge that this was merely a symbolic vote.

The Senate Republicans estimate that reducing the payroll tax by this much would take roughly $840 million away from the MTA each year. Their bill does include a few offsets in the form of existing revenues redirected to the MTA, which they claim would leave $375 million in total cuts to transit.

Capitol Tonight reporter Liz Benjamin, however, spoke to one source who said those offset estimates were wildly off the mark. Benjamin reports:

According to an Albany insider who crunched the numbers of this, by the time the bill is fully implemented in 2014, it would generate a budget gap for the MTA of about $800 million a year. That would be offset slightly by a statewide sales tax intercept, but the annual estimated hit to the authority is still hovering at about $768 million, this source maintains.

Even more fantastically, the Republicans are claiming that their cuts need not result in any increased fares or reduced service.

"There is absolutely no doubt that the MTA, without increasing fares or cutting services, can balance its books after this legislation is implemented," said Zeldin in a statement. "One must question the motives and veracity of any individual or group that attempts to dispute this fact going forward."

When Albany stole $143 million from the MTA in late 2009, of course, it led to last year's unprecedented wave of service cuts and fare hikes. Moreover, with a $10 billion deficit in the MTA's capital budget, enormous fare hikes or service-worsening deferred maintenance are already in transit riders' future unless Albany acts to provide new revenue for the MTA. Question our motives all you want, but Zeldin's claim is nothing short of delusional.

Benjamin's source lays out what's more likely to happen if the Senate Republicans get their way:

Well, the MTA pretty much has one major revenue generation option: Fare increases.

If the split was 50-50 between the subway system and the rails (LIRR and Metro North), fares would increase 15 percent and 30 percent, respectively, according to this source. If the MTA decided only the commuter lines should take the hit, which one could argue makes sense, since that’s what services those seven counties, fares would have to up a whopping 64 percent.

"It’s ironic that the Republican majority in the Senate would pass payroll tax relief bill that would drive a high fare increase for rails,” this source said.

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