New York City

A New Tax Is No Solution to New York's 'Summer of Hell'

New York Mayor Bill de Blasio's proposed tax will not address the root problems of his city's transit crisis.


Car interior 7 train
Dschwen?/Wikimedia Commons

New York City's subway system is a hot mess right now. Each month some 70,000 trains are delayed, compared to 28,000 per month five years ago. On-time rates for trains have plummeted, from 86 percent in 2012 to 65 percent today.

The city's commuters have also suffered through track fires, train derailments, claustrophobic waits aboard broken trains, and even sewage spewing from station ceilings. No wonder Gov. Andrew Cuomo has dubbed this the "summer of hell."

New York City Mayor Bill De Blasio thinks he has a plan to fix it: a new tax on high income earners. "We are asking the wealthiest in our city to chip in a little extra to help move our transit system into the 21st century," he said Monday.

De Blasio's plan would increase taxes on individuals earning $500,000—and joint filers earning $1 million—from the current 3.88 percent to 4.41 percent. This is projected to bring in $800 million a year for the city's transit system.

Given its performance problems, few would question the idea that the subways—overseen by the state's Metropolitan Transportation Authority—are in desperate need of improvements. But there are a number of reasons to suspect this new tax is not the solution de Blasio claims.

For one thing, about $250 million collected by the new tax—almost a third of projected revenues—would not go even go to repairing the system or expanding capacity. That money would instead be spent reducing subway fares for 800,000 low-income New Yorkers. Given that overcrowding is one of the chief culprits for the system's delays, it seems perverse to try to expand ridership before fixing the other problems.

Another reason to be skeptical of the mayor's plan: In that past, growth in MTA-dedicated tax revenue—which has doubled in real terms since the 1980s—has mostly been eaten up by growing employee benefit costs. In 2005, the MTA was spending 23 percent of its employee costs on health and retirement benefits; in 2017, those benefits made up 30 percent of employment expenses.

A July 2017 report by the conservative Manhattan Institute found that these cost increases were enough to consume the entirety of new revenues from a 2009 state payroll tax passed to shore up the MTA's budget. All told, the agency owes $18.5 billion in future pension liabilities.

What new revenue is not taken up by employee benefits would likely be swallowed by the increasing costs of the MTA's debt. In the 1980s MTA was virtually debt free. Today it has nearly $40 billion in outstanding debt, the interest payments on which cost $2.5 billion a year.

Says the Manhattan Institute: "absent control of costs, particularly employee-benefits costs, history indicates that the MTA will spend much of any new revenues allocated to it on increased operating spending and on servicing debt, not on adequate improvements to subway, bus, and commuter-rail service for New Yorkers."

What exactly an adequate fix would be for the MTA and the deteriorating subway system it oversees is outside the scope of this blog post, but it might start with the constant political burden-shifting that arises when a subway system is owned by the city but managed by the state. Until that's addressed, no new tax haul is likely to be spent well.