Democrats in the state Senate have rejected Gov. Kathy Hochul's proposal to raise revenue for the Metropolitan Transportation Authority through a payroll tax that would generate $800 million.

Instead, lawmakers are proposing an increase in a corporate franchise tax that Hochul has proposed extending in this year's budget.

The chamber's budget resolution released Tuesday omitted the payroll tax, which has a fraught political history for suburban Democrats. 

Hochul has called for the tax, as well as money from the expected casino licenses, to help boost the finances of the MTA.

Using a payroll tax for MTA revenue, however, has been a third rail for suburban lawmakers. Republicans in 2010 were able to recapture majority control of the state Senate in part due to suburban voters' anger over an earlier payroll tax. 

Democrats in 2023 face a different political landscape with supermajorities in both the Senate and Assembly in Albany. Nevertheless, lawmakers from the Hudson Valley and on Long Island have raised concerns with Hochul's MTA proposal. 

Democratic lawmakers in the state Senate, however, have acknowledged the financial concerns facing the MTA, which has struggled with reduced ridership in the aftermath of the COVID pandemic. 

Offsetting the rejection of the payroll tax is an increase in the corporate franchise tax that is levied for the MTA. The Senate's proposal would increase that tax from 30% of state liabilities to 45%. 

The resolution is expected to be approved later this week. A finalized budget deal is due April 1.