Fighting the MTA Tax
By Erica Jackson
This week, two more municipalities joined the fight against New York State’s Metropolitan Transit Authority (MTA) Employer Payroll tax. Calling the tax “unconstitutional,” the towns filed a joint lawsuit against New York State and the MTA.
“The tax is a bad idea, with bad implications that could not have come at a worse time,” said Southampton Councilman Christopher Nuzzi. “We’re trying to do more with less; we can’t afford to bail out the New York City transit system.”
The towns’ lawsuit, filed on Friday by attorney John Denby, Esq., of Devitt Spellman Barrett LLP of Smithtown allege that when the state adopted the tax, it violated the towns’ “home rule powers to transact business without suffering an overly-burdensome payroll tax.” The suit also claims that the tax was improperly passed “since it was not adopted by a two-thirds majority of each house of the state’s legislature.”
In the lawsuit, the towns are asking, according to Denby, “a declaratory judgment that the MTA Payroll Tax Bill violates several provisions of the NYS Constitution.” It also seeks a “stay against further collection of any and all taxes and fees imposed by the tax.”
Under the MTA tax, which was adopted in March of 2009 to pull the MTA out of debt, employers, including municipalities and school districts must pay $3.40 on each $1,000 of payroll. Southampton, to date, said Nuzzi has had to pay $155,000 towards the tax.
Bill Schoolman, owner of Classic Coach, was pleased that the towns filed an action; he delivered a similar action to the MTA and state in December. “I think it is a horrible tax. It is a tax that supports fiscal irresponsibility and corruption,” said Schoolman. He added, “The MTA is probably the most fiscally irresponsible corporate entity in the United States.”
Schoolman says the tax costs him about $20,000 a year, but he said, it’s not so much the money that upsets him, but rather, “the mismanagement of the money by the MTA.”
It is expected that additional municipalities will join the fight, including Suffolk County.
In March of last year, the towns of Brookhaven, Huntington, Smithtown, Islip, Riverhead and Babylon vowed to challenge the payroll tax.
At the time, Supervisor Patrick Vecchio said,“I am pleased to join with other elected officials in an effort to have this onerous and burdensome tax eliminated.”
According to Maryann Genzale, payroll supervisor for the Town of Smithtown, with nearly 1,200 full, part, and seasonal employees on the books, the town is required to pay at least $90,000 a year. “It is just another expense,” said Genzale.
Local School districts also felt the weight of the tax this year. Smithtown, Commack, Kings Park and Hauppauge School Districts all reported that they are asking voters to approve increased budgets due in part to the MTA tax.
As previously reported by SmithtownMatters.com., Smithtown School District alone was required to make a $400,000 payment toward the MTA tax this year.
“The tax has people pretty upset because it is indicative of government’s inability to control itself,” said Assemblyman Michael Fitzpatrick (R-Smithtown), who voted against the tax. He went on, “The New York City delegation stuck us with the payroll tax rather than increase its fare. In the short term, I’m afraid there is nothing that we can do about it.”
But, Fitzpatrick assured, “This is going to be a major issue in the state campaign this year.”
State Senator John Flanagan (R-2nd district) agreed with Fitzpatrick, saying, “I hate the tax. I didn’t like it when it was proposed or when it was implemented. It was a bad idea altogether.”
Flanagan, who also voted against the tax, said he was happy to hear that Southold and Southampton filed a lawsuit against the tax. “I just wish there was more stride and opposition at the time the tax was being discussed,” he said.
Of the lawsuit, the MTA provided the following statement, “How the MTA should be funded is a question for the legislature, but the payroll tax is an important revenue source for the MTA and its existence has prevented the recent round of service cuts from being even worse. The MTA is facing a nearly $800 million deficit due in part to shortfalls in the revenue generated by the payroll tax. Our focus remains to ensure that every dollar the MTA receives in taxes, fares and tolls is used wisely.”
The state governor’s office did not return phone calls as of press time.
* It should be noted that Pat Biancaniello, editor-in-chief of SmithtownMatters.com worked for a period of time for Bill Schoolman.