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Mar 31, 2010 10:35 AMPublication: The Southampton Press

Seven towns to sue MTA over payroll tax

Mar 31, 2010 10:35 AM

Seven Long Island towns have joined forces to file a lawsuit against New York State and the Metropolitan Transportation Authority to challenge the validity of the MTA employer payroll tax.

Gathering at the Ronkonkoma Long Island Rail Road train station on Monday, the supervisors of the towns of Brookhaven, Southampton, Huntington, Smithtown, Islip, Riverhead and Babylon took turns decrying the recently enacted payroll tax for negatively affecting businesses, not-for-profit organizations, governments, schools, universities and libraries across the region.

The conglomerate of supervisors said their towns plan to file litigation questioning the constitutionality of the tax. They also plan to note that legislation to enact the tax was not approved by a two-thirds majority in the State Legislature, and may add other claims to the suit as well.

The Suffolk County supervisors involved in the litigation say that collectively their towns ponied up more than $750,000 of taxpayer money in 2009 for the tax, which was approved in May 2009. Under the MTA tax, $3.40 is levied from each $1,000 of payroll for entities—businesses and municipalities alike—operating within the 12-county area of the MTA. The tax applies to all individuals making $10,000 a year or more.

Southampton Town Supervisor Anna Throne-Holst said employers in Suffolk County would be among the hardest hit by the tax, noting that businesses will have to fork over more than $100 million annually to the MTA via the new tax.

Ms. Throne-Holst said the MTA tax is particularly unfair to East End residents because they rarely use the transit system they are being taxed to support.

“Ninety-five percent of the people who live out on the East End can and should use the train, but can’t, because we don’t have proper services available to us,” Ms. Throne-Holst said. “The MTA claims that the service is not there because the ridership is low, but we know the opposite is true. If the train was there, people would ride it.”

Participating town boards have supported the action, believing the process and substance of the MTA Tax Bill, the legislation authorizing the payroll tax, violates several New York State constitutional requirements.

MTA Deputy Press Secretary Aaron Donovan said how the MTA should be funded is a question for the State Legislature, not the individual townships, but admitted that the payroll tax is an important revenue source for the MTA.

“The MTA is still facing a nearly $800 million deficit,” Mr. Donovan said. “Our focus remains to ensure that every dollar the MTA receives in taxes, fares and tolls is used wisely.”

Both Southampton and Brookhaven leaders have their respective attorneys working on the litigation to pursue the unconstitutional aspect of the tax, according to Ms. Throne-Holst. While Southampton Town officials had discussed joining a lawsuit filed in New York State Supreme Court last December by businessman William Schoolman, the owner of two Long Island bus companies, officials noted that the suit the towns will file, although borrowing much from Mr. Schoolman’s suit, would be a different action.

“We passed a resolution in Southampton to have our town attorneys explore this,” Ms. Throne-Holst added. “We’re also working with some outside counsel as well, and the goal is to get as many of the neighboring municipalities to join us. There is strength in numbers and this is something that we all share the burden of and the responsibility to do something about it.”

The supervisors pointed out on Monday that according to the Suffolk County Legislature’s Budget Review Office, residents of the county already contribute nearly $100 million per year in sales tax revenue to the MTA.

Brookhaven Town Supervisor Mark Lesko said on Monday that the town has been considering legal action against the MTA since the payroll tax was first approved in May 2009. The tax was part of the authority’s plan to plug a $1.2 billion deficit and prepare for even larger looming deficits.

The tax applies to employers whose payroll exceeds $2,500 in any calendar quarter. The tax also affects individuals with net earnings from self-employment that exceed $10,000 for the tax year. According to the Department of Taxation and Finance, this includes partners in partnerships and members of a limited liability company (LLC) treated as a partnership.

Several supervisors at Monday’s press conference referred to the payroll tax as a “job killer.” Mr. Lesko said that Brookhaven Town residents are already overburdened with taxes and believes the joint litigation against the tax has a good chance in the courts.

“Everyone realizes that this tax—on a variety of levels—is unjust,” Mr. Lesko said. “Attacking the constitutionality of state legislation is a tough road, it always is, but we think that our claims are sound and I have confidence in our town attorney and his staff. And obviously we have the support of the towns in Suffolk County, and we’re willing to add more if they are interested and we’ll see what the judge decides.”

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East Hampton does not sue but Huntington does. interesting. Many people commute into NYC for work in huntington
By razza5350 (1911), East Hampton on Mar 30, 10 10:35 AM
I think the relevent thing is that if you take the total rider ship for Suffolk County and divide it by this new contribution to the MTA it comes to about 3,100 per rider. Why don't we just rent these people cars and call it a day. Of course I'm not suggesting that, sarcasm intended, we put thousands of cars back on the road. The comparsion was meant to illuminate the lack of service we get for our buck. Also the statement that Bill Schoolman made that the MTA is the most poorly run authority in ...more
By Bob Schepps (77), Southampton on Mar 30, 10 11:25 AM
By uncleronk (136), southold on Mar 30, 10 12:19 PM
Obviously you do "Bob Schepps" because you clicked here in the first place ... if you "don't care" then keep it moving.
By gisselle1 (3), Islandia on Mar 30, 10 1:21 PM
To be fair, "uncleronk" said that, not Mr. Schepps.
By BOReilly (135), 27east Web Editor on Mar 30, 10 1:47 PM
You're correct. My eyes tricked me a bit. Thanks & my apologies to you Mr.Schepps :]
By gisselle1 (3), Islandia on Mar 30, 10 3:52 PM
Obviously you do "Bob Schepps" because you clicked here in the first place ... if you "don't care" then keep it moving.

