New York gubernatorial candidate Carl Paladino said Tuesday he would repeal a tax meant to support bonds for New York City transit projects, slash Medicaid, and cut personal income taxes.

The Republican businessman from Buffalo, who is vying with Democratic Attorney General Andrew Cuomo for the state’s top job, vowed to “provide our businesses relief from the onerous taxes and regulations that are strangling us today” if he is elected Nov. 2.

Last year, lawmakers enacted a payroll tax on employers in the 12 counties served by the Metropolitan Transportation Authority that was intended to raise $1.54 billion in 2010. The revenue stream would support about $6 billion of bonds as part of the agency’s $26.27 billion, five-year capital plan, which currently has a funding gap of $9.9 billion.

In February, Moody’s Investors Service downgraded the MTA’s transportation revenue bonds to A3 with a stable outlook from A2. Analysts cited the disclosure that revenue estimates from the payroll tax had been cut $350 million in the current year and $200 million in future years. The rating returned to A2 when Moody’s recalibrated its ratings to a global scale.

Paladino said he would end the tax.

“If we totally repeal this onerous tax, taxpayers would save $1.5 billion a year,” he said. “I will start by repealing this tax burden on suburban taxpayers who don’t benefit from the tax.”

Paladino said his administration would pay for the lost revenue by “cleaning up the waste and fraud and abuse at the MTA and ensure taxpayer’s money is not flushed down the MTA toilet.”

He also indicated that he would fire MTA chairman and chief executive officer Jay Walder. He appeared to say “yes” when asked whether he would break up the authority, which includes two commuter rails, bridge and tunnels, a subway and bus system.

“I’m going to take the MTA apart piece by piece,” Paladino said. “I will put it under a microscope.”

Neysa Pranger, spokeswoman for the Regional Plan Association, said the tax was likely to stay.

“I don’t think the payroll mobility tax is going anytime soon,” she said. “It might be unpopular, but until we’re serious about talking about serious ways to fund transportation, you can’t just get rid of [it].”

This year, the MTA implemented a series of efficiency measures that include reducing overtime, deferring projects, cutting service, and trimming the administrative staff at headquarters to save a projected $381 million in 2010 and generate recurring annual savings of $525 million. It has cut 3,400 positions so far this year, reducing its headcount to 66,292.

Paladino said he would cut state personal income taxes by 10% in his first year and continue to cut them back more every year. He also said he would cut spending.

PIT bonds, which are secured by a pledge of 25% of personal income tax revenue, are the state’s main vehicle for debt issuance. New York currently projects a 4.6 times debt-service coverage ratio on $1.3 billion of PIT bonds in the market this week. That ratio would have been four times if a 10% cut to the personal income tax been in place on the $34.75 billion of PIT revenue collected in fiscal year 2010.

Paladino also called for slashing Medicaid by $20 billion, with half of that coming from the state and local government share. At $53.2 billion in the current fiscal year, Medicaid is one of the largest expenses in New York’s $136 billion budget. It is funded by the state and local governments and federal matching funds.

William Van Slyke, spokesman for the Health Care Association of New York State, said that Medicaid reimbursement needs to be reformed but simply cutting costs isn’t the answer.

“There has to be a fundamental change in how we approach controlling Medicaid spending,” he said. “The reimbursement system as it is needs to be structurally reformed to better incentivize and create systems that coordinate” care for the elderly and chronically ill.

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