The Republican-sponsored tax plan advancing through Congress will have dire consequences for mass transit in New York and other major cities, according to a new analysis published Sunday.
The tax reform legislation, which the GOP aims to push through Congress this week, will amount to about $1.46 trillion in debt from tax cuts over the next decade, with reductions in rates focused for the richest Americans and corporations.
But it also presents grim funding questions for the MTA and other big-city transit agencies, according to the analysis, a joint study from transportation advocacy groups Riders Alliance and the Tri-State Transportation Campaign.
The groups believe the tax plan “marks a wholesale retreat from traditional government support for transit,” jeopardizing funding behind big projects like the expansion of the Second Avenue subway as well as everyday MTA operations, and negatively affecting fare and toll affordability.
“It’s kind of hard to escape that it’s just a middle finger to transit, generally,” Nicholas Sifuentes, executive director of the Tri-State Transportation Campaign, said of the plan. “The administration has utterly failed to get any kind of meaningful infrastructure plan to form and now we’re seeing rollbacks for transit in this bill that’s going to leave millions of New Yorkers — and the regional economy — in the lurch.”
There are five key ways the GOP tax plan will hurt transit, as outlined by the groups:
— Spending $1.5 trillion on federal tax cuts and squeezing the overall federal discretionary budget while also threatening key programs that the MTA is relying on to fund upgrades and expansions.
— Bringing back corporate profits held offshore without setting any aside for infrastructure investment.
— Slashing the state and local tax deduction, pressuring lawmakers to decrease revenue sources that would otherwise be expected to support public transit.
— Eliminating advance refunding bonds, which the MTA has used to lower interest payments on its debt.
— Ending the popular tax deduction for businesses that subsidize their employees’ transit fares.
The administration has already signaled that it would like to end several key transit funding programs. Implementing $1.5 trillion in cuts raises further questions over how what’s left in transit funding needs will fit into a squeezed budget, Sifuentes said. The MTA, specifically, relies on federal funding to pay for about 23 percent of its capital needs.
Raising money locally for transit would get tougher, too. Republicans in both houses of Congress have agreed to tax all state and local tax payments above $10,000. That means taxpayers would no longer be able to deduct the amount they pay in state and local taxes — like income or property taxes — from their federal tax return, making it more burdensome for high-tax states to raise money for transit improvements.
Some of these states — New York, New Jersey, California, Illinois, Massachusetts, Maryland and Connecticut — also happen to have the nation’s largest transit agencies and make up the bulk of the country’s transit ridership.
“What this is doing is basically hurting the economies of those states to finance the tax cut in other states,” said Gov. Andrew Cuomo during a recent appearance on NPR’s Morning Edition discussing the tax plan. “New York, California, financed through a property tax and an income tax — right now, that is deductible from your federal taxes. When they eliminate that deduction, they in essence raise your property tax and income tax by 20, 25 percent.”
The MTA gets about one-third of its capital budget from state and city funds. For its annual operating budget, the MTA also depends on state and city subsidies, as well as a dedicated tax revenue, for 43 percent of costs. Taxing all local and state tax payments of $10,000 or more will put pressure on transit agencies to raise fares and tolls to cover lost funding for operations, according to Sifuentes.
MTA Chairman Joe Lhota, who served as a budget director under Mayor Rudy Giuliani and ran as the GOP mayoral nominee in 2013, is also sounding the alarm on the tax plan. Likening the subways and commuter rail network to the “circulatory system” of the metropolitan region, Lhota said the tax plan “will provide unnecessary plaque that will clog” it.
“The tax bill in Washington is devastating for New York State and particularly jarring for the MTA,” Lhota said. “It will result in a reduction of federal funding for mass transit, will significantly impede the MTA’s access to the capital markets and will increase the tax burden for all of our customers. This legislation is not tax reform, it is tax deform and is a direct assault on all New Yorkers.”
The tax plan comes at a difficult time for the MTA. Cuomo this summer declared a “state of emergency” for the agency, which is shedding bus and subway riders after years of declining service. Subway delays have tripled as the MTA struggles to repair and replace aging, unreliable infrastructure.
Sifuentes said it’s important for Republicans in high-tax, transit-rich states to come out against the plan. He and John Raskin, executive director at the Riders Alliance, believe it’s also critically important for the MTA to find new revenue streams that will reduce its dependence on the federal government. Both championed the idea of congestion pricing, a policy Cuomo is expected to include in his forthcoming State of the State address.
The governor has not yet offered any details on what his idea of congestion pricing will look like on the streets of New York.
“In a time when the American government is failing to do its job, responsible governments like New York State have to step up and find creative local funding sources to take care of basic tasks like running our subways and buses,” Raskin said. “Gov. Cuomo and state lawmakers should see clearly that the feds aren’t coming to the rescue, and we’ll have to implement a new progressive funding source like congestion pricing if we are ever going to repair our transit infrastructure.”