Relates to the metropolitan commuter transportation mobility tax

Summary of provisions

Section One amends section 800 of the tax law, as added by section 1 of part C of chapter 25 of the laws of 2009 to define: "region one" as counties contained wholly within a city with a population of one million or more (New York City's five boroughs), "region two" as the counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester, and the metropolitan commuter transportation district ("MCTD") as the combination of these two regions. This section also excludes from the definition of an "employer" for the purposes of the imposition of this tax: agencies and instrumentalities of the United States, the United Nations, an interstate agency or public corporation created pursuant to an agreement or compact with another state or with Canada, public primary and secondary schools, non-public primary or secondary schools who have tax-exempt status within the MCTD, employers with twenty-five or less employees within the MCTD and self-employed individuals within the MCTD.

Section Two amends section 801 of the tax law. as added by section 1 of part C of chapter 25 of the laws of 2009 to provide a reduction in the tax imposed on region one employers from 0.34% to 0.28% for one year commencing January 1, 2013 and from 0.28% to 0.21% commencing January 1, 2014. For region two, the tax imposed shall be reduced to

0.23% on January 1, 2012, 0.12% on January 1, 2013, and fully eliminated as of January 1, 2014.

Section Three repeals Section 3609-g of the education law, which provided for the reimbursement of public schools for their MTA PMT payments.

Sections Four through Twelve provide measures to mitigate the immediate fiscal impact of this legislation on the MTA's operating budget. These measures include: $150 million in special aid and incentives to the City of New York for the NYC Transit Authority (Section Four); directing that any surplus moneys in the metropolitan mass transportation operating assistance account (MMTOA) be used only to support transit systems (Section Five); dedicating a portion of the prepayment of gasoline and diesel fuel sales tax to MMTOA (Sections Six through Eleven); section Twelve dedicates a maximum of $100 million from Regional Greenhouse Gas Initiative (RGGI) and Energy Efficiency Portfolio Standards (EEPS) revenues to the MTA.

It should be noted that the dedication of gas and diesel sales tax revenues provided for in this legislation does not represent any increase these taxes. It is a dedication of existing tax revenues only.

Section Thirteen provides the effective dates.

Justification

Enacted in 2009, article 23 of the tax law imposed an onerous tax on employers in the areas serviced by the Metropolitan Transportation Authority. This region, called the Metropolitan Commuter Transportation District (MCTD), includes New York City's five boroughs as well as the surrounding counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester. Employers who are required to withhold New York state income tax from employee wages and whose payroll exceeds $2,500 quarterly are currently required to pay a 0.34% tax on payroll expenses allocated to the MCTD. This amounts to $.34 per $100.00 of their payroll. Self-employed individuals who make more than $10,000 during the tax year are subject to the same 0.34% tax rate on their net earnings from self-employment allocated to the MCTD.

Taxing existing jobs and new job creation has had a crippling effect on the economy of the MCTD. This tax is having a severe negative impact on economic recovery, and is discouraging growth of new business and job creation at a time when the government should be promoting these objectives.

To address the negative effect of this tax on jobs and economic growth as well as the effect on school district property taxes, the tax shall immediately be repealed for the self employed and for employers with twenty five or fewer employees as well as public and non-public schools. Under current law, public schools are required to pay the mobility tax; however, they are reimbursed by the state for this cost. This legislation fully exempts public schools from having to pay the tax. This relief applies to employers, public and non-public

schools and the self-employed throughout the entire MCTD, including New York City.

A gradual reduction and repeal permits the MTA to absorb the reduction of PMT revenue without disruption of services or the need for fare increases. This legislation would reduce the amount of the tax imposed on employers of 26 or more employees in the seven counties outside of New York City to 0.23% beginning on January 1, 2012, and again to 0.12% beginning January 1, 2013, with a complete elimination one year later on January 1, 2014. For New York City employers of 26 or more, the tax would remain at the 0.34% level within the five boroughs until January 1, 2013, when it shall be reduced to 0.28% until January 1, 2014, when the tax will be reduced again to 0.21%.

This legislation's expedited reduction and ultimate repeal for the counties outside New York city reflects the fact that these areas are not as reliant on the MTA's services. While residents of New York city's five boroughs utilize the subways and busses in their daily life, many residents of the surrounding counties use MTA services infrequently. A review of ridership indicates that MTA service utilization rates are more than eight times greater in New York city than in outlying areas.

When fully implemented in 2014, the estimated $840.9 million in tax savings generated by this legislation represents a tiny portion of the MTA's expected $15 billion 2014 operating budget. The legislature's intent and expectation in enacting this legislation is that the MTA can absorb the gradual loss of PMT revenue through improved operating efficiencies, and without resorting to fare increases or service reductions. However, this legislation also includes several measures to mitigate the immediate fiscal impact of the PMT phase-out on the MTA's operating budget and in order to provide the MTA with the opportunity to implement greater operating efficiencies. These mitigation measures will result in the MTA having to absorb only $354.3 million in foregone PMT revenue by 2014, a tiny 2.4% of the MTA expected $15 billion operating budget.

As the economy of the MCTD improves through the reduction and repeal of the MTA PMT, the various other sources of revenue for the MTA will also recover. The legislature expects that this economic recovery, as well as the increased operating efficiencies implemented by the MTA due to to the repeal of the PMT, will provide the MTA with adequate operating revenues in the years ahead. Clearly, there is no need for the MTA to have to resort to fare hikes or service cuts as a result of enacting this legislation.

Legislative history

New bill.

Fiscal implications

When fully implemented on January 1, 2014, the total tax savings generated by this legislation is estimated at $840.9 million. The mitigation measures provided to the MTA by this legislation are expected to offset approximately $486.6 million of the estimated tax savings, for a net $354.3 million in foregone revenue for the MTA.

Effective date

This act shall take effect immediately; provided, however, that the provisions of sections one, six, nine, ten and eleven of this act shall take effect January 1, 2012; provided further that sections three and seven of this act shall take effect on January 1, 2013,; provided, further, that section eight of this act shall take effect on January 1, 2014; provided, further, that amendments to paragraph (a) of subdivision 3 of section 89-b of the state finance law, made by section ten of this act shall be subject to the expiration and reversion of such paragraph pursuant to section 13 of part U1 of chapter 62 of the laws of 2003, when upon such date the provisions of section eleven of this act shall take effect.