A Commuter Tax for Albany?
This past week, I attended the summer staff meeting for the organization that I work for. During a conversation with one of my colleagues, the concept of levying a commuter tax came up as one way of raising revenue for Albany, New York, the city where I live and work. As I found this idea intriguing, I decided to do some more research on it upon returning home. The following is what I discovered.
The city of Albany is the state capital of New York, and hosts a number of state government buildings and offices, among them the Empire State Plaza and the Harriman State Office Building Campus. The city is also home to a number of colleges and universities, as well as hospitals and medical research facilities. These properties are exempt from paying city property taxes; overall, 63% of the property value in the City of Albany is non-taxable, a very high percentage. Although some of these institutions provide the city with payments-in-lieu-of-taxes (PILOT) or other sources of revenue, particularly the state government, there is still a disproportionate burden of property taxes levied on city homeowners and business owners. [1] In the fiscal year 2017 budget, these property taxes composed $58 million out of the overall $177 million in revenue projected to be collected by the city - approximately one-third of the total. [2]
Another factor that exacerbates the City of Albany's revenue problem is that the majority of the people who work at these and other institutions do not even live in the city itself. Out of a total workforce of 110,749 (estimated 2010-12) in the City of Albany, 85,125 of those workers do not live within city limits - some 76.9%. [3] Although these workers use city services on a regular basis, the only tax revenue that they contribute to the city are sales taxes, which are collected by Albany County and allocated to the city. No property taxes can be can be collected from these individuals, and the lack of a city income tax deprives the city of a potentially vital source of revenue. Instead, many of these commuting workers live in lower-tax neighboring towns like Bethlehem or Colonie - which provide far fewer services to their residents - or in surrounding counties.
One possible solution is a commuter tax. In brief, "a commuter tax is a tax (generally on either income or wages) levied upon persons who work, but do not live, in a particular jurisdiction." [4] Commuter taxes have been used by other cities to raise revenue, including New York City, which had a commuter tax until 1999, when it was repealed due to politics at the state legislature. [5] Such a commuter tax would enable the City of Albany to capture as revenue some of the income that is generated within its city limits.
If Albany implemented a 0.45% commuter tax on income for non-resident workers - which was the rate in New York City - it would have the potential of generating over $20 million in annual revenue. This figure is based on an estimated non-resident workforce of 85,125, with an average annual salary of $55,055 for workers in the city, which would mean annual revenue of $21,089,506. [6] This is no small sum for a city with a budget of $177 million. It could help fund expansion of current programs and addition of new ones, while also allowing for some property tax relief for existing homeowners and business owners.
Meanwhile, the cost to commuters would be minimal; at an average annual cost of $248, it would be less than $1 per workday. This policy could be made even more progressive by having a graduated scale to take into account the greater ability-to-pay of commuters with higher incomes, and by exempting low-income commuters and those who commute using public transportation such as CDTA.
Attempting to implement such a policy would present challenges. Commuters would surely protest what they might view as an arbitrary tax, and would appeal to their state legislators to prevent such a tax from being levied. A past city report noted that a commuter represents a source of missing and potentially unobtainable revenue for the city, lamenting that "creation of such a tax for Albany would require City and State legislation that is not currently considered feasible." [7] It would likely take a determined effort by both city residents and elected leaders to have any hope of putting such a policy into place.
Of course, the best case solution would simply be to secure an increased dedicated stream of income from the state, or earn the right to tax the currently exempt properties within city limits. Given the enormous political hurdles for either of those ideas to come to pass, a commuter tax may represent the policy solution most likely to actually happen
The city of Albany is the state capital of New York, and hosts a number of state government buildings and offices, among them the Empire State Plaza and the Harriman State Office Building Campus. The city is also home to a number of colleges and universities, as well as hospitals and medical research facilities. These properties are exempt from paying city property taxes; overall, 63% of the property value in the City of Albany is non-taxable, a very high percentage. Although some of these institutions provide the city with payments-in-lieu-of-taxes (PILOT) or other sources of revenue, particularly the state government, there is still a disproportionate burden of property taxes levied on city homeowners and business owners. [1] In the fiscal year 2017 budget, these property taxes composed $58 million out of the overall $177 million in revenue projected to be collected by the city - approximately one-third of the total. [2]
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| A map of tax-exempt property in the City of Albany (from All over Albany - click for full size). |
One possible solution is a commuter tax. In brief, "a commuter tax is a tax (generally on either income or wages) levied upon persons who work, but do not live, in a particular jurisdiction." [4] Commuter taxes have been used by other cities to raise revenue, including New York City, which had a commuter tax until 1999, when it was repealed due to politics at the state legislature. [5] Such a commuter tax would enable the City of Albany to capture as revenue some of the income that is generated within its city limits.
If Albany implemented a 0.45% commuter tax on income for non-resident workers - which was the rate in New York City - it would have the potential of generating over $20 million in annual revenue. This figure is based on an estimated non-resident workforce of 85,125, with an average annual salary of $55,055 for workers in the city, which would mean annual revenue of $21,089,506. [6] This is no small sum for a city with a budget of $177 million. It could help fund expansion of current programs and addition of new ones, while also allowing for some property tax relief for existing homeowners and business owners.
Meanwhile, the cost to commuters would be minimal; at an average annual cost of $248, it would be less than $1 per workday. This policy could be made even more progressive by having a graduated scale to take into account the greater ability-to-pay of commuters with higher incomes, and by exempting low-income commuters and those who commute using public transportation such as CDTA.
Attempting to implement such a policy would present challenges. Commuters would surely protest what they might view as an arbitrary tax, and would appeal to their state legislators to prevent such a tax from being levied. A past city report noted that a commuter represents a source of missing and potentially unobtainable revenue for the city, lamenting that "creation of such a tax for Albany would require City and State legislation that is not currently considered feasible." [7] It would likely take a determined effort by both city residents and elected leaders to have any hope of putting such a policy into place.
Of course, the best case solution would simply be to secure an increased dedicated stream of income from the state, or earn the right to tax the currently exempt properties within city limits. Given the enormous political hurdles for either of those ideas to come to pass, a commuter tax may represent the policy solution most likely to actually happen