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As printed in Legislative Gazette — http://www.legislativegazette.com
Lawsuit asks court to declare MTA payroll tax unconstitutional
February 8, 2010 By KARLA CRUZ
In The owner of a small transportation company on Long Island is arguing that it is not only unfair he has to pay a payroll tax that benefits a competitor of his — the Metropolitan Transportation Authority — but that its adoption was unconstitutional.
William Schoolman, president of Hampton Luxury Liner and Classic Coach, a luxury coach bus service that operates between Manhattan and various locations in Suffolk County, filed a lawsuit Dec. 14 in state Supreme Court in Suffolk County after having to pay $2,500 in payroll taxes in 2009 for the MTA fund.
Gov. David A. Paterson in May signed into law legislation that requires employers in the MTA's service area to pay the payroll taxes. Lawmakers said the tax was needed to help bring MTA out of a $1.8 billion deficit.
"New York state is very unfriendly to businesses. It really is outrageous what the Legislature did," said Schoolman. "They passed an illegal law."
The Metropolitan Commuter Transportation Mobility Tax affects employers, including schools, hospitals and people who are self-employed, in the New York City boroughs and Rockland, Putnam, Nassau, Suffolk, Orange, Dutchess and Westchester counties. The tax amounts to 0.34 percent of every 1 percent of their payroll.
The 12 counties make up the Metropolitan Commuter Transportation District.
Schoolman's lawsuit lists six causes of action, and five of them are claims of constitutional violations.
The suit alleges the Legislature failed to the pass the payroll tax law by the two-thirds vote required for legislation affecting property and the appropriation of money for local government: It passed in the Senate with 60 percent of the vote and in the Assembly with 52 percent.
The suit also claims the bill passed with more than one appropriation, which is unconstitutional under Article VII, Section 6 of the Constitution, which states: "… no appropriations shall be made except by separate bills each for a single object or purpose."
In addition to the MTA payroll tax, the legislation amended the Vehicle and Traffic Law to require learners' permits and driving license applicants in the MTA transportation district to pay a supplemental fee of one dollar every six months their learners' permit or license is valid. The law also imposed a supplement fee for people in the district who are registering or renewing their vehicle registrations.
The sixth cause of action in the suit claims the law violates the New York Public Authorities Law, which mandates the MTA to be self-sustaining.
The legislation's justification states these taxes were imposed to create a fund to help the MTA reduce its $1.8 billion deficit: "This bill would establish new secure sources of funding for the Metropolitan Transportation Authority and its affiliates and subsidiaries …"
Schoolman assured many business owners feel the same way about this law and are not pleased they are responsible for reducing the MTA's deficit, especially in those counties where their employees don't use the MTA as a form of transportation.
The suit asks the court to declare the MTA tax is in violation of the state Constitution, a stay against further collection of all taxes and fees, and "any other relief the court deems just, proper and equitable."
MTA spokesman Aaron Donovan said "MTA believes the lawsuit to be without merit and is vigorously defending the action."
"It is the largest issue in the two counties I represent. Something has to happen; it is affecting our schools, our business and our taxpayers," said Assemblywoman Nancy Calhoun, R-Blooming Grove. "It is not fair that the whole Legislature votes on something that happens only in certain districts."
"More power to him," said Long Island Assemblyman James Conte, R-Huntington Station, referring to Schoolman's lawsuit. "The MTA to me in good faith did not show any meaningful reform in the way they do business. They said these taxes would stop them from making cuts, but we have found out they are making drastic cuts. All the small businesses do not use the railroad, and more importantly, this has affected our municipalities."
"My constituents are outraged," said Assemblyman Marcus Molinaro, R-Red Hook. "The bailout unfortunately did not include any real public dialogue and there was limited transparency, and then beyond that we feel the burden was disproportionately placed on the people of the Hudson Valley and Long Island,"
Molinaro said "Dutchess County pays $100 million in taxes for the MTA, and in return we receive limited service. Whether or not the enactment of this law was constitutional, the people in Long Island, Hudson Valley and in the city are being forced to pay more taxes without real accountability from the MTA, which is the most inefficient institution in the world."
Travis Proulx, Senate majority conference spokesman, spoke about why the tax was implemented by Democrats in the first place. "The reality is that the Senate Republicans employed a bought-and-spent fiscal policy that has resulted in many taxes on already overburdened New Yorkers," he said. "Senate Democrats are reviewing all taxes as well as ways in which we can continue to support the vital programs New Yorkers rely on and return our state to responsible fiscal practices and budgeting."
"Our main goal is to annul the MTA payroll tax, and force a better solution rather than continue to give money to a rat hole," said Schoolman. "MTA is the best example of New York state government at its absolute worse. Enough is enough. We are prepared to go all the way."
In addition to the MTA, other defendants named in the suit are: Gov. David A. Paterson, Assembly Speaker Sheldon Silver, D-Manhattan, Senate President Malcolm A. Smith, D-St. Albans, Comptroller Thomas DiNapoli, MTA Commissioner Jay H. Walder, and the state Department of Taxation and Finance.
Silver's office deferred comment to the Attorney General Andrew Cuomo's office, which would not provide a comment for this story either.
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