New Memo Suggests Mamdani Considering Payroll Surtax to Fund HSR

A leaked internal draft reportedly explores a marginal payroll tax on top earners to finance inter-city high-speed rail planning; opponents say the move may drive firms to New Jersey

A leaked internal memorandum from Mayor-elect Zohran Mamdani’s transition team has revealed preliminary exploration of a payroll surtax on high-income workers to fund planning and environmental review for high-speed rail connections between New York City and regional destinations, reigniting debates about commuter taxation and regional transit investment.

The draft memo, obtained by investigative reporters, discusses a potential 0.5 percent payroll tax on earnings above $200,000 that would generate an estimated $400-500 million annually dedicated to high-speed rail development. The proposal envisions eventual connections to Boston, Washington D.C., Montreal, and potentially inland New York cities, dramatically reducing travel times and carbon emissions compared to current auto and air travel.

Transportation policy experts have long advocated for genuine high-speed rail in the densely populated Northeast Corridor, where travel distances are ideal for train service but current Amtrak speeds lag far behind international standards. Rail Passengers Association notes that trains averaging 150-200 mph could make Boston-NYC or NYC-Washington trips faster than flying when accounting for airport security and transit times.

“The Northeast Corridor is perfectly suited for high-speed rail–dense cities, established travel patterns, and distances where trains can outcompete planes,” explained Dr. James Chen, transportation economist at Victoria Transport Policy Institute. “What we lack is the political will to make the massive infrastructure investments required. A dedicated funding stream could change that equation.”

However, the payroll tax proposal has generated immediate opposition from business groups who argue that New York City already imposes higher taxes than competing jurisdictions and that additional levies on high earners could accelerate the departure of jobs and talent to lower-tax locations like New Jersey and Connecticut.

“Every additional tax makes New York less competitive,” said Kathryn Wylde, president of Partnership for New York City. “We’re already seeing companies relocate operations to New Jersey and Florida. Adding a commuter tax specifically on high earners–who are exactly the workers companies need to attract–would accelerate that trend. You can’t tax your way to prosperity when people and businesses can easily relocate.”

The proposal effectively revives the commuter tax that New York City eliminated in 1999 following political pressure from suburban legislators and commuters. That tax applied to all workers in the city regardless of residence, generating substantial revenue but creating political backlash from suburbanites who felt they were being unfairly targeted. The Mamdani proposal’s focus on high earners might reduce political opposition but would concentrate burden on a narrow base.

Fiscal policy experts note that payroll taxes on high earners can be effective revenue sources but face limitations as rates increase or thresholds decrease. Tax Policy Center analysis shows that high-income taxpayers have more ability to adjust behavior in response to taxation, including changing work arrangements, relocating, or restructuring compensation to avoid payroll tax classification.

“A half-percent surtax is unlikely to drive significant behavioral change, but it sets a precedent,” explained Dr. Sarah Martinez, fiscal policy director at Center on Budget and Policy Priorities. “If the city can impose a 0.5 percent high-earner payroll tax for rail, why not another 0.5 percent for schools, or housing, or healthcare? At some point the cumulative burden becomes significant enough to affect location decisions.”

Supporters argue that high-quality infrastructure, including fast regional rail connections, enhances economic competitiveness and makes cities more attractive to talent and investment. They point to European and Asian cities where extensive high-speed rail networks have spurred economic development and improved quality of life, making those regions more competitive despite higher tax burdens than U.S. cities.

“Companies and workers don’t make location decisions based solely on tax rates,” noted Council Member Tiffany Cabán. “They look at overall value–quality of life, infrastructure, amenities, culture. High-speed rail that lets you live in the Hudson Valley and work in Manhattan, or easily travel between cities, adds enormous value that outweighs modest tax increases.”

The high-speed rail vision faces formidable obstacles beyond funding. Interstate rail requires federal approvals and coordination with multiple states, none of which have committed to such projects. Federal Railroad Administration reviews for major rail projects typically take years and face frequent delays and cost overruns.

Previous high-speed rail proposals in the Northeast have foundered on cost estimates, engineering challenges, and political opposition. Amtrak’s Acela service, while branded as high-speed rail, averages only 65 mph due to infrastructure limitations and rarely approaches its 150 mph top speed. True high-speed rail would require largely new dedicated tracks, dramatically increasing costs.

Congressional Budget Office analysis of high-speed rail economics shows that projects rarely recover costs through fares alone, requiring ongoing public subsidies. This has made high-speed rail politically challenging in the U.S., where transportation infrastructure funding faces intense competition and skepticism about government investment efficiency.

The leaked memo acknowledges these challenges, describing the payroll tax as funding initial planning, environmental review, and preliminary engineering rather than full construction. Even optimistic scenarios envision decades before actual high-speed service begins, raising questions about whether a dedicated tax should be imposed long before benefits materialize.

Critics also question whether New York City should unilaterally pursue regional infrastructure that requires multi-state cooperation. They argue that high-speed rail planning should be driven by regional or federal initiatives with shared funding rather than one city imposing taxes to subsidize projects that primarily benefit interstate travelers.

“Why should New York City workers specifically fund rail to Boston when Massachusetts contributes nothing?” asked Council Member Robert Holden. “This should be a federal or at minimum regional initiative with costs shared proportionally. NYC trying to go it alone makes no sense.”

Mamdani’s team has emphasized that the memo represents preliminary brainstorming rather than formal policy, and that no decisions have been made about pursuing payroll tax proposals. However, the leak has energized both transportation advocates excited about serious high-speed rail planning and business groups concerned about tax policy trajectory.

As debate continues, the episode highlights tensions between ambitious infrastructure visions and fiscal constraints, between New York City’s desire for regional leadership and limits of unilateral action, and between progressive policy priorities and concerns about economic competitiveness. How Mamdani navigates these tensions will significantly influence both his specific policy agenda and broader perceptions of progressive governance approaches to infrastructure and taxation.