To assuage reluctant lawmakers, Gov. Paterson has proposed that school districts be exempt from the new payroll tax that he wants Albany to impose on all employers, including public-sector employers, in the Metropolitan Transportation Authority’s service region.
But the way in which the state will handle the exemption exacerbates an existing problem: the state rewards school districts that spend too much.
Already, state income-tax payers subsidize school districts via STAR, a state rebate program that sends checks to taxpayers to make up for a portion of the property taxes that they pay to support their local schools. The more schools spend, the more local taxpayers get back from Albany.
Now, Gov. Paterson wants to levy the MTA payroll tax on schools, and then use the state’s dollars to reimburse those school districts for the tax. Obviously, the more a school spends on payroll, the more payroll tax it would pay, and the higher the rebate.
Big-spending school districts would argue that they’re not getting a reward here, since they’ll be just where they were when they started before they had to pay the payroll tax. But, the fact remains that in reimbursing localities for the tax, greater state resources will go toward school districts with the biggest payrolls.
Of course, employers that are less politically sacrosanct than the school districts are will get no such protection from a tax that is effectively a direct tax on jobs in a job-destroying recession.
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