Lesko seems dishonest to me, I honestly feel that he was advised to propose this lawsuit for his personal gain. Classic Coach owner Bill Schoolman originally was the only one who made a move against the MTA on the Payroll Tax and if you see him speak he has done his research instead of reading off of what advisors write for Lesko to say ... ultimately, this is a copy-cat ...more
By gisselle1 (3), Islandia on Mar 30, 10 1:21 PM
A high-profile photo op but, legally, meaningless. This is just the opening step in an extraordinarily long drawn out process that will see the East End get something in exchange for the MTA tax, maybe.

The fact is that no one can dispute a tax just because one doesn't benefit from it.

Instead of this "high concept", (by which I mean, as Hollywood does, so utterly simplistic that the headline tells the whole story), maneuver, why not take legal action against Wankel forcing out ...more
By highhatsize (4217), East Quogue on Mar 30, 10 2:07 PM
1 member liked this comment
Unfortunately "taking action" against Wankel would be baseless, since all indications are he has not breached his contract - he's simply upset some folks. We have no one to blame but the Town(s) for granting him a contract that left the terms of the restaurant lease up to him. Lets use our town attorneys for real work.
By zaz (197), East Hampton on Mar 30, 10 6:31 PM
The Towns are trying to protect their own. Their dispute is not that Southampton doesn't "benefit" from the tax, its dispute is that the tax is unconstitutional.

As for local government protecting its own - they are. If this tax is repealed, it puts a lot of tax payer $$$ back in the public coffers. Not to mention anyone self employed must pay this tax and all businesses, big and small, must pay this tax. By getting it repealed, the Town's "own" people have more money to spend and ...more
By Nature (2966), Hampton Bays on Mar 30, 10 8:06 PM
Chris Nuzzi, pointman for the Fairway restaurant deal said that none of the council members wanted Murray forced out. Since the Wankel lease is for five years, they could point out the unlikelihood of its being extended if he violated the intention of all the town execs.
By highhatsize (4217), East Quogue on Mar 31, 10 1:52 AM
After all the grandstanding is done our NYS legislators need to meet with "The Boss" Sheldon Silver, Speaker of the Assembly to see what can be done. If they don't....nothing will ever happen to change what is going on. It actually might be easier for us all to chip in and buy him a house in the Hamptons so he could finally understand what is going out here. Or will he?
By nellie (451), sag harbor on Mar 30, 10 6:05 PM
This story has been updated to accurately reflect the MTA tax levy on payroll. Incorrect information was provided in a press release.
By BOReilly (135), 27east Web Editor on Mar 30, 10 9:16 PM
But, unfortunately for the east end, Sheldon Silver remains in office.
By nellie (451), sag harbor on Mar 30, 10 10:08 PM
As a small business owner I want everyone to know that this tax hurts. The people that are actually using the trains are not being taxed, the business owners are. How is this fair? It's not like here in East Hampton my employees are taking the train!
By Happy in Springs (12), Springs on Mar 30, 10 10:56 PM
2 members liked this comment
So am I,,You can thank Democratic Speaker of the Assembly "the boss" Sheldon Silver for this mess. Do not think he cares about us because he doesn't. Aren't the judges that will be hearing the case indirectly appointed by him?
By nellie (451), sag harbor on Mar 31, 10 5:27 PM
Lesko has done an about face on this one and he has sucked six other towns along to pay for his folly. It was the Republicans in Brookhaven who wanted to fight the tax originally and Lesko who sand bagged the board to pay the tax. Now he needs to get out from under that mistake. He has duped the other towns into helping to pay for his mistake. It's nice to see the three East End towns were smart enough to stay out. Lesko would have footed the bill for the entire suit if need be, now he can ...more
By hohum123 (91), springs on Mar 31, 10 6:14 PM
Lesko never stated he supported the tax. What happened in Brookhaven was many of the Town Board members didn't want to pay the tax which would of course be illegal (regardless of the validity of the law which is now in question). The comptroller (former Southampton Town comptroller) was then thrown under the bus for making the payment, even though it was her job and she had no say in the matter. Lesko was accused of "sneaking" the resolution onto the agenda, which is ridiculous because all Town ...more
By Nature (2966), Hampton Bays on Mar 31, 10 7:37 PM
What would have happened if the Brookhaven Town did not pay the tax that according to you and this lawsuit was believed to be illegal by Mr.Lesko? Would the Town have been arrested? No. Would Mr. Lesko have been arrested? No. Would the Town Board have been arrested? No. Would the Town had been fined? Probably. Would the town have had to defend itself in a legal action against it? YES. So......Mr. Lesko paid the tax, lost the use of the funds, but avoided legal action against the town that ...more
By hohum123 (91), springs on Mar 31, 10 9:28 PM
1 member liked this comment
And, prey tell, did Mr. Lesko (who by no means I'm a big fan of) coerce and dupe into joining him in a lawsuit?
By Nature (2966), Hampton Bays on Mar 31, 10 9:38 PM
Lesko did not coerce anyone....he did dupe those who have been willing to help him bail himself out by sharing in what will be a costly and ineffective lawsuit. What will the south shore towns who signed onto the suit gain in a perfect world? The 4:40 out of Penn Station? The only train that matters for the east end in the summer is the 4PM express. After sandbagging the Town Board in Brookhaven and being called out for it Lesko had to do something to repair the polictical damage. He was slick ...more
By hohum123 (91), springs on Apr 1, 10 11:02 PM
I'll try to keep this simple.

Poor management on their part, does not necessarily constitute an emergency on OUR part.

The East End should not have to cover the cost of the MTA's gross fiduciary negligence. We also cannot be expected to cover the cost of their lack of due diligence.

It's unconstitutional, and how can we not get someone to take this pro bono from a moral standpoint?
By Mr. Z (11847), North Sea on Apr 5, 10 6:07 PM