Big NYC businesses gets hit with payroll mobility tax increase in Hochul’s proposed budget

The year was 2009 and Democrats had managed to wrench control of the state Senate in the prior year’s election for the first time in decades. A lot happened that year that led to Democrats’ downfall in the chamber for another decade – tales of the coup anyone? – but political observers have long considered one decision the death knell for a handful of vulnerable and crucially important state Senate seats that Democrats held tenuous control of on Long Island. And that was the creation of the regional payroll mobility tax to help fund the Metropolitan Transportation Authority. 

Fast forward to the current budget process when Democrats hold a supermajority in both chambers of the Legislature as well as the governor’s office. But that doesn’t mean the so-called commuter tax has become any less contentious in the suburbs. It’s no surprise that despite an initial proposal from Gov. Kathy Hochul to increase the tax rate nominally for the entire MTA region, a final budget deal will limit the raise just to New York City businesses.

Democrats in 2009 used their rare control of the state Senate to create the payroll mobility tax to support the transit agency, which is in a perpetual state of financial crisis. Although the MTA serves the suburbs to the east and north of New York City, its primary reputation is that of the agency that runs the city’s buses and subways. And suburbanites bristled at the idea of being forced to pay for what they considered a problem for the city. In 2010, Republicans defeated the lone two Democrats on Long Island who afforded Democrats their slim majority in the state Senate. One former Assembly member from Long Island once described those senators’ votes as “political malpractice” to City & State.

So when Hochul first proposed increasing the payroll mobility tax to 0.5% for the entire region to help bail out the MTA, it’s no surprise that much like her housing plan that involves overriding local zoning laws, it didn’t go over well in the suburbs. In the tentative deal that Hochul announced Thursday night, big businesses in New York City would instead see an increase to 0.6% with the suburbs getting spared. “The most gracious analysis is that somebody in the city Democratic leadership finally realized how incredible, perhaps unique, a burden suburban taxpayers already bear with (the) highest property taxes on the planet,” Lawrence Levy, the executive dean at the National Center for Suburban Studies at Hofstra University, said in a text. “Of course, the more cynical interpretation, but one without some validity, is that the Senate Democratic leaders actually want to win back some of the seats they lost and help avoid an ‘extinction event’ for the remaining suburban Democrats.”

A red wave swept Long Island in 2021, with nearly every countywide seat and many other local positions in both Nassau and Suffolk falling into Republican hands. Last year, several seats previously held by Democrats on Long Island and the Hudson Valley flipped from blue to red, even though the party held onto their supermajority. The turnover was even starker at the federal level as Democratic losses in New York lost the party the House. Given the fraught history of the commuter tax, it’s within reason that Democrats would fear that it could cost them again in 2024.

Not everyone viewed the final deal so charitably, especially lawmakers in New York City. “It’s preposterous, it defies logic,” Assembly Member Robert Carroll of Brooklyn told City & State. “Why, when we’ve got a regional system, would we not have the region help pay for its operating cost in an equal and equitable manner? Especially considering that (the Long Island Rail Road) and MetroNorth consistently receive more operating dollars and capital dollars per capita than New York City Transit.” He said that from conversations about the proposal with fellow lawmakers, suburban reps were seeking exemptions for certain areas that eventually evolved into a blanket exemption for all of the city’s suburbs.

The final compromise has also received criticism from at least one financial government watchdog. The left-leaning Fiscal Policy Institute released a report this week that concluded that exempting the suburbs from the payroll mobility tax increase will cost the MTA $200 million. Hochul said the city-only increase would generate about $1.1 billion in new revenue for the transit agency.