The Democrats in the New York State Senate have rejected Gov. Kathy Hochul’s proposal to raise revenue for the Metropolitan Transportation Authority (MTA) through a payroll tax that would generate $800 million. Instead, lawmakers are proposing an increase in the corporate franchise tax that Hochul has proposed extending in this year’s budget.
Hochul has called for the payroll tax, as well as money from expected casino licenses, to help boost the finances of the MTA. However, the proposal has a fraught political history for suburban Democrats, and the chamber’s budget resolution released on Tuesday omitted the payroll tax.
Using a payroll tax for MTA revenue has been a contentious issue for suburban lawmakers. Republicans in 2010 were able to recapture majority control of the state Senate in part due to suburban voters’ anger over an earlier payroll tax. Nevertheless, Democratic lawmakers in the state Senate have acknowledged the financial concerns facing the MTA, which has struggled with reduced ridership in the aftermath of the COVID pandemic.
To offset the rejection of the payroll tax, the Senate’s proposal would increase the corporate franchise tax that is levied for the MTA. The proposed increase would raise the tax from 30% of state liabilities to 45%.
Lawmakers from the Hudson Valley and on Long Island have raised concerns with Hochul’s MTA proposal. However, Democrats in 2023 face a different political landscape with supermajorities in both the Senate and Assembly in Albany.
The resolution is expected to be approved later this week, with a finalized budget deal due on April 1st.
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