Albany Deal on MTA Tax Won't Cut MTA Budget -- Yet

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New York Governor Andrew Cuomo (photo courtesy of Gov. Cuomo's flickr page)

Staying one step ahead of the zeitgeist, NY Governor Andrew Cuomo reversed himself and agreed to a tax hike on the super-wealthy today. To secure Republican agreement, he bartered away $250 million in revenue collected to fund the NY MTA -- but his office says that $250 million will be replaced with revenue from the tax increase on people making over more than $2 million.

Cutting the MTA payroll tax, sources say, was the deal maker for State Republicans. The MTA payroll tax has been an emotional issue in New York suburbs, who see it as a tax they're paying for New York's transit system. Suburban Republicans have been pushing for it's demise since it was imposed, and agreement to eliminate the tax was a prerequisite to the larger deal.

The payroll tax was imposed in 2009 as part of a bail-out package for the MTA, contributing some $1.4 billion per year to the MTA's budget.  Today's agreement cuts that tax for small businesses, the self-employed, and private schools. But the MTA says it's no net loss to them.

Confused? Let's break it down.

New York had a temporary "surcharge" on taxpayers making more than $250,000 that expires at the end of this month. Through his 2010 campaign for Governor, and his first year in office, Governor Andrew Cuomo has steadfastly opposed reimposing that surcharge, forfeiting billions in revenue.

But two things happened. One, the budget deficit for next year -- and possible cuts to health care, education, and the like, were really really severe.

And, Occupy Wall Street.

All of a sudden people were talking about fairness in the tax code.  Then suddenly, Governor Cuomo was too.  In Op-Eds over the weekend, he asked if it was fair for someone making $20,000 to pay the same tax as someone making $2 million. He answered that in the way most Americans now approve:  No.

Even under the new Cuomo tax hike, the rich are getting a cut over what they're paying this year because the current surcharge is higher than the new tax rate. (The surcharge expires on December 31.) But it's a hike over what would have been -- so there will be some $1.9 billion in revenue that wouldn't have otherwise been collected.

From that, the Governor's office says it will take $250 million to plug the hole in the MTA's budget created by the loss in payroll tax revenue.

That still has transit advocates worried -- because $250 million from the general fund can be snatched for other purposes when the going gets tough (It's happened in the past.) But it's not the outright cut some had feared.

Here's how Bob Yaro of Regional Plan Association expresses it:  "The payroll-mobility tax, adopted by the New York legislature with the support of Regional Plan Association in 2009, produces 14.3% of the MTA’s annual operating budget. In addition, the PMT has been seen by the MTA as a cornerstone of its strategy to close a $10 billion gap in the MTA’s five-year capital program.

"The governor’s commitment to replace any lost funds will be critical to maintaining the MTA’s transportation services for the more than eight million New Yorkers who ride the MTA every day.

"The governor’s initiative announced today to rebuild New York State’s water, energy and park facilities through the creation a statewide infrastructure fund is a vital step toward strengthening the region’s economy"

“We look forward to also working with the governor and the legislature to ensure that the financial health of the MTA is sustained. We don’t know how much revenue would be lost with the reductions in the PMT announced today, so we want to make sure that any loss is made up on a dollar-for-dollar basis.”