Why Us? How the Commuter Tax Chips Away at the Self-Sufficient Self-Employed

Today I wrote a check for $400 to the New York State tax department and I'm not sure why. The form says "Estimated Metropolitan Commuter Transportation Mobility Tax," and it requires me to pay 34 cents on every $100 I earn above $10,000. Ouch!

Apparently the cost of the MTA's malfeasance and mismanagement has fallen upon the shoulders of small employers and the self-employed. The assumption, I guess, is that we use subways, trains and buses far more than anyone else, and we must therefore bear the burden. This must be true; otherwise the extra tax would be random and unfair, right?

Wait a minute, it is random and unfair!

Now I'm all for paying my share of taxes. As high as they are in New York City, and as much as they put the squeeze on entrepreneurs who are trying to build something and be self-sufficient, this is an expensive town to run, and I made the choice to live here. As a non-citizen who lived in New York for seven years on a work visa before getting permanent residence status, I also accepted the hefty taxes I paid to support public schools, even though, if I had children, I wouldn't have been entitled to send them to those same public schools my income supports. This is my home and I, like everyone else, should pay for government-run services. I'm Canadian, I get it.

But this commuter tax makes no sense. It's only requiring freelancers, single proprietors and small business owners to cough up. People who work for large companies, and who often enjoy tax breaks in the form of transit checks, are exempt. As entrepreneurs, we create wealth and jobs. We get no breaks, and we carry all of our own expenses. We don't siphon off the system, and if the work dries up, as it often does, we don't qualify for unemployment benefits. Many of us also work from home and rarely commute. (I bike and walk, and almost never take the subway.) So what makes state legislators -- along with hapless mayoral candidate Bill Thompson -- think we're the perfect source of revenue to close the MTA budget gap?

I'm surprised by the meek protest to this tax. The Freelancer's Union has complained, but they're already worn out by the dozens of other battles they have to fight to protect the rights of their members -- like pushing back the 4% unincorporated business tax levied by the city, even on people who earn less than $100,000 a year.

This latest hit adds up to a few hundred, and in some cases an additional few thousand dollars a year in expenses. For some self-employed people I know, including many struggling photographers, writers, musicians, actors and artists, it's forcing them to make the choice between buying groceries, paying rent or filling up the gas tank.

Last year I became a freelancer. I quit my full-time job as a reporter at Crain's New York Business because I saw a chance to build a business as a ghostwriter and co-writer of books. I was tired of working harder and harder as a business reporter for effectively less pay (our raises were almost always below inflation), and I wanted to take control of my own destiny. I could also see what was happening in the world of print media, and I knew I needed to come up with an alternative plan. I didn't want to be a wage slave living in constant fear of layoffs.

This is the position many of my former colleagues in the media find themselves in now. They're either stressed, overworked and terrified; or stressed, unemployed and terrified. Several downsized journalists are running out of their unemployment and health care benefits, and trying to establish their freelance careers just as magazines are slashing budgets. The same is true for people across all industries. Now, more than ever, the little guy should be encouraged and given incentives (like tax breaks) to start businesses and strike out on their own, not penalized!

I've never collected unemployment and I hope I never will. I pride myself on generating business and contributing to the local economy. I've been especially lucky. I've produced a bestseller and snagged a couple of tidy book deals despite a troubled publishing market. I hope this good fortune continues. But as a newly self-employed person I do notice my expenses run higher. Health care, for example, is a killer. Living and doing business in Manhattan, entertaining clients and promoting my services as a writer, are also costly pastimes. So this commuter tax comes as an insult at a critical time, just as I am getting ahead and establishing my enterprise.

If we all had to pay (at a much lower rate) fair enough. But if the MTA can't afford to operate our decrepit transportation system with fare hikes alone, they should spread the additional cost to everyone living in the metro area. Don't just stick it to small business people, single proprietors and the self-employed.

Targeting this particular subset of earners is a slap at all the dynamic, self-starting people who are the backbone of this economy. It says to me that my government doesn't care if I succeed on my own, and will continue to chip away at everything I've achieved.

And the irony is, one of the big appeals of launching out on my own was the fact that I would no longer be commuting every day. I used to hate that 40-minute ride on the A train. Who knew I'd be paying for it anyway?

