Recalling 2009, Long Island lawmakers oppose MTA tax hike

ALBANY — An increase in the MTA payroll tax, recently proposed by Gov. Kathy Hochul, won’t impact nearly as many employers as it did when implemented in 2009. But political opposition might be just as loud from suburban lawmakers who want to block it.

It’s one issue that appears to unite Long Island Democrats and Republicans in the State Legislature.

“I don’t want to put added fiscal stress on Long Islanders, and this mobility tax, or whatever they call it, will do just that,” State Sen. Kevin Thomas (D-Levittown) said. “What is the need for this?”

At issue is Hochul's call to increase the top tax rate on a payroll tax that is paid by some employers in the 12-county region serviced by the Metropolitan Transportation Authority. The Democratic governor said the hike is needed to help the MTA recover from a huge deficit triggered in part by a steep decline in subway and train ridership during the COVID-19 pandemic.

“The New York City economy drives the state of New York,” Hochul said when unveiling her proposed budget for fiscal 2023-24. “And the MTA helps drive the New York City economy, so it’s critically important for all of us.”

The tax has a stormy and, for Democrats, a costly political history.

The levy — officially known as Metropolitan Commuter Transportation Mobility Tax — was enacted in 2009, a year after the stock market meltdown that sent the nation into a recession. Then-Gov. David A. Paterson approved the tax as a way to cover a massive deficit and help fund the MTA.

But its unpopularity resulted in the ouster of two Democratic state senators on Long Island in 2010, which flipped Senate control back to Republicans. In 2011, the GOP helped push a rollback that exempted schools, libraries and businesses with less than $1.25 million annual payroll. Municipalities aren't exempt.

Since then, no one’s tried to touch the issue.

Now, with the MTA facing a “fiscal cliff,” Hochul suggested a multipronged remedy, including cash infusions from the state and city, a chunk of future casino revenues, and a rate increase in the top bracket of companies still subject to the payroll tax — companies with $1.75 million or more in annual payroll.

To be sure, the number of companies paying the highest rate and, therefore, potentially impacted is a subset of employers in the MTA region.

About 20,600 companies or self-employed individuals fall into the top bracket in the 12-county region, according to the state Tax Department. About 5,400 filers fall into the lower tax brackets and wouldn’t be affected. 

The 20,600 who would pay more represent about 5% of the more than 400,000 employers in the MTA-serviced region, according to the Hochul administration.

For those, the tax rate would increase from 34 cents for every $100 dollars of payroll to 50 cents, under the governor’s proposal. If approved, a company would pay $500 in tax for $100,000 of payroll instead of $340. It would generate about $800 million annually in extra revenue for the MTA, the governor said.

"Making this plan work is going to have a little bit of sacrifice from all stakeholders to just make sure that we're all doing our share, because there are no other options," Hochul said. "The MTA must continue. It must continue being safe, reliable, and available for New Yorkers." 

The MTA has said it is running out of money and headed for a deficit. It's also said Long Islanders will be getting more and better service through the "third track" expansion and the new Grand Central Madison station.
But the opposition to the payroll tax still will be vocal.

"As an individual point of contention, it probably wouldn't have the energy it had a decade or so ago. But you add it to expected pushback on [Hochul's] housing proposals and other issues and you have the makings of political synergy," said Lawrence Levy, executive dean at the National Center for Suburban Studies at Hofstra University.

Levy referred to Hochul's plan to spur the building of affordable housing, which includes allowing a state entity to overrule local zoning decisions.

Most Island lawmakers — Democrat or Republican — panned the tax hike as soon as Hochul proposed it. Democrats control the Senate and Assembly and though many of them know the MTA needs help, the payroll tax didn’t go over well with the members, sources said.

“Due to the diligent work of the Senate GOP, the impact will not be felt as widely as it was in 2009,” State Sen. Anthony Palumbo (R-New Suffolk) said in a statement to Newsday. “However, this new tax increase will still hurt the downstate economy, especially our businesses still finding their footing after the pandemic.”

Democrats are objecting too.

Assemb. Fred Thiele (I-Sag Harbor) considers the idea a "non-starter."

“I am 100% opposed to any increase in the MTA mobility tax,” State Sen. Monica Martinez (D-Brentwood) said. “This is something we need to band together on. This is something that does not cross party lines. This should be a nonpartisan issue.”

Hochul and lawmakers are supposed to adopt a budget by April 1, the start of New York's fiscal year.

Correction: A previous version of this story incorrectly listed the payroll tax rate under the governor's proposal. It would increase from 34 cents for every $100 dollars of payroll to 50 cents.

By Yancey Roy

yancey.roy@newsday.com@yanceyroy