64° Good Evening
64° Good Evening

Kremer: Commuter tax is better alternative

MTA chair Jay Walder offers testimony at a

MTA chair Jay Walder offers testimony at a State Senate hearing on MTA finances on May 5 Photo Credit: Photo by Howard Schnapp

Jerry Kremer, Democratic assemblyman from Long Beach from 1966-1990, founded the lobbying firm Empire Government Strategies.

Earlier this month, Republican state senators sparred with the head of the Metropolitan Transportation Authority over the hated MTA payroll tax. The senators want to repeal it, but none at the hearing were able to suggest alternative funding.

Here's one: Fix the terrible mistake of repealing the commuter tax.

That blunder had more to do with raw politics than fiscal fairness. It was May 1999, and Albany's two houses were anxious for their majority parties to win a vacant State Senate seat in a special election in suburban Rockland County.

Republican state senators, eager to firm up control of their house, rushed through repeal of the 33-year-old tax on income earned in New York City by those living elsewhere in the state. The 39 to 16 repeal vote had the support of suburban Democrats, who also thought their party's candidate would be able to win the Rockland seat.

The State Assembly, long the protector of the city's interests, was expected to defeat the repeal by letting it die in committee. But to the surprise of the Democratic majority, the bill came to the floor for a vote. By the time the final vote was taken, 59 of the 98 Democrats supported the bill, along with 16 Republicans. Gov. George Pataki signed the bill into law within hours of its arrival on his desk.

When the tax was repealed, Mayor Rudy Giuliani denounced city lawmakers, saying, "Politics aside, after a while, it starts to become the theater of the absurd when you are voting against the interests of the people that elected you." Sen. Roy Goodman (R-Manhattan), a staunch supporter of the city, said "the bill would go down in the annals of this house as one of the most foolish pieces of fiscal folly ever perpetrated on the public."

Estimates of what the repeal cost the city and mass transit were upward of $450 million per year. With income growth and the passage of time, that same tax today could yield as much as $650 million per year or more, a significant chunk of what's currently coming in through the payroll tax.

Fast-forward to 2009. Faced with few alternatives for funding the MTA other than tolling the East River bridges, the Democratic-controlled State Senate passed a payroll tax on all businesses in the region, both for-profit and nonprofit entities, as well as self-employed individuals. The new tax, has taken a hit on every employer, from motels in Montauk to churches in Queens and delis in Rockland County. Hofstra University, one local example, pays more than $400,000 a year in mobility taxes for mass transit.

In hindsight, the political strategists were wrong in both cases: The 1999 special election in Rockland County ended up being an easy win for the Republicans; and the Senate Democrats' 2009 support of the MTA payroll tax cost them the majority, with the loss of two crucial Long Island seats.

So how can Albany now raise the necessary funds for mass transit and end the payroll tax? While Long Islanders may reflexively reject the idea of a commuter tax, it's still the fairest of all revenue raisers and could go a long way toward helping mass transit. It is also relatively inexpensive.

The tax would apply to salaries earned in New York City by state residents living outside the five boroughs. An individual with an annual income of $100,000 would pay just $450 over the course of a year -- 0.45 percent -- to help support the mass transit system that is the lifeblood of our entire region. The current payroll tax is at the rate of 0.3 percent of all payrolls in the MTA region, and is a tax on all companies with wage earners whether they use the MTA services or not.

Tolling the East River bridges would cost residents of the outer boroughs as much as $1,200 a year and, perhaps more important, it's a nonstarter in Albany. A group of suburban legislators from the Hudson River Valley proposed this revenue raiser recently, and it was shot down once again.

A much fairer way to raise money to keep the trains and buses running is a modest tax on the income of people who each day take advantage of a transit system that desperately needs to be upgraded -- whether because they use the system or drive on roads less congested because others do.

As a former legislator, I understand the reluctance to impose any new levy. But the arbitrary, unfair payroll tax should never have been adopted in the first place. Just as the commuter tax should never have been repealed.


We're revamping our Comments section. Learn more and share your input.