New York City Commuter Tax

¶ … New York City Commuter Tax and its history. The writer discusses the previous attempts to bring it forth as well as current discussions about its use. The writer argues that the tax is a bad idea. There were 15 sources used to complete this paper.

While New York City continues to grow it struggles to find resources to handle its public duties. As the most populated city in the nation it bears the brunt of providing the largest police force, the largest garbage collection service and many other large agencies. All of these services must come from tax dollars and throughout the years there have been many incidences where the money has run out and the services has stopped. Several times along the way the idea of a commuter tax has surfaced. Those who are in favor of the tax believe it will provide funds for public services by people who come into the city, use its services and then leave the area to go home. Those who are against it believe it is unfairly punishing those who come into the city and contribute to its greatness financially. A commuter tax sounds good on paper but when actually implemented it punishes those who already contribute to the city coffers through local spending while reaping none of its benefits because they live outside the area that the tax dollars from that spending service.

The idea of a commuter tax came to light when New York City Mayor Michael Bloomberg found himself facing a budget crisis that was the worst in three decades. For over 30 years the city had managed to pull through each year and squeeze by but eventually the borrowing and shifting of funds caught up and the mayor found himself facing the worst budget issues that the city had seen in over 30 years. His answer was to propose a commuter tax that would effect the almost 1 million commuters. Currently the city of New York receives about 800,000 commuter workers daily. Bloomberg contends that the commuters who come into the city each day use the services that are provided by public tax dollars which are not paid by the commuters, because they reside outside of the New York City boundaries. According to Bloomberg it is reasonable to expect those commuters to offset the cost of those services that they use while in the city by paying a commuter tax. The mayor believes since they earn money by being in the city each day they should contribute a portion of those earnings through a tax to pay for services they help deplete.

His belief boils down to this: "For the services they use and the wear and tear on the streets, the commuters should pay some tax on what they earn in the city."

While there are supporters of the mayor's idea there are also many who believe a commuter tax would be a huge mistake.

Nassau County Executive Thomas Suozzi - with a county fiscal crisis (inherited from a previous administration) so deep that his government has been on state life support for two years - responded that Bloomberg's proposal would effectively pull the plug, or, as he said, tell the people of Nassau to "drop dead." He spoke bluntly, but spoke more or less accurately for all the suburban elected officials around New York City. The slowing economy, the aftershocks of 9/11 and rising health care costs have forced almost every one of them to cut services and raise taxes."

THOSE FOR THE TAX

For those who believe the tax is fair they feel the services being depleted by such a large number of commuters is detrimental to the well being of the services meant and paid for by those who live within the city full time.

They believe that the commuters benefit from the services because they use the trash cans, the police and the fire department assist in keeping their experiences in the city safe and pleasant and they have access to other services as needed any time they are at work within the city limits.

The commuter tax has been argued with since its inception years ago.

A year ago, however, City Hall officials did not predict the full depth of the city's current fiscal plight. Then-Mayor Rudolph Giuliani touted a list of tax reductions enacted during his tenure valued at $3.4 billion - now in effect and totalling more than half the current $6.4-billion deficit.

Giuliani's list even included state actions, such as the $500- million repeal of the commuter tax, a move he had opposed. At the urging of the City Council, $807 million was cut by ending the 12.5% income-tax surcharge."

The services being used by the commuters add up to an impressive figure, and according to some reports top millions of dollars each year. Those who support the idea of a commuter tax believe the commuters should chip in to pay for those services with a commuter tax.

For those who are for the tax being reinstated they point to several reasons for its implementation including:

Commuter Tax Benefits http://www.gmtma.org/fedtax.htm

Mode of Transportation

Transit

Vanpool

Parking

Incentive

Up to $100/month, $1,200/year for transit expenses.

Up to $100/month, $1,200/year for vanpool expenses.

Up to $175/month, $2,100/year, for parking at or near an employer's worksite, or at a facility from which the employee commutes via transit, vanpool or carpool.

Employer Tax Benefits

Employers:

Give their employees up to $100/month to commute via transit;

Receive a tax deduction; and,

Saves over providing same value in gross income.

OR-

Employers:

Allow employees to use pre-tax income to pay for transit;

Save on payroll tax (at least 7.65% savings)

OR- combination of both Employers:

Give employees up to $100/month to commute via vanpool;

receive tax deduction;

Save over providing same value in gross income

OR-

Employers:

Allow employees to use pre-tax income to pay for vanpooling; and,

Save on payroll tax (at least 7.65% savings)

OR- combination of both.

