EDITORIAL: Payroll taxes: Revisions for the suburbs are a dream

Bad financial news continues to roll in for the MTA and state coffers. Income and payroll taxes are simply not generating the revenue officials had expected. New York's ability to tax in this economy may be reaching its upper limit.

The MTA's hated payroll tax, which lawmakers passed last year for New York City and seven surrounding counties, is collecting $240 million less than the $1.54 billion projected. Some people, especially sole proprietors, aren't aware they must pay the new tax. But the state budget division's estimates also failed to account for the state's eroding wage base. They should have their calculators repaired.

In response to the weak numbers and political pressure, Gov. David A. Paterson this week proposed halving the payroll tax for Long Island and other suburbs - to .17 percent from .34 percent. Manhattan and the boroughs would pick up the tab, plus the shortfall. With a city-dominated State Legislature, this plan hasn't a prayer. But filling MTA gaps instead by using federal stimulus money intended for maintenance, as transit advocates have proposed, is shortsighted.

Wall Street paying bonuses in stock options - delaying tax collection by years - helped blow another $750 million hole in the state's financial plan. Yesterday, Paterson amended his budget proposal, bringing the total to $1.1 billion in new or increased taxes and fees, in part to offset this.

But the governor and lawmakers must lead in these diminished times, and adjust spending to what the state can afford. hN