Gov. Hochul pledged Wednesday not to raise taxes on the middle class. As she said, “it’s not a news flash that New Yorkers already believe they pay too much.”
So what did she do in her massive $227 billion budget? Raise taxes on the middle class.
New York, for now, isn’t wanting for fiscal resources. Tax revenues for the fiscal year ending in March are $5.9 billion higher than expected, for a total of $116.3 billion — 11.1% higher than last year. (The rest of the state budget comes from federal funds, plus various fees.)
Hochul will “only” increase spending by 2.4% for the fiscal year that starts April 1. But all-fund spending is now 28.6% higher than in the final pre-COVID budget.
Still, we have an $8.7 billion surplus. That’s plenty of money to fix what Hochul rightly sees as a major problem: the Metropolitan Transportation Authority’s future deficits.
These gaps, against the MTA’s own $19.4 billion budget, will be at least $600 million this year and billions of dollars in future years. And that’s even after a projected fare hike this summer.
There is room for MTA cost-cutting. As The Post’s Nolan Hicks reported recently, the MTA could save $200 million a year “just by getting the LIRR’s labor costs and efficiencies in line with its other major commuter railroad, Metro-North.”
Instead, Hochul wants to increase a transit tax the state levies on most businesses downstate. Right now, the state levies a 0.3% tax on most downstate payrolls (that is, all the money your employer pays workers). Hochul wants to raise that to 0.5%, bringing the total tax take from $1.8 billion a year to $2.6 billion.
That Hochul feels comfortable raising this tax is yet another result of the far-left power in New York’s Legislature. Moderate lawmakers have always disliked this 14-year-old tax because it is effectively a tax on all workers’ paychecks, even if you don’t see it directly.
The tax is also too broad to be fair, with employers in Putnam County paying the same as employers in Manhattan, even though the former’s workers don’t depend on transit.
Hochul’s second big idea for the MTA is to . . . force New York City taxpayers to pay more, via a new $500 million contribution from the city. This is not a new revenue or a savings; this is just moving around money.
Only third on the list comes cost savings — $100 million this year and $400 million next year. But the MTA has already assumed these efficiencies in its budget.
Worse, Hochul is asking lawmakers to approve the $800 million tax hike for the MTA when, despite numbers on paper, we have no idea what the MTA’s budget deficit really is.
The MTA’s labor agreement with the Transport Workers Union is up in May, six weeks after the state budget is due. The MTA assumes just 2% raises for the workforce; inflation’s still running at 6.5%. Raises close to inflation could add another $250 million in annual costs this year, half a billion next year.
Finally: The MTA assumes a 5.5% fare increase, expected to raise $200 million this year, $300 million next year. But that process, too, won’t start until after the state budget is finished. Hochul could easily use new money from her tax hike to kill the fare hike — and the MTA will be back where it started.
Transit advocates would cheer this development. But keeping fares low only makes transit even more dependent on state lawmakers, who have other priorities.
Case in point: Hochul is massively increasing education spending this year, from $31.3 to $34.4 billion, a 10% hike, even with enrollment in the biggest school district, New York City, falling.
Just one-third of that money for the MTA would have allowed Hochul to avoid her massive MTA tax hike.
In sum, Hochul is proposing an increase in a tax that is unpopular with small-business employers and moderate suburban lawmakers, thus stoking resentment against transit. All without fixing transit’s underlying problems.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.