Governor Hochul pledged on Wednesday not to raise taxes on the middle class. As she put it, “it’s not a news flash that New Yorkers already think they’re paying too much.”
So what did it do in its massive $227 billion budget? Raising taxes on the middle class.
New York, for the moment, does not lack fiscal resources. Tax receipts for the fiscal year ending March are $5.9 billion higher than forecast, for a total of $116.3 billion, or 11.1% more than last year. (The rest of the state budget comes from federal funds, plus miscellaneous fees.)
Hochul will “only” increase spending by 2.4% for the fiscal year that begins April 1. But spending across all funds is now 28.6% higher than in the final pre-COVID budget.
Yet we have an $8.7 billion surplus. That’s a lot of money to deal with what Hochul rightly sees as a major problem: the future deficits of the Metropolitan Transportation Authority.
Those variances from the MTA’s $19.4 billion budget will be at least $600 million this year and billions in years to come. And that’s even after a planned price hike this summer.
There is room for MTA cost reduction. As The Post’s Nolan Hicks recently reported, the MTA could save $200 million a year “just by matching LIRR’s labor costs and efficiency to its other major commuter railroad, Metro -North”.
Instead, Hochul wants to raise a transit tax the state levies on most businesses downstate. Currently, the state levies a 0.3% tax on most lower state wages (i.e. all the money your employer pays workers). Hochul wants to raise that rate to 0.5%, which will bring total tax levies from $1.8 billion a year to $2.6 billion.
That Hochul feels comfortable raising this tax is yet another result of far-left power in the New York Legislature. Moderate lawmakers have always hated this 14-year-old tax because it’s 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 Putnam County employers paying the same price as Manhattan employers, even though workers in the former are not reliant on public transit.
Hochul’s second big idea for the MTA is to . . . force New York taxpayers to pay more, via a new $500 million contribution from the city. It’s not a new income or savings; it’s just moving money.
Only third on the list comes from cost savings – $100 million this year and $400 million next year. But the MTA has already factored these efficiencies into its budget.
Worse, Hochul is asking lawmakers to approve the MTA’s $800 million tax hike when, despite the numbers on paper, we have no idea what the MTA’s budget deficit really is.
The MTA’s labor agreement with the Transportation Workers Union is in place in May, six weeks after the state budget deadline. The MTA assumes only 2% increases for labor; inflation is still at 6.5%. Increases close to inflation could add another $250 million in annual costs this year, and half a billion next year.
Finally: the MTA assumes a 5.5% fare increase, which is expected to yield $200 million this year, $300 million next year. But this process will also not begin until the state budget is completed. Hochul could easily use the new money from his tax hike to kill the rate hike — and the MTA will be back where it started.
Transit advocates would applaud this development. But keeping fares low only makes public transit even more dependent on state legislators, who have other priorities.
Example: Hochul is massively increasing education spending this year, from $31.3 billion to $34.4 billion, a 10% increase, even with declining enrollment in the largest school district, New York.
Just a third of that money for the MTA would have saved Hochul from its massive MTA tax hike.
In sum, Hochul is proposing an increase in a tax unpopular with small-business employers and moderate suburban lawmakers, stoking resentment against public transit. All without solving the underlying problems of mass transit.
Nicole Gelinas is editor-in-chief of the City Journal at the Manhattan Institute.
