Boston’s Millionaire Tax for Transit: What Could It Mean for London’s TfL Funding Debate?

A new funding injection for Boston’s public transport system, reported by Smart Cities Dive on 24 July 2026, offers a case study in dedicated transit finance that has direct relevance to London’s ongoing debate about sustainable transport funding. The Massachusetts Bay Transportation Authority (MBTA) will receive $530 million from the state’s fiscal year 2027 budget, paid for by the voter-approved “millionaire tax” – a 4% surcharge on income over $1 million. The money will cover operating expenses, not capital projects.

While the story is about a US city, the mechanism behind it – a hypothecated tax on high incomes for transit – is one that has been repeatedly proposed for London but never enacted. The contrast between Boston’s ability to raise ring-fenced revenue via a state-level income surcharge and London’s reliance on fares, council tax, business rates, and government grants is a live issue for the Greater London Authority, Transport for London, and anyone who uses London’s tubes, buses, or trains.

What the Boston story reveals

The Smart Cities Dive article confirms that the $530 million comes from the Massachusetts “Fair Share Amendment”, a constitutional amendment approved by voters in 2022. It imposes a 4% surtax on annual income above $1 million. The revenue is constitutionally required to be spent on education and transportation. The MBTA’s portion for FY2027 will be used for operating expenses – a critical need given the agency’s post-pandemic fare revenue shortfall and ongoing maintenance backlog.

The MBTA serves the Boston metropolitan area with commuter rail, subway, bus, and ferry services. The operating budget is a perennial pressure point, and the millionaire tax has become a predictable funding stream. The state legislature allocated the money as part of the broader state budget, which passed in June 2026. No breakdown of exactly how the MBTA will spend the $530 million has been published, but the agency’s board has indicated it will prioritise service reliability and workforce stability.

The millionaire tax mechanism

The Massachusetts model is notable for three reasons. First, it was approved by ballot initiative, giving it strong democratic legitimacy. Second, the surcharge is levied at the state level, not by the individual transit agency. Third, the revenue is constitutionally earmarked for education and transportation, which prevents the legislature from diverting it to other priorities.

In the UK, no comparable mechanism exists. Income tax is a national tax, and the devolved nations (Scotland, Wales) have limited powers to vary rates, but English regions, including London, have no power to add a surcharge on income. The Mayor of London can set council tax, business rates, the congestion charge, and the Ultra Low Emission Zone (ULEZ) charges, but these are all property or usage-based. A direct income tax surcharge for transport would require primary legislation from Westminster.

Why this matters for London’s transport funding debate

London’s TfL emerged from the COVID-19 pandemic with a severely weakened financial position. Government bailouts in 2020-2021 totalled around £1.8 billion, but the long-term funding settlement has been temporary and conditional. TfL’s current five-year capital funding deal (2024-2029) includes £1.2 billion in government capital grants, but the operating budget still relies heavily on fare revenue, which remains below pre-pandemic levels due to changed commuting patterns.

The London Finance Commission, a cross-party body that advises the Mayor on fiscal devolution, has repeatedly recommended that London be given the power to introduce a “London income tax” – a small surcharge on earnings, similar to the Massachusetts model. The commission’s 2017 report, “Devolution: A Capital Idea”, proposed a 2% income tax surcharge that could raise around £1 billion annually for transport infrastructure. The idea was revived in 2022 and 2023, but has not been adopted by the government.

What London lacks: the power to tax incomes

Unlike the Massachusetts state government, the Greater London Authority has no power to levy income tax. The main transport-related taxes the Mayor controls are:
– Council tax (precept for TfL is a small portion)
– Business rates (retained locally, but subject to national caps)
– Congestion charge and ULEZ (both user charges, not broad-based taxes)
– Mayoral Community Infrastructure Levy (on new developments)

All of these are relatively narrow bases. The congestion charge, for example, raised about £200 million in 2024/25, while ULEZ net revenue was around £100 million. Neither comes close to the scale of the $530 million injection from Boston’s millionaire tax, which is roughly equivalent to £410 million at current exchange rates.

The London Finance Commission has estimated that a 1% London income tax surcharge would raise roughly £500 million annually. That would be enough to cover a significant portion of TfL’s operating budget, which is currently around £5 billion per year. The Boston injection, while not a direct comparison due to different cost structures, shows that a high-earner surcharge can produce meaningful sums for transit operations.

Could a similar model work in the UK?

The political and constitutional barriers are substantial. The UK government has resisted regional income tax powers for England, fearing a “race to the bottom” or increased complexity. The Treasury has historically opposed hypothecated taxes, preferring to allocate revenue through general taxation. Furthermore, the Massachusetts model relies on a state-level constitutional amendment, which would require a UK Act of Parliament and possibly a referendum.

However, the debate is not dead. The London Assembly and the Mayor have both called for greater fiscal devolution as part of the ongoing “London Devolution” discussions. The previous government’s Levelling Up White Paper (2022) committed to exploring “London-style” devolution deals for other regions, but did not offer new tax powers for the capital. The current Labour government has indicated a willingness to consider devolution, but transport funding has not been a central focus.

What remains unclear

Several unknowns should be highlighted for readers. First, the exact impact of the Boston millionaire tax on the MBTA’s service quality is not yet measurable – the $530 million is for FY2027, which begins in July 2026. Second, the political feasibility of a London income tax surcharge is uncertain given the current government’s fiscal stance. Third, no detailed cost-benefit analysis of a London version has been published by the GLA or TfL since the 2023 London Finance Commission update. Fourth, the potential behavioural effects – such as high earners moving away from London – have not been studied in the UK context.

The Boston story is a useful reference point, but it is not a blueprint. London’s transport funding challenges are unique, and any solution must account for the city’s size, its role as a national economic engine, and the existing tax base.

Source: Smart Cities Dive, “$530M from state millionaire tax will go to Boston-area transit agency,” https://www.smartcitiesdive.com/news/mbta-boston-massachusetts-millionaire-tax/826103/

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