There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES, BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES AND THEIR OWNERS.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that utilizing even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets, even if restricted to businesses in the New York City area. Second, unlike individual income and property taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
STILL, CONGESTION PRICING MUST STAY ON THE TABLE
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table early in 2019 during State budget negotiations. The truth is that the MTA needs twice as much, or more, than the revenue congestion pricing can deliver. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/app- vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the new FASTFORWARD PLAN put forth by NYC Transit President Andrew Byford on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
THE MTA’S PROBLEM
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget.
The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, and more, requires external sources of funds. The capital budget needs government grants and/or borrowed funds. Borrowed funds means paying interest, and that is the major, growing issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of borrowing and a lot of interest to pay. Congestion pricing is a necessary and essential step- but the billion dollars a year from it can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
HOW MUCH NEW MONEY IS AVAILABLE?
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in fiscal year 2017 (before Trump’s cut) were approximately $300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put about $9.6 billion in new cash annually into the pockets of New York corporations, not adjusting for year-to-year fluctuations. How much of that is in the MTA region– New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning roughly $8 billion a year in new money to the region’s businesses from the Federal reduction.
Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit. Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
NEW YORK’S OWN CORPORATE TAX CUT PROBLEM
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1.3 billion, or 28%, compared back five years ago to 2013, before the reforms were even enacted. The result of the reform was serious revenue losses.
Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
FEDERAL TAX CUTS JUST GAVE NEW BILLIONS TO NEW YORK’S BUSINESSES- WHAT ABOUT THE MTA ?
There is a sudden new source of money in New York State that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems- let alone just manage to keep the mass transit system going. That source is: THE BIG CORPORATE INCOME TAX CUTS JUST ENACTED BY CONGRESS THAT HAVE PUT BILLIONS- YES- LITERALLY BILLIONS OF DOLLARS-INTO THE HANDS OF NEW YORK BUSINESSES.
There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses are so large that tapping even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets- even if restricted to businesses in the New York City area. Second, unlike individual income taxes, business taxes remain fully deductible at the Federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the State’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when the New York business leadership supported a payroll tax.
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table in the 2019 State budget. That is because the truth is that the MTA needs twice as much, or more, than the revenue from congestion pricing. The congestion pricing plan developed by the Fix NYC Panel this past January conceived of a Manhattan business district entry fee of about $1 billion a year (excluding the new taxi/App vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the Byford new FASTFORWARD PLAN on top of it, will require double the size of the congestion pricing fee, and more.
The MTA itself made the case at its end of July Board meeting. The presentation of the July 2018 Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “ AS STATED IN THE NOVEMBER AND FEBRUARY PLANS, THE MTA REQUIRES NEW SOURCES OF SUSTAINABLE REVENUE FOR OPERATIONS AND CAPITAL.”
The Board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit will be $200 million in 2020, $400 million in 2021, and $600 million a year in 2022. A few weeks before the Board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the cost of which he proposed the State split with the City. This is political rhetoric. Neither the Cuomo or the DeBlasio administrations want to divert resources from their current budgets to provide steep new revenue sources to the MTA. New sources of money are required.
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget. The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, requires external sources of funds. The capital budget needs government grants or borrowed funds. Borrowed funds means paying interest, and that is the issue. When you need $37 billion dollars, and most of it won’t come from grants, that’s a lot of interest to pay. Congestion pricing (CP) is necessary and an essential step- but a billion dollars a year from CP can pay interest on only $12 to $15 billion worth of borrowed funds. That means you are not even half way there to $37 billion.
How much new cash are businesses in New York saving from the Federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the Federal corporate income tax as the starting point in a business’s own New York tax filing. It will take some time to get that answer, so some back-of-the-envelope calculations are in order.
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in ‘FY 2017( Before Trump’s cut) were @$300 billion. New York’s contribution to the Federal receipts can be simply computed at 8% of that, or $24 billion. The Federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put $9.6 billion in new cash on an annual basis into the pockets of New York corporations. How much of that is in the MTA region, New York City and its suburbs?
A study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the State’s FY 2009-10 year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from the City and its suburbs. The figures are higher now because economic activity has become even more concentrated Downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from Downstate is reasonable, meaning $8 billion a year in new money to the region’s businesses from the Federal reduction. Some of this money is not New York taxable income- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula- but a very large proportion is New York profit- who knows? Maybe half? The New York Tax Department knows the answer.
A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax- not related to the new cash from the Federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.
The New York business leadership proposed a payroll tax in 2008 in the MTA district and it was enacted in 2009.The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the State as a whole.
In 2014 Governor Cuomo proposed cutting the State corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.
| FY 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Corporate Franchise Tax | 3.009 | 3.812 | 3.548 | 4.527 | 3.166 | 3.08 | ||
| Bank Tax | 1.912 | 1.05 | 1.536 | -121 | 389 | 467 | ||
| Total | 4.921 | 4.862 | 5.084 | 4.406 | 3.555 | 3.547 | ||
The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep, $1,3 billion, or 28%, going back five years to 2013 before the reforms were even enacted. The result of the reform was serious revenue losses. Regardless, mass transit is in crisis and there are many, many billions of new dollars from the Federal tax cuts. Some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.
SOURCES OF INFORMATION:
- S. Commerce Department
- Congressional Budget Office
- MTA July 2018 Financial Plan and 2019 Preliminary Budget
- New York State Division of the Budget- Enacted and Executive Budgets 2014-2019
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