As soon as the contours of the GOP tax plan were made public early last month, New York State Governor Andrew Cuomo and New York City Mayor Bill de Blasio pegged the proposal as uniquely shitty for New Yorkers. A modern-day “Ford to New York: Drop Dead” and another chapter in the long-lasting, love-hate relationship between New York and Washington. That the insanely unpopular tax plan—which President Trump could sign into law as early as this week—will likely hurt the Empire State is one of the few topics the two actually agree on. The bill, which will raise taxes in the New York area through a variety of different means, will constrain the fiscal abilities of an already high-tax region, Cuomo and de Blasio believe.
Yet little attention has been paid to how that could trickle down to transit in Trump’s hometown. The feds pay about 23 percent of the Metropolitan Transit Authority (MTA)’s capital needs. Another third comes from the city, and state. And as for the MTA’s annual operating budget—which is essential when day-to-day service has quite literally gone down the tubes—city and state subsidies make up 43 percent of it with dedicated tax revenue.
So any sort of drastic change to these revenue sources—namely, the biggest overhaul of the country’s tax code in 30 some odd years—will have serious implications for an already-ailing system, and potential solutions to fix it. And more recently, transit advocates and elected officials in New York have started to take heed.
According to an analysis released over the weekend by two transit advocacy groups, Riders Alliance and the Tri-State Transportation Campaign, the GOP tax bill “marks a wholesale retreat from traditional government support for transit, just when New York’s transit crisis demands a multibillion-dollar fix.” And it hits hardest in five key ways, the report says.
By raising the national deficit by $1.46 trillion in tax cuts—reserved in large part to corporations and the uber-wealthy—over the next ten years, the report’s authors argue that the federal government will have less money left over to spend on discretionary items, like the MTA’s budget. The plan would also eliminate the use of advance refunding for bonds; according to the report, the MTA, the country’s largest public transit authority, issued $2.2 billion of these tax-exempt bonds just last month.
“This will prevent the MTA from taking advantage of lower interest rates, and refinancing bonds in order to save on debt service, which is one of the biggest drains on transit authority revenues,” said Doug Turetsky, the chief of staff and communications director at the Independent Budget Office (IBO), which analyzes municipal finances.
In the press, MTA Chairman Joe Lhota, a one-time Republican candidate for mayor, has called his national party’s tax plan an “unnecessary plague” that will clog the MTA’s finances. “The tax bill in Washington is devastating for New York State and particularly jarring for the MTA,” Lhota said. “It will result in a reduction of federal funding for mass transit, will significantly impede the MTA’s access to the capital markets and will increase the tax burden for all of our customers. This legislation is not tax reform, it is tax deform and is a direct assault on all New Yorkers.”
Meanwhile, none of the one-time repatriation fees for offshore corporate profits will go toward infrastructure investment, as originally intended by the Trump administration. (In fact, the administration doesn’t seem any closer to finishing that infrastructure bill.) The mortgage interest deduction—which is beneficial in a region where home prices are some of the most expensive in the country—would be capped at $750,000 of debt, down from $1 million. And, when the new plan goes into effect, businesses will no longer receive a tax deduction for directly subsidizing their employees’ transit fares.
But perhaps the biggest impact for New Yorkers will come in the form of what’s known as SALT, the state and local tax payments that New Yorkers are currently allowed to write off on their federal tax forms. Currently, income or sales and property taxes can be written off; the new tax system will cap that number at $10,000, meaning that a significant number of New Yorkers could owe Uncle Sam a lot more money next year.
That will put New York lawmakers in a tough position, politically, to raise taxes for anything, let alone transit. “In terms of transit, no question the constraint on state and local tax deductibility will make it much harder to look for any tax increases to pay for any transit improvements and expansions,” Turetsky told VICE. “Anything that looks and smells like a tax increase will be a very heavy lift, much more than before.”
One of the underlying themes of the Trump Years thus far has been the notion of “progressive federalism,” in which left-leaning states and municipalities, signaling disinterest in what Washington is up to, have concocted their own policies to address long-standing issues—just as right-leaning states did under Obama. That should be extended to transit, the report’s authors argue; in other words: if the GOP tax plan constricts New York’s finances, then New York should do everything in its power to no longer have to rely on Washington to invest in local transit.
In statements, John Raskins and Nick Sifuentes, the executive directors of the respective organizations, both backed congestion pricing as the best bet New York had to forge its own path ahead without Washington. “As the federal government rolls back its support for public transit, states will have to step up to fill the breach—and congestion pricing is one of the best ways Governor Cuomo can ensure our subways and buses keep moving and our economy stays strong,” Sifuentes said.
Governor Cuomo’s office is currently examining proposals that would charge drivers to enter Manhattan’s busiest areas at rush hour, the fees of which would go towards funding transit. But again, any hint of an “increase” will be a tough sell in Albany, if New Yorkers find themselves paying more come tax season.
The other major idea on the table is Mayor de Blasio’s “Millionaire’s Tax,” which would raise taxes on the city’s highest earners to pay for transit infrastructure. The proposal—which the mayor recently reiterated support for—requires approval from Albany, which, as mentioned, will be harder to convince, now that the GOP tax plan is law.
When VICE reached out for comment before the bill’s passage, City Hall spokeswoman Freddi Goldstein criticized the GOP tax as “double taxation for the first time in our nation’s history.” In New York, “there will be downward pressure on local governments to provide relief by lowering our taxes, which in turn would create less revenue for city services,” she said.
However, she added, the flip side is that New York’s highest earners could be “even better positioned to pay their fair share;” that, in fact, a millionaire’s tax for an ailing transit system may make a better case under the new tax model. “It's middle-class people, many of whom ride our subways, that will be in need of relief,” Goldstein said.
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