If you want less of something, tax it. We want people to smoke and drink less, so we have heavy taxes on tobacco and alcohol products.
In the midst of the Great Recession, New York state leaders apparently want to cut down on jobs, at least in the New York City area.
In August, unemployment in the country’s biggest city hit 10.3 percent, well above the national average of 9.7 percent. With numbers like that, the state should be giving out medals to companies that continue to provide New Yorkers with jobs. Instead, it is imposing a new payroll tax.
The Metropolitan Commuter Transportation Mobility Tax was enacted in May and the first payment is due on Nov. 2. The tax affects employers, self-employed individuals and partnerships that do business in the area served by the Metropolitan Transportation Authority. That area, referred to as the metropolitan commuter transportation district (MCTD), includes the five boroughs of New York City and the counties of Nassau, Suffolk, Rockland, Westchester, Orange, Putnam and Dutchess.
Employers who withhold New York state income tax from wages and whose payroll expense exceeds $2,500 in any calendar quarter are required to pay the tax, which is set at 0.34 percent of payroll expenses for employees working in the region. Exemptions are included for federal government agencies, the United Nations, household employers and interstate agencies or public corporations “created pursuant to an agreement or compact with another state or Canada.” Partners in partnerships and self-employed individuals who earn more than $10,000 in a single tax year in the MCTD must pay 0.34 percent of those earnings.
This money will go to the beleaguered MTA to help close its budget gap. The tax was proposed as alternative to dramatic fare hikes and service cuts. The fare increases that took effect over the summer were moderate, compared to earlier fears. The transit agency increased the cost of a single subway ride from $2.00 to $2.25 and boosted the price of an unlimited monthly pass from $81 to $89.
On the surface, this seems like a win for working-class New Yorkers who rely on public transportation. However, foisting costs onto businesses and state and local agencies will hurt more in the long run.
Republican State Sen. John Bonacic complained, “This tax will take millions out of the collective small businesses of the Hudson Valley. Those millions of dollars would have circulated throughout the Hudson Valley in terms of employee salaries, job creation, and investment.”
Soaking up money that might have gone to restoring the economy seems to be the state’s fiscal strategy these days. Last spring, Gov. David Paterson signed a budget bill that creates two new tax brackets, raising the highest income tax rate from 6.85 percent to 8.97 percent. The change is a temporary measure that is supposed to be phased out after three years. But, given the state’s poor financial condition, its over-reliance on the perceived cash cow of Wall Street and its laughingstock leadership, I doubt many entrepreneurs, professionals, executives and financiers — the target of the tax — are counting on that happening. Instead, many are probably looking for ways to divorce themselves financially from the Empire State. And if those folks leave, they are going to take a lot of other jobs with them.
It is worth remembering that gasoline spiked above $4 a gallon last year. Then the economy cratered, prompting many people to look for ways to cut expenses. Both of these facts should have meant boom times for New York’s dense, well-used public transportation system. Instead, the MTA said it could not continue to function without major infusions of new cash. Something is wrong with this picture.
Rather than find and fix the problem, New York’s elected officials (in which we can charitably include the accidental governor, who was at least elected to his prior post as Eliot Spitzer’s lieutenant) decided, characteristically, to throw money at it. That may cause bigger problems down the road, but Albany’s philosophy is to let someone else worry about that.
So, if you employ yourself or somebody else in the MTA’s New York service region, get ready to pay more for the privilege. Or you can exercise your freedom to cut down on things that are bad for you, like smoking, drinking and making a living.