New York's Metropolitan Transportation Authority could lose $1.5 billion of revenue a year after a state court ruled on Wednesday that a payroll tax was unconstitutional, partly because it applies to only 12 counties in the state.
The tax is paid by employers located within the downstate area served by the MTA, which runs New York City's buses, subways, commuter railroads and some major bridges and tunnels.
The lawsuit was brought by Nassau County Executive Edward Mangano, a Republican, whose county, which lies on the western half of Long Island, is located within the taxing district.
The MTA noted that four previous lawsuits challenging the constitutionality of the payroll tax had been dismissed. "We will vigorously appeal today's ruling," the authority's statement said.
By limiting the tax to Nassau County, New York City, and the ring of suburban counties that lie north of the city, including Dutchess County, the legislature signaled that it was not "a substantial state concern" but instead a special law, Judge Bruce Cozzens, a state Supreme Court judge in Nassau County, said in his ruling.
The legislature was required to enact the law with a home-rule message or with a message of necessity, which requires two-thirds of the Senate and Assembly to approve the measure, Cozzens said. By failing to meet either condition, the legislature enacted the law unconstitutionally, he concluded.
The MTA is the nation's largest mass transit agency, serving 8.5 million passengers a day. Its current budget totals nearly $13 billion.
Employers in the MTA region pay as much as 34 cents per $100 of salaries.
"This is a great victory for every taxpayer as we buried the job-killing payroll tax that burdened every resident whether they used public transportation or not," Mangano said in a statement.
The New York Supreme Court is the lowest of the three levels in the state. The judge did not order or direct the state to stop collecting the tax, so his ruling will not have any immediate effect.
A spokesman for the state senate majority leader, Dean Skelos, a Republican who represents Nassau County, said, "Senator Skelos has always maintained that the MTA payroll tax, which was imposed by the Democrats without a single Republican vote, was an unfair and onerous tax on jobs that never should have been implemented in the first place." (Reporting by Joan Gralla; Editing by Peter Cooney and Lisa Shumaker)