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Hochul’s business tax proposal falters in Albany after congestion pricing pause

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State lawmakers appear set to hand Gov. Kathy Hochul a defeat Thursday over her last-minute proposal to raise taxes on New York City businesses to salvage the finances of the Metropolitan Transportation Authority, which followed her decision to delay the launch of congestion pricing.

Top business groups including the Partnership for New York City heavily lobbied the state Senate and Assembly against the proposal, which would raise the payroll mobility tax on city-based businesses with payrolls of $1.75 million or more in order to raise the $1 billion per year that the MTA expected to receive from congestion pricing tolls. The messy push unfolded in the waning hours of this year’s legislative session, with the state Senate planning to leave Albany at the end of the day on Thursday.

By late afternoon, it appeared doubtful whether Hochul would get her wish. The Senate held firm against it, and the proposal was considered dead in the Assembly by late afternoon despite some initial openness in that house, four sources told Crain’s. Liz Krueger, an influential state senator from Manhattan, told reporters that the new tax “does not have support.”

Rejecting the tax leaves no obvious option for shoring up the MTA’s capital budget, which had long been structured around expected revenues from the Manhattan tolling program. Hochul has considered dipping into the state’s reserves as an alternative — a prospect that budgetary watchdogs have cautioned against.

“The business community is broadly opposed and is trying to get their message through to the Legislature in hopes that they will not act precipitously to enact” the tax, said Kathy Wylde, president and CEO of the Partnership, in an interview.

Wylde and other critics called the tax hike unfair to the city, given that the MTA also serves the suburbs. Indeed, the Long Island Rail Road and Metro-North were each slated to receive $1.5 billion in congestion pricing revenues under the MTA’s 2020-2024 capital plan.

“This lets the commuters, the people who mostly drive in from Connecticut and New Jersey, totally off the hook,” Wylde said. The tax on larger city businesses was already increased in last year’s state budget from 0.34% to 0.6% to help the MTA, and would have risen by another 0.2% under Hochul’s new proposal, Wylde said.

Hochul’s tax proposal was a remarkable turnaround from just a few months ago, when the centrist governor trumpeted her opposition to any new taxes during budget negotiations with the Legislature. Some critics also argued the tax hike would contradict her stated purpose for shelving congestion pricing: avoiding imposing new costs on the city during its fragile pandemic recovery.

Even in the Assembly, there was little excitement about taking up the tax hike, which would have risked its own political backlash.

“There’s a lot of anger in the Assembly,” one member of the body told Crain’s.

An alliance of business and transit advocates spoke out against Hochul’s tax increase. Even as it leaves the MTA in murkier territory, transit advocates hoped rejecting the tax could pave the way for a last-ditch effort to keep congestion pricing on track.

Other critics of the tax hike included the watchdog group Reinvent Albany, which called it an “epic Hochul blunder.” The association representing New York City’s 76 business improvement districts cautioned legislators against the proposal as well.

“I don’t know where the conversation goes from here,” Senate Deputy Leader Michael Gianaris told NY1 Thursday afternoon. He said lawmakers would try to “fill the hole that the governor created,” but offered no timeframe or specifics.

Hochul herself has issued no statements since her bombshell announcement of an “indefinite delay” to congestion pricing on Wednesday, leaving it unclear whether she will pursue any alternative schemes to resolve the MTA’s budgetary crisis that results from her decision. MTA CEO Janno Lieber, a years-long booster of congestion pricing, is strategizing over how to save the tolling program and may resign if it is set aside entirely, Crain’s reported Thursday.

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Nick Garber , 2024-06-06 23:33:36

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