Hochul's Floated Payroll Tax Hike Rejected By Lawmakers

ALBANY, New York — State lawmakers immediately nixed Gov. Kathy Hochul’s proposal to increase a tax on New York City businesses — a plan intended to recover money that would have been generated by congestion pricing tolls.

Four people confirmed to POLITICO on Thursday the payroll mobility tax hike was considered a non-starter in the Democratic-led state Senate, making it all but impossible for the measure to go forward.

“It’s insane to do that right now,” Long Island state Sen. Kevin Thomas said after a closed-door meeting of Democratic lawmakers.

And timing is also running out to reach a deal: The state Legislature is expected to wrap up its work for the year on Friday and not return to Albany until January.

In effect, Hochul's latest proposal might be even more politically unpalatable than the congestion pricing plan she abruptly scrapped in the first place, lawmakers said.

Rejecting a payroll tax increase to offset lost revenue deepens uncertainty over the future of mass transit capital improvements.

Hochul floated increasing the tax in the hours after she rescinded support for the toll plan, which would have charged drivers $15 to travel into Manhattan below 60th Street, said three officials briefed on the plan who were granted anonymity to freely discuss sensitive negotiations.

Congestion pricing was expected to generate about $1 billion for the Metropolitan Transportation Authority’s $15 billion capital plan and help pay for infrastructure improvements. The proposal to increase the payroll tax would have generated an additional $1 billion, lawmakers briefed on the plan said.

The governor’s choice to back out of the congestion pricing plan — a surprise move intended to help Democrats in tough House races — leaves hundreds of improvement projects in the MTA’s service area in limbo.

Lawmakers have been scrambling over the past two days to consider a range of options to replace the toll revenue, including one that would have packaged the payroll tax increase with a suite of environmental-focus bills.

“We had a funding stream for the MTA,” said Senate Finance Chair Liz Krueger, who has blasted Hochul’s reversal.

Business executives who had supported congestion pricing blasted the proposed payroll tax hike.

“Congestion pricing spread the MTA funding burden equitably across all the constituencies that benefit from the mass transit system that supports the tri-state regional economy,” the Partnership for New York City, ordinarily a Hochul ally, said in a statement. “The [payroll tax] burden is entirely on New York City, which is already the most highly taxed city in the country. The governor should allow congestion pricing to move forward.”

And it’s not clear whether any alternatives can provide another form of revenue.

The New York City Independent Budget Office said in a statement Thursday that indefinitely delaying congestion pricing “halts decades of policy and implementation work representing unquantifiable amounts of time, money, and other resources.”

Bill Mahoney contributed to this report.