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Queens Chronicle

Judge strikes down MTA payroll tax

Authority vows appeal of ruling that could cost mass transit $1.8B

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Posted: Thursday, August 30, 2012 10:30 am | Updated: 11:07 am, Thu Sep 6, 2012.

The Metropolitan Transportation Authority is vowing to appeal a ruling last week that could strip it of more than $1.8 billion in funding per year.

The Payroll Mobility Tax, which is charged to almost all employers in New York City and the surrounding counties served by the MTA, was ruled unconstitutional by a judge in Nassau County Supreme Court on Aug. 22.

Nassau and Suffolk counties were among the plaintiffs in the case. Four previous attempts to have the law ruled unconstitutional had failed.

Joseph Lhota, chairman of the MTA, was blunt about the impact should the ruling of Judge Bruce Cozzens Jr. be upheld on appeal.

“It would be a catastrophe for the entire region and the entire state economy that depends on it,” he said during a press conference on Thursday.

“Without the Payroll Mobility Tax, the MTA will be forced to balance its budget with a combination of devastating service cuts and ever-increasing fare hikes,” Lhota added.

The New York Post and The Wall Street Journal quoted Lhota as saying that “without the services that the MTA provides, New York would choke on its own traffic.”

The current law charges companies 34 cents for every $100 in payroll provided total payroll exceeds $2,500 per quarter. Also affected by Cozzens’ ruling are state surcharges on car registration, driver’s license applications and taxi rides.

Collection of the taxes will continue while the case is appealed.

“We will vigorously appeal it and we expect that it will be overturned,” the MTA said in a statement issued on Thursday.

Cozzens found that the law — passed by the Legislature in 2009 to bail out the MTA — was unconstitutional because the entire state does not benefit from it; he wrote that the Legislature should have followed so-called home-rule procedures in the effected counties. But proponents of the tax said the MTA, through the revenue generated for the state by New York City, very much benefits the entire state.

“This decision threatens the foundation of the state’s economy,” said Paul Steely White, executive director of Transportation Alternatives in Manhattan, in a statement from the organization.

“Public transportation is critical to the New York City Metropolitan area — an area which provides 45 percent of the state’s tax revenue, paying for countless public services from Niagara Falls to Montauk,” he said.

Gov. Cuomo has been quoted in multiple media sources as saying the ruling should be overturned.

The decision has been cheered in Nassau, Suffolk and other counties, with their officials calling on the MTA to tighten its belt.

Senate Majority Leader Dean Skelos (R-Rockville Centre) also hailed the ruling.

So too did Councilman Eric Ulrich (R-Ozone Park), who hopes to join Skelos by getting elected in the 15th Senate District.

“[The] Supreme Court decision declaring the MTA payroll tax unconstitutional is good news for small businesses in Queens,” Ulrich said in a statement issued by his campaign.

“Hopefully this will force the MTA to identify smart, cost-saving solutions to balance its budget rather than simply cutting bus service and raising fares,” Ulrich said. “Albany must get the MTA’s budget under control. Asking small businesses to shoulder the burden for public transportation is unfair and I’m glad the court agreed.”

Skelos spokesman Scott Reif did not have any specific recommendations for where the majority leader would be willing to accept fare hikes or service cuts for the Long Island Rail Road, such as for the Babylon branch, which serves his Rockville Centre home, or the West Hempstead branch that runs through his district.

“That is a conversation we are expecting to have with Gov. Cuomo and our colleagues in the Assembly,” Reif said. “Republicans have held the majority in the Senate for most of the last 40 years and we have always funded the MTA. Our point is that the payroll tax was unfair and never should have been put into place to begin with. Not a single Republican in the Senate voted for it. A tax on businesses in the middle of a recession is not the way to go.”

Reif pointed out that Cuomo last year agreed to a deal that reduced the tax, with the state making up the money to the MTA from other sources.

The spokeswoman for Nassau County Executive Ed Mangano did not respond to an email seeking comment from Mangano or any specific recommendations for fare increases and service cuts on the LIRR, or alternative funding sources.

Nassau County is served by approximately 60 LIRR stations.

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