N.Y.C. Tax on Out-of-State Commuters Is Repealed

A New York City commuter tax cannot be imposed on residents of other states if the tax does not also apply to New York commuters, the state’s highest court ruled Tuesday.

The ruling by the state Court of Appeals will cost the city $360 million a year. About 500,000 people live in New York state, outside the city, and commute to jobs in the city, and about 300,000 people commute to the city from other states.

The Legislature rescinded the tax on New Yorkers last year.

A tri-state battle over the tax has been raging since then, when both New Jersey--which sends New York City about 240,000 commuters each day--and Connecticut--which sends about 86,000 a day--sued New York state for only erasing the commuter tax for its own residents.

“The language of the statute plainly and frankly discriminates against nonresidents,” the court said in its ruling.

The city had justified the tax on in-state and out-of-state commuters by saying it was only fair to require them to help pay for transit and other city services they use.

Lawyers for New York City also had argued that under “home rule” provisions, the Legislature and governor could not rescind the tax on New York residents without a request by the New York City Council.

The Court of Appeals unanimously said that no such request was necessary.

It was no surprise to legislators that the out-of-state portion of the law was declared unconstitutional. When lawmakers rescinded the tax for New York state residents, they included a provision that said that if part of the law was found unconstitutional, the repeal of the commuter tax would apply to everyone.