Stop NYC Congestion Tax

The Independent Budget Office (IBO) released a report in December 2007 titled, Behind the Wheel: Who Drives Into The Proposed “Congestion Zone?”.

The report analyzed certain demographic characteristics about those who drove into Manhattan for work as opposed to taking mass transit. In general, it found that the median income of the average commuter to Manhattan who drives is a bit higher compared to those who take mass transit. It also found that drivers were much more likely to be married than mass transit commuters (68% versus 50%), and more likely to live in family households (85% versus 77%). Make no mistake that married couples and families in New York City will bear the brunt of this tax if it passes.

Most notably, however, is what this would represent in terms of the financial impact on the car commuter’s income. The proposed congestion tax plan offers no serious relief in sight for commuters who live in parts of the city lacking adequate or any subway service.

Case Study: John & Jane Smith

Let’s assume that over the next 10 to 20 years, this remains the case. Let us also assume, despite evidence to the contrary in London, that the tax would remain $8 a day for the next decade. Over 240 workdays, this amounts to approximately $2,000 a year. The median income for a driver to Manhattan in New York City is only $41,209.

Let’s say John and Jane Smith rent an apartment in Canarsie, Brooklyn. Jane is on maternity leave, pregnant with their soon-to-be first born, and John works at a job in Manhattan, which generates a taxable income of $41,209. They need a car both to take care of their daily errands. It also provides a more convenient, cheaper and time-efficient commute to work, which is important to this young family, compared to owning a car AND paying for mass transit. An express bus wouldn’t do, since that would require extra traveling on top of an extra $10 a day ($2,400 a year), which isn’t in the budget right now. However, it’s tax season, so it’s time to figure out what the Smiths owe to the City and State.

In New York State, the highest tax bracket is $40,000 for a married couple. The initial tax is $1,946, and 6.85% of the excess over $40,000. In total, that’s $2,038 in State taxes. The City tax rate for a married couple is $628 and 3.534% of the excess over $21,600. In total, that’s $1,320 in City taxes. Add another $2,000 in congestion taxes, which is equivalent to a separate 5% tax for the Smiths. So far, to the City and State, that amounts to about $5,400 in taxes to the City and State alone!

If the $2,000 were a City tax hike, it would be a 400% increase of the excess rate, from 3.5% to 14%. If it were a State tax hike, it would be a 2500% increase of the excess rate, or 172%.

Furthermore, realize that the wealthier you are, the less of a tax increase this would represent, further emphasizing the absurdity of a regressive congestion tax in New York City.