New York Approves Payroll Tax Increase for MTA Funding

Albany, New York – Lawmakers in New York reached a tentative agreement on Monday for the state’s fiscal year 2026 budget, incorporating a higher payroll mobility tax (PMT) to fund Metropolitan Transportation Authority (MTA) infrastructure improvements.

The budget, amounting to $254 billion, includes a significant $68 billion capital plan for the MTA. The proposed increase in the payroll tax, which currently sits at 0.6% in New York City and surrounding areas, aims to provide necessary funds for the agency’s extensive improvements.

Governor Kathy Hochul highlighted the intentions behind the tax increase, stating that while larger employers would face higher taxes, small businesses would benefit from reduced tax burdens. “We’re making modest adjustments to the payroll mobility tax to protect small businesses while ensuring large corporations contribute their share,” Hochul said.

In a move to ease the financial strain on smaller firms, the plan specifies that businesses with more than $10 million in payroll will see increased taxes, whereas smaller employers may experience no change or even reductions.

The funding includes $1.2 billion previously allocated for the redevelopment of Penn Station, which federal authorities have taken over. Instead, these funds will assist the MTA’s capital plan aimed at ensuring reliable and efficient transit infrastructure.

Transit advocates expressed support for the budget agreement, emphasizing the importance of a reliable public transport system amid potential federal funding cuts. Danny Pearlstein, policy and communications director at the Riders Alliance, remarked, “When public transit riders organize, we win.”

However, not all reactions were positive. Some lawmakers criticized the plan as another financial burden on taxpayers. State Senator Dean Murray voiced concerns, stating, “You’re literally taxing jobs. You’re punishing success.”

The MTA capital plan, which is required to deliver $150 million in annual efficiencies, is expected to generate about $1.4 billion each year through the payroll tax. This funding will support various infrastructure projects, including plans for a new light rail line between Brooklyn and Queens.

The details of the budget and tax changes are set to be finalized as lawmakers prepare for voting on the remaining budget bills this week.