Hochul’s sneaky MTA tax hike is a job-killing train wreck

Gov. Hochul’s latest job-killing tax hike, like the subway it funds, will mostly run beneath the surface. 

The state-controlled, perennially cash-strapped transit authority is still hunting for ways to fund its $68 billion five-year capital plan.

In the recently agreed-upon state budget, Gov. Hochul and lawmakers have obliged by hiking a tax charged to employers on most downstate payrolls, the Payroll Mobility Tax. 

Introduced in 2009 in response to that year’s MTA funding crisis, the PMT has become an important and fast-growing part of the agency’s budget.

Its expansion stems largely from its obscurity: Absent from workers’ pay stubs, it carries far less risk of political blowback than a direct income levy would pose.

But it’s a tax on their income all the same, reliably raking in billions the agency uses to float bonds that finance capital projects. 

This isn’t the first time Hochul has turned to the PMT to mend the MTA’s shortfalls.

Two years ago, when the top PMT rate was 0.34%, she spiked it to 0.60% for city employers. (It was left unchanged in the downstate suburban counties — Rockland, Dutchess, Westchester, Nassau and Suffolk.)

That brought in another $1.1 billion a year to the MTA, for a grand total of around $3.1 billion in 2024. 

Thanks to Albany’s latest deal, companies in the city with payrolls of $10 million or more will see their rates go from 0.6% to 0.895% — a 49% increase, and roughly 2½ times what it was just two years ago.  

Don’t be fooled by the small percentages — it adds up.

A city firm with a $10 million payroll paid $34,000 in PMT before the 2023 budget deal, pays $60,000 today, and will soon pay $89,500.

In just two years, that difference is the price of an entry-level job. And it’s on top of the myriad other taxes New York’s employers shoulder. 

The rate for similarly sized suburban firms will rise to 0.635%, almost double what they’re paying now. 

All told, the hike will generate an additional $1.4 billion for the MTA annually — about triple the estimated $500 million coming in from congestion pricing this calendar year.

This marks the fourth time in 15 years that Albany has stepped in to give the beleaguered MTA new or increased funding sources. 

In September, Hochul told big business leaders, “I want you to stay here and I want you to grow. I want you to be successful.”

With this move, they can see through the rhetoric. Albany wants them around, sure — to fill the state’s various budget holes. 

Hochul has promised time and again that she won’t raise taxes. The truth is, she won’t raise taxes that voters see.

But just because a tax is politically convenient doesn’t mean it won’t hurt the economy. 

Tax something, and you get less of it. A tax on jobs will mean fewer of them. 

Larger firms — the ones with the most capability and flexibility — will automate, hire more out-of-state remote workers, and expand operations elsewhere.

Over the last five years, Gotham lost 125,000 residents and $14 billion in income to Florida, the Citizens Budget Commission found.

Placing more of the burden on large companies only makes the MTA more vulnerable whenever one of them closes shop in New York. 

The PMT rate increase won’t just affect tech titans, big banks, and white-shoe law firms: Companies in labor-intensive industries like supermarkets, hotels, medical services and Broadway will take a hit. 

Expect more self-checkouts and ordering kiosks, and an even larger rule-skirting underground economy. 

As a gesture of relief for smaller firms, those with payrolls under $1.75 million will see their rate cut in half — essentially, back to 2023 levels.  

But that could have an adverse effect: Small but growing companies might hold off on raises and hire more contractors to stay within the much lower small-business PMT rate, crimping downstate hiring. 

And even with all this fresh cash, the MTA is still $3 billion short of its capital goal.

MTA chief Janno Lieber says he’ll find the savings, but until the transport-worker unions give him some productivity concessions, he’s likely going to come up short. 

If the MTA is going to squeeze more out of New York’s businesses, it should at least deliver riders and residents good value for its capital spending.

Besides overhauling decades-old procurement practices and labor agreements, that means prioritizing what’s most important: reliable, predictable service.

Replacing archaic signals and upgrading electrical facilities should take precedence over snazzy station upgrades and electric buses. 

But if Albany keeps refilling the MTA’s coffers no matter what, hardworking New Yorkers will keep footing the bill for the same old broken system. 

John Ketcham is director of cities and a legal policy fellow at the Manhattan Institute.