Bringing Back The Commuter Tax
by Glenn Pasanen
Aug 12, 2002
There are three good arguments for the restoration of New York City's commuter tax: history, budget stability, and basic fairness.
From 1966 to 1999, commuters shared in the city's tax burdens, at least partially. For the suburbanite with an annual salary of $100,000, the commuter tax, which was set at a mere .45 percent of wages, totaled just $450 a year.
But if the city had the tax today, it would benefit by as much as $500 million. Or, to put another way, a commuter tax would pay for all of the city's youth, senior citizen, and parks services.
It is unfair for commuters to have a virtual free ride on the essential services they use. (Some commuters pay a different tax, the unincorporated business tax.) Police, fire, sanitation, and transportation services are among the most obvious.
New York City is the economic engine of the entire metropolitan region, and it seems reasonable for the beneficiaries of the engine to pay for some of the fuel.
When it comes to taxes, New York City is at the mercy of the State Legislature and the governor. With the exception of its real property tax, the state must approve any city tax change.
The impetus for eliminating the commuter tax in 1999 came from both Democratic and Republican leaders in Albany who wanted the upper hand in a special election. Both sides saw the repeal as a way to woo suburban voters. Albany rolled over New York City and raw politics triumphed over sound fiscal policy. Democratic Speaker of the Assembly Sheldon Silver who represents lower Manhattan played a shortsighted political game and voted to repeal the commuter tax, an act that benefited only upstate voters.
What makes the repeal especially galling to many New Yorkers is that it underscores the state government's general disregard for the city.
New York City already carries a unique burden in paying for Medicaid and public assistance costs, which now exceed more than $3.5 billion a year. In much of the rest of the nation, the state government funds these items almost exclusively. Similarly, state education aid has historically denied the city its fair share based on the number of children enrolled in schools. Another recent blow to the city budget was last year's repeal of a $114 million state payment that over more than two decades had made up for revenues lost when the city's stock transfer tax was eliminated.
It is no wonder that this anti-city, nonpartisan heavy handedness in Albany has finally prompted a political response in New York City.
THE COST OF COMMUTERS
Beyond the historical and political arguments for restoration of the commuter tax is the argument that the fiscal costs to New York City of providing services to commuters ought to paid for, at least in part, by commuters themselves.
A recent report by two Hunter College economists Howard Chernick and Oleysa Tkacheva estimates that commuters cost the city between 2.2 and 3.8 percent of the city budget, or between $1.2 and $1.9 billion a year. The annual cost to the police force alone is an additional $185 million. The same report found that on average commuters earned 37 percent more than residents. The authors concluded that "the elimination of the commuter tax imposed a significant, and in our view, unfair fiscal burden on the City of New York."
With the New York State Financial Control Board, the agency that oversees the city's fiscal plans, projecting a possible budget deficit of $6 billion in 2006, the restoration of the $500 million commuter makes political and fiscal sense.
In fact, little more than a doubling of the tax to one percent would raise over $1 billion. Commuters would still be paying less than a third of the top personal income rate for residents, and they would be helping stabilize the city's budget that funds the services they use.
Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.
For the opposite view, see "The Tax Whose Time Has Gone," by E.J. McMahon
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