A fed-up Long Island businessman has gone to court to overturn the Metropolitan Transportation Authority payroll tax, claiming the levy imposed this year on employers in the 12-county MTA commuter district is unconstitutional on several grounds.
“If we win, the tax gets repealed and every taxpayer wins,” said Joseph N. Campolo, the Long Island attorney who filed the lawsuit last week on behalf of the owner of two private bus companies in Suffolk County.
Opposed by numerous business groups throughout the MTA”™s service region, the payroll tax was proposed in March by Gov. David Paterson and adopted by the state Legislature to reduce the transit agency”™s projected $1.8-billion budget deficit this year. The tax, which applies to all employers and self-employed persons with a quarterly payroll of at least $2,500, amounts to 34 cents per $100 of payroll.
Employers, whose first payment was due in November, to date have paid an estimated $1.35 billion into the MTA fund, Campolo said. MTA officials preparing the agency”™s 2010 budget recently said the state this year expects to collect $229 million less than initially projected, although $129 million of that first-year shortfall will be recovered from employers in 2010.
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In Bohemia on Long Island, William Schoolman owns Hampton Transportation Ventures Inc. and Schoolman Transportation System Inc. His companies operate two metropolitan and East Coast bus services, Hampton Luxury Liner, in which Schoolman has invested heavily since buying it 11 months ago and has hired 30 drivers, and Classic Coach. He said his payroll tax payment will amount to about $18,000 annually.
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“It hurts,” said Schoolman, who described himself as “the prototypical entrepreneur,” one who has mortgaged his home 12 times to sustain his enterprises in his 33 years in business. “Will I survive it? Yeah, I”™ll survive it. But I”™m just tired of all the taxes.”
“I”™m just outraged that I”™m being forced to subsidize my competitors, both Metro-North and the Long Island Railroad, with what”™s clearly an unconstitutional tax,” Schoolman said the day after his lawsuit was filed in state Supreme Court in Suffolk County. Named as defendants are Paterson; Democratic majority leaders of the state Assembly and Senate; the state Department of Taxation and Finance and its acting commissioner; the state comptroller and the MTA and its commissioner.
Schoolman said his luxury coach service can take passengers from New York City to Woodbury Commons and the Hamptons at a lower price than his publicly subsidized competition and still be profitable. “The MTA is the most fiscally irresponsible organization in New York state,” he said. “The MTA to me is clearly the worst example of New York state government at its worst”¦No bailout is going to save it.”
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His attorney argued in court papers that legislative bailout arose from “the MTA”™s extreme waste and inefficiency, which has been improperly condoned with repeated infusions of taxpayer money.” Those infusions are unconstitutional, Campolo argued, as the MTA is required by statute to be self-sustaining.
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He also noted the agency”™s $1.8 billion deficit was the result of its reliance on self-supporting debt in the form of bonds, some of which came with variable interest rates that led the MTA to deal in risky interest-rate swap contracts with “a series of notorious counter parties,” including Bear Stearns, Lehman Brothers and AIG.
Among several alleged constitutional violations in the Legislature”™s hasty adoption of the MTA tax bill, Campolo argued the measure in both the Assembly and Senate failed to get the two-thirds majority vote required for a bill that appropriates public money for local purposes. Lacking official support from local government bodies in the 12-county region, state lawmakers”™ adoption of the law also failed to meet the state constitution”™s home rule requirement, the attorney also claimed.
“The real issue is, the government and our elected officials dropped the ball” and failed to perform due diligence with the payroll tax measure, Campolo said in an interview. “Instead this legislation was proposed by the governor and passed by the Legislature in one day.”
Schoolman said he thinks he represents all employers affected by the payroll tax. “I think there”™s a lot of people who really resent paying this ridiculous tax,” he said.
