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Commentary By Nicole Gelinas

Tax Deal Slaps Straphangers

Cities, Cities, Economics, Economics New York City, Tax & Budget

Tax deal slaps straphangers

The most overlooked losers in Gov. Cuomo’s $2 billion tax-hike deal are Gotham’s commuters: Some $320 million of the tax hike will go to buying the state-run Metropolitan Transportation Authority freedom from accountability.

The cash will cover a “reduction” in the tax that the MTA gets from downstate workers’ paychecks — the bone that Cuomo used to get Senate Republican leader Dean Skelos to go along with the tax hike.

Since taking over the Senate last year, Republicans have promised to cut the two-year-old MTA payroll tax. Now, they can say they’ve done it — at least for the next three years, after which the new tax law will expire.

Albany will trim the tax from $1.5 billion to $1.18 billion a year, exempting schools as well as some small businesses and cutting the tax for other small businesses.

Only one problem. To permanently reduce MTA taxes, Albany must cut the MTA’s labor costs. But, now that Skelos & Co. have “won,” they’ll show even less interest than usual in that topic.

Yet without lower labor costs, the MTA will have no money to finish projects like the Second Avenue Subway and do regular track work to avoid fires and delays.

That’s clear from the MTA’s November budget — which aims to fund such capital investments by borrowing $7.3 billion. It would pay for that debt mostly by saving money in its contracts with labor unions — $225 million a year over the next four years.

This plan doesn’t add up. Even with the labor savings, the MTA faces a $122 million deficit in 2014 — two years from now — and a $206 million shortfall in 2015. That means less money to pay debt costs.

Plus, even these huge deficits assume that the MTA will be collecting nearly a billion more a year by 2015, thanks to two fare hikes of 7.5 percent each — starting in 2013, right before Cuomo runs for re-election.

And the holes in the plan get even bigger without labor savings: $508 million in 2014, and $513 million the year after.

Of course, the MTA ought to have plenty of room to make those savings. For starters, it’s set to spend $1.7 billion a year on worker and retiree health care by 2015 — $538 million more than today, or a 46 percent rise. Yet city transit workers pay only 1.5 percent of their paychecks — about $1,000 a year — toward these costs. The MTA could also fix its work rules, which drive $578 million a year in overtime costs.

The time to get these savings is now: Talks are underway with the Transport Workers Union, whose three-year contract expires next month. The outcome will determine whether it has those capital funds, or not.

Yet the MTA can deal with the union only with political backup — and right now it’s negotiating without anyone minding the store.

Sure, Cuomo has nominated former Giuliani deputy Joe Lhota to head the agency. But the Senate hasn’t confirmed him. Even though the media refers to him as the chairman, he’s not.

In a rational world, Albany would invest Lhota with political authority before the contract is done — like, now. But the Senate hasn’t scheduled a hearing, and Cuomo doesn’t seem upset.

It’s not paranoid to think that Cuomo’s plan is to sweep a bad TWU contract under the rug before Lhota is confirmed. The last governor, David Paterson, made sure the old contract was settled via arbitration, so that nobody could be held politically accountable. That contract resulted in three-year raises of twice the inflation rate.

Arranging for a contract that doesn’t cut labor costs would ensure that Cuomo avoids the headache of a winter strike threat. A delayed hearing on Lhota gives the Senate a chance to call for MTA cost-cutting at his hearing — without blaming Lhota, and after the union knows it’s too late to do anything.

Everyone is happy: the unions, the pols and the MTA.

The only unhappy party would be riders. They should save the tiny tax cut they’re getting. They’ll need that extra $200 to take days off when the trains aren’t running right.

This piece originally appeared in New York Post

This piece originally appeared in New York Post