[Congressional Record Volume 145, Number 88 (Monday, June 21, 1999)]
[Senate]
[Pages S7325-S7326]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. TORRICELLI (for himself, Mr. Lieberman and Mr. Dodd):
  S. 1246. A bill to amend title 4 of the United States Code to 
prohibit the imposition of discriminatory commuter taxes by political 
subdivisions of States; to the Committee on Finance.


                     tax fairness for commuters act

  Mr. TORRICELLI. Mr. President, I rise today with my colleagues from 
Connecticut, Senator Lieberman and Senator Dodd to introduce the Tax 
Fairness for Commuters Act. Last month, Governor Pataki of New York 
signed legislation to ``repeal'' the New York City commuter tax. 
However, the legislation signed into law only repealed the tax for 
residents of New York. The over 300,000 residents of Connecticut and 
New Jersey will still be subjected to this tax.
  I believe that the lawsuit jointly undertaken by New Jersey and 
Connecticut along with the city of New York and affected commuters will 
ultimately prevail and this attempt will be proven unconstitutional. 
However, I am concerned about the attempted precedent that has been 
set.
  Our legislation will remove the temptation of any State or any city 
to impose higher taxes on non-residents than it does on residents. The 
bill is very simple. It says that a State or city may not impose a 
higher tax on the income earned by non-residents than it does on 
residents. I hope that each Senator, no matter what part of the country 
they are from, will recognize the inherent danger in discriminatory 
taxes of this nature and will support this effort.
  Mr. President, I ask unanimous consent that the text of the 
legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1246

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PROHIBITION ON IMPOSITION OF DISCRIMINATORY 
                   COMMUTER TAXES BY POLITICAL SUBDIVISIONS OF 
                   STATES.

       (a) In General.--Chapter 4 of title 4, United States Code, 
     is amended by adding at the end the following:

     ``Sec. 116. Prohibition on imposition of discriminatory 
       commuter taxes by political subdivisions of States

       ``A political subdivision of a State may not impose a tax 
     on income earned within such political subdivision by 
     nonresidents of the political subdivision unless the 
     effective rate of such tax imposed on such nonresidents who 
     are residents of such State is not less than such rate 
     imposed on such nonresidents who are not residents of such 
     State.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 4 of title 4, United States Code, is amended by 
     adding at the end the following:

``116. Prohibition on imposition of discriminatory commuter taxes by 
              political subdivisions of States.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of 
     enactment of this Act.

  Mr. LIEBERMAN. Mr. President, I rise today to join my distinguished 
colleague from New Jersey, Senator Torricelli, and my colleague from 
Connecticut, Senator Dodd, to introduce legislation that would amend 
title 4 of the United States Code to prohibit the imposition of 
discriminatory commuter taxes by political subdivisions of States.

[[Page S7326]]

  On May 26, 1999, New York Governor George Pataki signed into law a 
repeal of the commuter tax for people who work in New York City but 
live outside of the five boroughs. This repeal only applies to 
residents of New York state; it does not include the 330,000 people 
from New Jersey and Connecticut who work in New York City.
  In 1966, Governor Nelson Rockefeller and Mayor John Lindsay initiated 
the commuter tax. To the present day, New York City has enforced the 
0.45% tax on commuters' income much like a payroll tax. Estimates show 
that this tax generates $360 million a year in revenue that helps to 
supports services such as police and fire protection and emergency 
medical care. New York state residents contribute $210 million a year 
in commuter tax revenue, while New Jersey and Connecticut residents 
account for the remaining $150 million in tax revenue. The commuter tax 
repeal eliminates more than $200 million from New York City's annual 
tax revenue.
  New York State's unilateral, partial repeal of the commuter tax only 
for its residents is an unfortunate development after 33 years of 
assessing the tax on all commuters who work in New York City. This is 
an unprecedented action on the part of a legislative body and state 
executive to repeal a tax on its residents but maintain it for non-
residents. The imposition of taxes only on out-of-state commuters could 
violate the equal protection clause of the 14th Amendment. Limited 
repeal discriminates against out-of-state commuters and inhibits 
interstate commerce and travel.
  Approximately 86,000 of my constituents work in New York City, 
contributing an estimated $100 million in commuter tax revenue; 244,000 
New Jersey constituents account for an estimated $50 million in tax 
revenue that goes to New York City. According to Connecticut Attorney 
General Richard Blumenthal, the taxable income of Connecticut commuters 
is lower than non-commuters because of this tax that commuters pay to 
New York. The commuter tax essentially draws away millions of dollars 
in tax revenue from Connecticut and gives them to New York City to 
subsidize services and other public works.
  This Connecticut and New Jersey subsidy to New York City is 
unacceptable. If a commuter tax is imposed all commuters--whether they 
are from Newark, New Rochelle, or New Haven--are equally responsible to 
bear it. There is no reason that our commuter constituents should be 
paying for New York City services while New York state residents are 
not.
  Senator Torricelli and I are joined by others who have taken action 
to force a repeal of the law passed by the New York state legislature. 
Two attorneys, Richard Swanson and Thomas Igoe, filed a complaint in 
Manhattan Supreme Court that seeks class-action status for other 
commuters from New Jersey and Connecticut. Swanson from New Jersey and 
Igoe from Connecticut are colleagues at the Manhattan law firm of 
Thelen, Reid & Priest. Moreover, Governor Rowland of Connecticut and 
Governor Whitman of New Jersey plan to challenge the constitutionality 
of the commuter tax repeal bill in federal courts. New York City Mayor 
Rudolph Giuliani also intends to file a lawsuit against the state, 
although his claim stands on different grounds than the ones brought 
forth by Governors Whitman and Rowland.
  The partial commuter tax repeal bill that Governor Pataki signed 
includes a provision that says that the tax will be repealed for all 
commuters if a partial repeal is found unconstitutional in federal 
courts. Even if the lawsuits succeed in their legal challenges, we 
still need legislation that will prevent state governments from 
discriminating against nonresidents and imposing unfair commuter taxes 
in the future.
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