New York transit rescued at last

Paying More For This?The New York MTA has been facing the possibility of large fare increases and deep service cuts, but a funding agreement has finally been reached. The main source of revenue? Payroll taxes (34 cents per $100). Fares will also go up by 25 cents. A taxi surcharge of 50 cents, increased car rental fees, diver’s license fees, and vehicle registration fees will also help fund the cash strapped agency.

This is an important development because $1.53 billion will come from the payroll tax alone. This is a stable funding source whereas sales taxes, the more common method of covering transportation costs, are not. However, there are still problems ahead for the agency. The budget plan will not help cover the capital costs to complete certain projects and because the tax is not fixed to any price index, inflation and rising costs will effectively lower the tax year after year. This means that in just two years the agency may need more money to cover operating costs.

Another problem with this plan is the specific type of tax that will be levied. Finding new funding mechanisms is good, but a lot of people, especially a lot of rich people, don’t earn their money from pay roll taxes. Another problem is that this tax is a flat tax which means even the poorest of the poor will have to pay the same rate as the rich.

Nevertheless, this plan is pretty good. The trains and buses keep coming and a new source – a better source – of revenue has just been created for the New York MTA. Perhaps this will spur a new trend around the country.

© Brian A. Tyler and SwitchingModes.com, 2009.

1 Response to “New York transit rescued at last”


  1. 1 Adirondacker May 8, 2009 at 3:28 pm

    This is a stable funding source whereas sales taxes, the more common method of covering transportation costs, are not.

    …well more stable. New York State and New York City are partly in such dire straits because many of the Master of the Universe who used to work on “Wall Street” don’t anymore. The ones that are left are making less. When the economy turns down, sales tax revenues plummet but payroll and income taxes go down too.

    Inflation and rising costs will effectively lower the tax year after year.

    Long term wages tend to follow inflation. It’s levied as a percentage of income, not a flat tax on each employee.

    but a lot of people, especially a lot of rich people, don’t earn their money from pay roll taxes.

    Almost no one earns their income from payroll taxes. Even tax collectors don’t get a slice of revenue, just a salary. Rich people tend tend to make their living by mean other than work, since they aren’t on a payroll they don’t pay payroll taxes….


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