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Judge rules MTA payroll tax unconstitutional

NEWS 12 WESTCHESTER: The tax was supposed to save the cash-strapped MTA. (Aug. 23, 2012)

A state court on Wednesday agreed with leaders in Westchester, Putnam and Long Island, striking down a controversial payroll tax levied by the MTA by ruling the tax unconstitutional.

Nassau County filed the suit in 2010 while in the midst of a funding battle with the Metropolitan Transportation Authority, which was looking for ways to seal a $1.8 billion budget gap. Westchester, Putnam and Suffolk counties joined the lawsuit as plaintiffs, along with more than a dozen towns and villages from Long Island to Orange County.

The communities challenged the MTA's solution to its budget shortfall -- a payroll tax that charges employers in the MTA region 34 cents for every $100 of payroll. The tax violated the State Constitution because it changed the tax policies of individual municipalities for a purpose that did not benefit the entire state, State Supreme Court Judge R. Bruce Cozzens Jr. ruled.

"The MTA payroll tax is a special law, which does not serve a substantial state interest," Cozzins Jr. wrote in his decision. Because the state did not seek a home rule message, "this was passed unconstitutionally."

Reaction was swift among county and municipal leaders who opposed the MTA's tax.

"This is good news for Westchester County and its municipalities," Westchester County Executive Rob Astorino said in a statement issued Wednesday night. "The MTA payroll tax is essentially an unfunded mandate from Albany. In this case, we were allowed to challenge it. We did. And now we've won an important victory with the court's decision that this unfair burden on taxpayers was unconstitutional."

Nassau County Executive Edward Mangano called the ruling "a great victory for every taxpayer."

"This success sends a strong message to job creators that we will not allow the MTA to stifle economic growth and chase jobs out of our state," Mangano said in a statement. "This is a historic victory for tax relief and tax reform. I am proud that Nassau led counties and villages around this state to a tax relief victory."

An MTA spokesman was not immediately available to comment.

The tax was created in 2009 as part of a $2.3 billion state bailout of the Metropolitan Transportation Authority as it faced a record deficit.

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