Imposes a tax on wages and self employment income earned within New York city by resident and nonresident individuals, estates, and trusts

Summary of provisions

Section 1 contains the short title of this legislation. Section 2 creates the Municipal Service Support and Enhancement Tax. This tax is levied at a rate of 1.25 percent on the wages and self-employment income earned within New York City by residents, non-resident individuals, estates and trusts. There is an income threshold of $50,000. Of the annual estimated $2.8 billion in revenue, $1 billion would go directly to the Metropolitan Transportation Authority and the remaining $1.8 billion of annual revenue would be deposited in the treasury of New York City to be used specifically for "law enforcement, public protection, public safety, and transportation expenditures" by the City. The tax shall be deemed to be in full force and effect on and after January 1, 2007 and shall remain in effect until December 31, 2010.

Justification

Until June of 1999, the City of New York, as authorized by State law, imposed a tax on the wages and self-employment income of commuters who worked in the City but lived outside of the City. Chapter 5 of the Laws of 1999 was intended to repeal that portion of the commuter tax imposed on commuters who live in New York State. The rationale behind this repeal was that even though all commuters benefit from City services, instate commuters contribute to those services indirectly through other State taxes and through the services provided to the City by their own localities. Since there is no comparable recoupment from those outside of the State, the tax was retained on those commuters.

Since then, court rulings have decided that the imposition of a commuter tax solely on out-of-state residents violates the equal protection clause of the federal Constitution. Therefore the remaining portion of the commuter tax was declared unconstitutional.

The Municipal Service Support and Enhancement Tax is a State tax imposed on the wages and self-employment earnings in New York City of all resi- dent and non-City residents. Despite a record property tax increase and

repeated spending cuts across all city agencies, New York City is still facing multi-billion dollar deficits. For the city to make deeper cuts in basic services like education, sanitation, police and fire protection would risk driving both residents and businesses that employ suburban commuters, out of the city. To prevent that from happening, it is neces- sary to create an infusion of funds to maintain these essential services. Furthermore, the Metropolitan Transportation Authority, which makes the economic integration of the entire metropolitan region possi- ble, is overburdened with debt and facing growing budget deficits for both its operating and capital needs. To maintain the mass transit system upon which millions of city and suburban residents depend, the MTA is also in need of new revenue. $1 billion in revenue generated by this legislation would go directly to the MTA and the remaining $1.8 billion in revenue generated would go to the City to provide those services that will be used by residents and nonresidents including those which provide public protection, safety and transportation.

Legislative history

2008: A8549 (Kavanagh) - Ways and Means 2007: A8549 (Kavanagh) - Ways and Means

Fiscal impact on the state

The Municipal Service Support and Enhancement Tax is estimated to gener- ate $2.8 billion: $1 billion to go directly to the Metropolitan Trans- portation Authority and the remaining $1.8 billion to be deposited in the City treasury for specified purposes.

Effective date

This act shall take effect immediately and shall be deemed to have been in full force and effect on and after the first of January next preced- ing the date on which this act shall be become law.