Employers:

Give their employees up to $175/month for qualified parking;

Receive a tax deduction;

Save over providing same value in gross income.

OR-

Employers:

Allow employees to use pre-tax income to pay for vanpooling; and,

Save on payroll tax (at least 7.65% savings)

OR- combination of both.

Employee Tax Benefits

Employee:

Receives up to $100/month tax free

(not on W-2 Form)

OR-

Employee:

Pays for commute benefit with the pre-tax income and saves on income tax;

OR- combination of both Employee:

Receives up to $100/month tax free

(not on W-2 Form)

OR-

Employee:

Pays for commute benefit with the pre-tax income and saves on income tax;

OR- combination of both AGAINST

Desmond Ryan, Commuter Tax Merits Fast-Track Derailment., Newsday, 04-09-2003, pp A34.

Those who are against the idea of a commuter tax point to the many assets the commuters are already providing to the city by their presence. Commuters spend their money shopping during their lunch hours, and before they leave the city at night. They eat lunch each day at the city's eateries and they place money in the city coffers through various other actions. In addition to the money the commuters spend within the city each day that they are there for work they also bring revenue through their jobs. Whether it is first step revenue with actual spending for the job, or second step revenue by way of others having to come into the city to attend meetings etc. The commuters are responsible for dollars being brought into the city because they are there according to many of those who are against the idea of taxing commuters for commuting.

Bloomberg, in his continuing effort to obtain a commuter tax, says he needs the dollars because the city is facing unprecedented times. Fair enough. But his agenda calls for cutting the city's income tax on city residents while re-imposing a commuter tax on those who come in daily from the suburbs. That is not only unfair and inequitable but just plain wrong. Gov. George Pataki, a number of state senators and assemblymen as well as economists who study public policy agree that the Bloomberg plan is profoundly flawed. Marc Goloven, a senior regional economist for JP Morgan, predicts that by trying to re-impose this onerous commuter tax at nearly six times its previous level, Bloomberg is "heightening the attractiveness of locating beyond the five boroughs." In other words, New York City-based companies that depend on key staffers who happen to commute could easily decide to relocate in order to get out of the grasping reach of Bloomberg and to keep their key employees at their desks."

LINE

If the mayor manages to get the commuter tax pushed through the potential impact would be significant on the commuters who come into the city each day. "The old tax, at 0.45%, brought New York City just under half a billion dollars a year. Typical of government doublespeak, the proposed new tax is billed as "equitable tax reform" with the average commuter paying $9 per day in New York City income taxes. It would dramatically raise the percent paid out to as much as 2.75%, while handing an income tax cut to city residents."

This means that the commuters would be paying six times more than they paid under the former tax system.

Asking others to pay nearly six times more than they paid under the old tax - for a total of about $1 billion yearly - when the city is cutting income taxes on its own suggests a level of political arrogance that is mind-numbing."

Those who are against the commuter tax want the city to tighten its financial belt and locate new avenues of locating funds to pay for the services it publicly offers. According to those against the tax the commuters are already putting tens of thousands of dollars into the city wallet each week and taking more from them is punitive and might backfire in the long run. If the commuter tax gets to be to much many commuters will stop coming into the city to work and will instead locate positions outside of the city. In addition there will be the chance that companies will bow to pressure by workers and will begin to locate their satellite offices outside of the city and new companies looking for a place to land will not look within New York City limits because they will have a more difficult time attracting workers.

All of these things will have a negative impact on the financial contribution the commuters currently make to the city budget. In addition if the tax becomes to much of a burden the commuters may get a movement together to boycott spending any money in the city. This could cause a serious dent in the revenue they had been providing if more than 800,000 commuters AND their family members top spending any money in New York City because of the commuter tax.

Bloomberg needs to make good on his threat to expand on the token layoffs of city employees hired when times were fat. That's what organizations are supposed to do when faced with sharp shortfalls in revenue. Bloomberg also needs to expand his public-private initiatives that seek to generate new sources of revenue and he needs to get his hands out of the pockets of commuters who already put tens of millions of dollars into the city's economy every day. The governor and members of the Legislature should continue to stand up against a tax so onerous it could end careers, redirect investment and greatly accelerate the city's financial woes. Bloomberg, who knows how to read a ledger better than any recent resident of the mayor's office, should appreciate more than the average politician that taxing your way out of a financial hole only creates a very bigger crater. Confiscatory taxation at a time when the city needs to attract new business, new investment and a broader confidence in its future is the wrong remedy."