How would free transportation be funded in New York City?
Executive summary
Zohran Mamdani, NYC’s mayor-elect, says making the city’s buses “free and fast” would cost about $800 million a year and he proposes paying for it partly by hiking the corporate tax to 11.5% and imposing a 2% surtax on incomes over $1 million; he and allies also point to potential state pilots and prior one-off state grants as precedents [1] [2] [3]. The MTA’s operating budget relies heavily on dedicated taxes and subsidies and on farebox receipts that are pledged to bondholders, so eliminating fares raises legal and fiscal questions that involve Albany, the MTA, and bond markets [4] [5].
1. The arithmetic Mamdani offers: $800 million and new taxes
Mayor-elect Mamdani estimates free buses will cost roughly $800 million per year and says that revenue could come from tax changes — raising the corporate tax to 11.5% (parity with New Jersey) and a flat 2% levy on incomes above $1 million — revenues he has tied to a broader platform including childcare and housing [1] [2]. Bloomberg reporting places Mamdani’s revenue target at about $9 billion of new revenue for his package that includes free buses among other priorities, showing the proposal is part of a larger tax-and-spend framework [5].
2. The MTA’s fiscal plumbing and bond implications
The MTA’s operating budget is large and complex; a major portion of its revenue already comes from dedicated taxes and subsidies rather than fares alone, but farebox revenue is pledged to bondholders and used in financial planning [4]. Bloomberg warns that eliminating bus fares could unsettle holders of MTA’s fare-dependent bonds, making free transit a legal and credit-market issue as well as a budget one [5].
3. State-level pilots and precedent: limited, conditional funding
Albany has funded small-scale fare-free pilots before: the governor’s office announced $15 million to cover a five-route fare-free bus pilot, and the State Legislature has considered bills that would appropriate limited sums (e.g., $45 million language in a bill and statutes that allocate $160 million annually to offset fare increases) — showing the state can and does fund limited experiments, but not citywide, permanent swaps of fare revenue [3] [6]. Streetsblog coverage shows Governor Hochul has publicly resisted plans that would strip the MTA of fare revenue or be paid for by broad tax hikes, indicating state buy-in is not assured [7].
4. Political alignments and the governor’s gatekeeping role
Any sustainable shift away from fare revenue requires Albany’s cooperation and the governor’s comfort with funding replacements. Governor Hochul has said she would not support plans that deprive the MTA of a key revenue stream or that rely on tax increases she is unwilling to back, signaling a likely negotiating choke point [7]. Mamdani’s plan therefore faces a political contest in Albany as well as debate with bondholders and the MTA [5] [7].
5. Where the budget currently stands — context for scale
The MTA’s projected 2026 annual operating budget is about $21.3 billion, and the agency already gets major sums from dedicated taxes and subsidies; fare revenues, while important, are one piece of a much larger fiscal puzzle — which means an $800 million gap is large but not insurmountable in theory if new recurring revenues or state support are secured [8] [4]. City and state budget filings and prior executive actions demonstrate the state and city can redirect or add targeted funds, but sustained operating subsidies at scale require recurring appropriations [9] [3].
6. Equity, paratransit and hidden trade-offs
Advocates celebrate free buses as affordability and climate policy, but critics and advocates for paratransit warn that shifting dollars could harm Access‑A‑Ride and other services that already cost hundreds of millions annually (Access‑A‑Ride’s budget cited at roughly $700 million), highlighting trade-offs in line-item priorities if overall funding is not increased [10]. Streetsblog editorializes that free buses should not come at the expense of vulnerable riders, a political and moral constraint on budget choices [10].
7. Competing viewpoints and the open questions
Supporters argue the $800 million figure is small relative to city and state budgets and that tax changes can cover costs [2]. Opponents — including the governor’s office and those worried about bond covenants — stress legal, fiscal and credit risks and question the political willingness to raise the recurring sums needed [7] [5]. Current reporting does not provide a fully worked legislative financing plan that shows enacted, recurring revenue streams covering the projected annual cost; available sources do not mention a finalized law or budget line that would replace $800 million of MTA fare revenue permanently.
8. Bottom line: feasible politically, uncertain legally and fiscally
Making NYC buses free is financially plausible if Albany and the city agree to permanent new revenues or reallocate substantial subsidies, but it will require overcoming bond-market constraints, securing the governor’s support or a legislative majority for recurring funds, and resolving trade-offs with other transit programs. Sources document the headline cost estimates and candidate proposals, limited state pilots and strong pushback from Albany and financial stakeholders — all of which make the plan prominent but far from guaranteed [1] [2] [3] [7] [5].