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Tax Day every day: New York City’s stealth tax problem

Tax Day every day: New York City’s stealth tax problem
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Next time you step out of a yellow cab, take a good look at your receipt. Most likely, you have been unaware that you are subsidizing the MTA subway system with your taxi fares. That’s because the charge isn’t written on the receipt.

Whenever you set foot into a New York City cab, you’re on the hook for a base fee of $3.30, which comprises a 50 cent MTA surcharge. This surcharge was implemented as a “temporary” measure in 2009 as part of a $2.3 billion bailout for the city’s failing public transportation system, but there’s no sign the city will remove it anytime soon. Call it want you want: a charge, a fee, or a tax — the MTA surcharge is a direct tax imposed by local politicians on top of the consumer price. Unlike with the local sales tax, politicians can barely be held accountable by voters for imposing the tax or for ways in which the resulting revenue is used or misused.

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New Yorkers are already subjected to some of the steepest state and local income taxes in the nation. What many don’t realize is that income taxes make up less than half of their personal tax burden. Add up income taxes, ordinary sales tax, and a third tier of stealthily-implemented taxes imposed onto everyday spending, and various levels of government ultimately receive about 50 percent of New Yorkers’ paychecks.

Taxi fees are just the beginning, a slice of what Gotham residents pay for nearly every aspect of living is siphoned into government coffers. Taxes make up 27 percent of every electric bill, 28 percent of every cooking gas bill, and 10 percent of every cable bill. Restaurant meals, subway tickets, museum passes, plane tickets, hotel stays, gasoline, and rent payments are inflated by taxes. Even bagels are taxed — but only if they’re sliced! New York extends taxes to “altered” bagels. So if you buy a whole bagel, you avoid the tax.  

Even 24.36 percent of the average monthly cell phone bill paid by New Yorkers is an aggregate tax payment, made up of several stealth taxes that typically have vague but important-sounding names: the “Universal Service Fund Fee,” the “FCC Compliance Fee,” the “Line Service Fee,” and the “911 Fee.”

The 911 Fee, like the other fees, doesn’t sound offensive to most consumers. Who would be against supporting emergency services? In reality, however, nearly all of the $185 million collected by the state annually from the 911 Fee goes straight into the general fund, where it can be spent on just about anything.

General funds, which house revenues collected by cities or state, are massive unrestricted funds from which officials can spend as they see fit. Officials in New York City and employees of the city benefit from the local general fund much like party bosses in communist countries, paying themselves wildly above-market salaries on the taxpayers’ dime with a shred of accountability to market discipline. One-in-four city workers earns six-figures, costing taxpayers more than $11 billion in fiscal year 2016. More than 34,000 city employees annually rack up over $20,000 in overtime, creating a tab for which totals nearly $2 billion annually.

Stealth taxes are a tool for elected officials to generate additional revenue for city and state general funds with little political consequences. In order to balance undisciplined budgets and make up for shortfalls in poorly run programs without suffering blowback from raising income and sales taxes, officials invent a fee and attach it to something we already have to spend money on, like our cell phone or internet bill. The lack of transparency as to how stealth taxes are levied and collected and the misleading labeling of these taxes contributes to systemic inefficiencies and waste.

Although nobody likes paying taxes, we generally appreciate that they are necessary to maintain a civilized city and society. But if hard-working New Yorkers had a better insight into how much of their income is being siphoned into public coffers, beyond what they pay in ordinary income and sales taxes, if they knew how these fees were misleadingly labeled, and if they knew better how the resulting revenue is spent and misspent, more would undoubtedly demand change and greater visibility on how these fees are collected and spent.

New Yorkers, like all Americans, are experiencing the annual ritual of filing their taxes today, Tax Day. Although most media attention related to taxation focuses on the Trump tax plan, New Yorkers would do well to keep in mind that in New York City, every day is Tax Day. The implementation of taxation above the ordinary sales tax must be transparent and honest to consumers and voters, and it is right for citizens to expect and demand better performance.

Kristin Tate is the author of the new book, How Do I Tax Thee?: A Field Guide to the Great American Rip-Off (St. Martin’s Press). Follow her on Twitter @KristinBTate.