New York Gov. David Paterson wants to increase the level of taxation on New York City businesses to support the Metropolitan Transportation Authority, the according to a press release yesterday.
Paterson said the proposal would return revenue from a payroll tax — known as the mobility tax — to forecasted levels following disclosure last week that collection would come up $350 million short this year.
Moody’s Investors Service last week downgraded the MTA’s transportation revenue bond credit to A3 with a stable outlook from A2 with a negative outlook following. The action followed the disclosure that mobility tax collections would come in far below expectations in this year and that future revenue would be $200 million less than previously forecast. The MTA delayed by one day a $657 million bond deal on the day the credit was downgraded.
The mobility tax was enacted last year as part of a bailout package for the MTA. Paterson’s proposal would eliminate the current 0.34% flat rate paid by businesses in the 12 counties served by the MTA and replace it with a two-tiered structure. Businesses in New York City would see their rate rise to 0.54% while the rate in the seven affected counties outside the city would be cut to 0.17%. Paterson’s proposal would also increase an exemption from the tax on partners and the self-employed to $100,000 from $10,000.
“The new proposal I am putting forward will provide relief to straphangers, as the MTA makes the difficult decisions necessary to balance its budget during an historic fiscal crisis that is significantly impacting all levels of government,” the governor said in a press release. “In addition, it also makes key improvements to the current tax structure, promoting regional equity and delivering relief to small businesses.”
The new structure would increase New York City’s portion of mobility tax revenue to 88% from 70%, according to the press release. The mobility tax was originally forecast to bring in $1.54 billion in 2010, $1.6 billion in 2011 and $1.7 billion in 2012.
New York City Mayor Michael Bloomberg’s press office had no immediate comment on the proposal yesterday.
“This proposal puts the train into reverse on the track toward equity in financing what is a regional transportation system,” said Carol Kellermann, president of Citizens Budget Commission, a business-oriented fiscal watchdog organization. “While we understand suburban taxpayers feel burdened by the mobility tax, their property values are enhanced by the access to the central N.Y.C. business and cultural areas that MTA services provide.”
The tax has been especially unpopular in the counties outside of New York City, which could play an important role in deciding the balance of power in the state Legislature. Democrats control the Senate by a narrow majority in an election year.
Senate Minority Leader Dean Skelos, R-Rockville Centre, called for the tax to be completely eliminated, claiming that it had driven away jobs.
“If we are going to make New York more competitive and create jobs instead of driving them away, we must first stop the cycle of spending hikes and tax increases,” he said in a statement.