In his campaign for the mayorship of New York City, Zohran Mamdani has proposed replacing fares for the city’s buses with taxes. The reaction to this proposal has been really bizarre and mostly based on a mistaken understanding of how to think about government revenue.
Annie Lowrey neatly summarizes the conventional wisdom in her recent piece in the Atlantic where she describes the proposal as “impractical” and elaborates that “free buses would deprive the MTA of needed revenue.” Other pundits like Matt Yglesias and various commentators on transit have said the same thing.
But this is just wrong. Mamdani proposes replacing fare revenue (a user fee) with tax revenue. The MTA would have the same revenue just from different sources.
When you push people on this point, what they end up saying — with varying levels of awareness — is that they want the MTA to both have the tax revenue that Mamdani is proposing for it and the fare revenue. Because doing both generates more revenue, this proposal always wins against just doing the tax.
But this is confused. Taxes and fares are both revenue sources and ultimately they trade off with one another. Every dollar you collect in fares is one less dollar households have for paying tax. Thus, the more fares you charge, the less you can tax because you need to ensure that individuals have enough money to pay the fares.
This is a mistake I have seen again and again in my years as a policy analyst. Back during the Medicare for All debates, Kevin Drum and Wendell Primus made a version of this argument where they argued that financing our health care system with private premiums and out-of-pocket spending (user fees) makes it so that we have more room to fund government services because it makes it so we do not have to spend as many tax dollars on health care and can use those dollars for other purposes.
This is wrong for the same reason the argument against fare-free buses is wrong: having…
Auteur: Matt Bruenig
