An oft-decried payroll tax for subsidizing the Metropolitan Transportation Authority — a tax that is so reviled Southampton and Southold town officials fought in court, albeit unsuccessfully — has been rolled back, but full repeal is still the aim of many state lawmakers and local businesses.
Under the 2012 state budget, the tax, which affects metro-area counties, has been eliminated for nearly 80 percent of small businesses and for all elementary public and secondary schools, and the tax is slashed for businesses with bigger payrolls. The reduction in tax bills could not come soon enough for many businesses, which were hit in 2009 — in the midst of recession — with the tax of $0.34 for every $100 of weekly payroll.
For , the cost of the tax was about $100,000 annually for the past two years, said Assistant Superintendent for Business Maria H. Smith.
Superintendent J. Richard Boyes, Ed.D., was happy to see the tax fall by the wayside. “The MTA tax made no sense in that we had to budget to pay it with the promise that it would later be reimbursed,” he said. “It was like floating a loan to the state and hoping the state was good for the repayment. Why do it in the first place?”
, a Sag Harbor resident and the only Independence Party member of the Assembly, voted against the tax's inception and voted for the recent rollback. “This is a good big first step toward complete repeal of the payroll tax,” he said in a recent interview. He explained that the tax drew as many complaints from constituents over the last two years as high Long Island property taxes have. “I don’t think anything was hated more than the MTA payroll tax,” he said.
Thiele noted that in Southampton, portions of sales tax and mortgage recording taxes already go toward the MTA, while “On the East End we don’t get any service to speak of.”
“It really got shoved down our throats,” he said of the original implementation of the tax, explaining that it came at a time when the “so-called three men in the room were all from New York City,” the governor, the speaker of the assembly and the majority leader of the state senate.
For businesses with an annual payroll under $1.25 million, the tax is eliminated entirely, affecting nearly 300,000 employers. Payrolls ranging from $1.25 million to $1.5 million will see a tax reduction from $0.34 for every $100 of weekly payroll down to $0.11, and those between $1.5 million and $1.75 million will see a reduction to $0.23.
For bigger businesses and institutions, there is no tax cut.
Henry Hildreth, the owner of , said his payroll, between his locations in Southampton and East Hampton, is more than $2 million, and the payroll tax costs him $7,000 annually. “Seven thousand dollars is a lot of money no matter how you look at that,” he said. “We may be America’s Oldest Department Store, but we’re still a mom and pop store.”
Hildreth said he employs some 50 employees in the winter and about 70 or 80 in the summer, down from 100 when the economy was in better shape.
“There’s not going to be more jobs as long as you tie the hands of the American entrepreneurial spirit and the American businessman,” he said.
As of December, the year-to-date cost of the MTA tax to the Southampton Town government is approximately $130,000, according to Jennifer Garvey, the assistant to town Supervisor Anna Throne-Holst.
The cost of the tax is even steeper for , a nonprofit.
“The MTA payroll tax will cost Southampton Hospital at least $350,000 in 2012,” President and CEO Robert S. Chaloner said. “These are funds that would be far better utilized in providing healthcare to East End residents.”
The tax cut also raised the threshold for self-employed taxpayers, affecting another 415,000 individuals. In total, the measures are expected to put roughly $250 million back in the pockets of taxpayers.
Thiele said the state will fill the budget gap created by the tax cut with a new surcharge on millionaires.