NY: Subway Riders Could Pay for New York Tax Breaks

Dec. 9, 2011
A deal being crafted in Albany to revamp the state's tax code could end up costing subway riders in New York City.

New York City subways are likely to suffer under an agreement brokered by New York Governor Andrew Cuomo to overhaul the state's tax code.

The financially strapped agency that runs the trains, the Metropolitan Transportation Authority, stands to lose a key component of its funding in the deal. The subway system would be out at least $250 million a year that it currently derives from payroll taxes paid by employers of New York workers. The state would supposedly make up the shortfall, but many observers are wary about that prospect.

"A measure of skepticism would not be out of line," writes The New York Times. "Albany budget makers have a history of pocketing money intended for transit to cope with their own headaches. A couple of years ago, a subsidy that made MetroCards available to students all but disappeared, and was then only partly restored."The payroll tax for New York and surrounding communities charges employers 34 cents for every $100 they spend on payroll. It was first imposed in 2009, in an attempt to shore up the MTA's finances. Many businesses oppose it, as do suburban Republicans. Phasing out part of the tax was a key component of the compromise Cuomo forged with lawmakers, explains Capital New York.

"The tax is a political dog in those places," the site reports. "So the Long Island Republicans who run the Republican majority in the State Senate, and who therefore control the Senate, have lobbied fiercely to get rid of it. This past June, the Senate voted to phase it out, but the proposal, which would have blown a hole in the MTA budget absent a replacement source of revenue, went nowhere in the Democratic-controlled Assembly."

The current deal would only scale back the tax, not eliminate it. Small businesses and schools would no longer have to pay it, while other employers would see reductions in their bills. With the changes, the New York Postreports, the tax would go from bringing in $1.5 billion a year to $1.18 billion. Currently, it accounts for 14 percent of the transit agency's funding.Some experts feel the $250 million estimate of transit agency losses might actually be on the low side. Transportation Nation, a website that deals with transportation issues, says the cuts could amount to as much as $370 million.

"Transportation Beat" provides a quick analysis of recent transportation news in state government. Click here to find Stateline's daily roundup of transportation news. - Contact Daniel C. Vock [email protected].

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