Samantha Marshall is a freelancer and co-writer of the New York Times bestseller, "Profits Aren't Everything, They're the Only Thing," by George Cloutier (Harper Business, Sept. 2009). See www.SamanthaMarshallGhostwriter.com for more details.

 

 

Comments

[tompoe]

How do you feel about cigarette taxes?

[Samantha Marshall - Huffpost Blogger]

You are missing the point. The tax effectively targets small and individual employers and the self-employed. The general employed get tax breaks on their commuter costs in the form of transit checks. I suggest you speak to an accountant.

[Jacomina]

I'm happy that Samantha Marshall has written this article to bring attention to the unfair MCTMT. Just yesterday I e-mailed my state representatives in Albany to voice my concerns. But Ms. Marshall doesn't mention what I find most objectionable about the MCTMT -- it's an outrageously regressive tax imposed on nearly all self-employed people at the same rate, as long as their annual net earnings exceed $10,000. Once again Albany has enacted tax legislation and failed to make the tax sufficiently progressive. The plutocrats reign in the Empire State!

Although I've earned far more in the past, both as an employee and as a freelancer, my earnings are currently poverty-level, and the only reason I'm able to stay afloat is that I'm raiding my IRAs. While Ms. Marshall just wrote a check for $400, I'm preparing to write one for $42. And while readers may think that $42 is chicken feed, I recently gave up my cellphone to save $44 a month.

Ms. Marshall and I both pay the same rate (.0034 %), but she's apparently making about 10 times what I make. I just wish I were making enough to pay $400! But then, Ms. Marshall seems to know super-successful freelancers who owe thousands, and they're paying the same rate that she and I are paying. How could our legislators in Albany have passed a law that requires people making $10,001 a year to pay the same rate paid by those earning $1,000,001?

[John Petro - Huffpost Blogger]

The author suggests that large employers are exempt from this tax: "It's only requiring freelancers, single proprietors and small business owners to cough up. People who work for large companies, and who often enjoy tax breaks in the form of transit checks, are exempt."

The Metropolitan Commuter Transportation Mobility Tax is a payroll tax and is paid by all employers within the 12-county metropolitan commuter district. It is not targeted at small business owners and the self-employed, it is targeted at all employers.

The tax is the result of the MTA's budget gap from earlier this year. Without resolution, the budget gap would have resulted in the elimination of subway and bus lines (remember the "Doomsday budget?). Originally, the plan was to spread the pain by including tolls on the East River Bridges, but unfortunately that proposal was defeated by politicians that had the interests of car owners in mind, even though most New Yorkers don't own cars.

I understand the author's frustration at having to pay more taxes to support the MTA. Perhaps the tax wouldn't have been necessary if we had had the foresight to approve congestion pricing. However, funding the MTA is essential for the continued health of the NYC economy. While the tax hurts, allowing the subway and bus system to deteriorate to the dirty, unsafe, and inefficient days of the 1980's would hurt the local economy even more.

[Bobotheclown]

It costs to work in NYC. And everybody pays, not just you. I commute two hours each way into NYC and I pay the whole freight of train and parking costs. As you are probably aware, almost no large company helps out its employees with these costs (transit checks) even though they are available because large companies have some employees that are entitled to them and some that are not and they don't want the hassle of dealing with the paperwork. As a self-employed person you can write off all your commuting expenses as the cost of doing business. As an employee I have to eat them even though they are my cost of doing business just like you. A self-employed person is no more self sufficient than an employee. Self-employed people often do the same work as employees (but for higher pay) so that the company does not have to pay benefits and social security taxes. In fact most self-employed people are just employees with a different title. Don't complain that the city wants to get back a little of what you are scimming.

[Citizen54]

I'm not sure where you are getting your "facts" that suggest self-employed people are rolling in the dough. Start with the double taxation on income, something an employee does not have to pay. And this "higher pay" you allege, seldom does it make up for the double whack in income tax that self-employed people pay.

Apparently you resent people who work for themselves to such an extent that you missed the focus of the piece. Why are people who work mostly at home having to pay a "mobile" tax for using transportation facilities?