Empirically demonstrated by their continued decision to live outside of the city and commute into it, they believe they are getting more value than they are paying in via whatever tax scheme the locale has in place.
You'll know they're paying their fair share when the arbitrage actually stops, but taxing non-resident earnings so aggressively to stop it produces way more negative side effects and regressive taxation effects than congestion pricing does. That's why congestion pricing is a good idea and 90% taxes on non-resident incomes is not (not to mention the ease of enforcement).
People with families aren't often willing to accept the living conditions they'd need to in order to live in NYC while paying market prices. So they arb and get suburban living conditions with urban employment.
The cost of their decision to do that is mostly borne by the respective communities (home community loses economic productivity and then city community bears increased infrastructure consumption).
We would know there's zero arbitrage when zero people did this. Which again, I don't think is the goal to shoot for. But simply asserting you have some god-given right to make this arb indefinitely at zero cost is a losing argument.
You didn’t say they should pay as much as they are willing to pay. You said they should pay.
They are paying!
Your new goal is that nobody can afford to work in the city except residents, but that is an objectively dumb idea, and certainly has nothing to do with a “fair share.”
I certainly did not declare that as a goal, lol. I said that you'll know you have eliminated the arbitrage when people no longer do the arbitrage. This is a simple description of reality and not a normative claim.
First, in most cities people don't pay income taxes to the cities they work in but do not reside in. At least in the US this is not typical.
Second, the position that people should pay to reduce their negative externalities does not necessarily imply the view that they pay nothing today. It implies they ought to pay more.
If someone pays for entry to Disneyland, steals a t-shirt, is a valid defense that "they paid" when they bought the ticket? No, obviously not. Does demanding that they pay for the t-shirt imply that they did not pay for a ticket? No, obviously not.
No you said, "You'll know they're paying their fair share when the arbitrage actually stops.” It might not have been intentional, but you communicated clearly that people should be charged more until they are unwilling to work inside the city and live outside. Otherwise they are not "paying their fair share.”
Nevertheless, NYC is the only city I’m aware of in the USA that has congestion pricing, and I’m shocked to find that non-residents who work there do not pay income tax to the city. I live in OH and have to pay an income tax to the small city I work in even though I’m not a resident of said city. I thought it was more common.
You're jumping from "it's unfair that people can do X" to "the goal is to prevent all X."
I, as a realist, believe in systems with flex. As our very own patio11 put it: the optimal amount of fraud is nonzero. Here, the optimal amount of unfairness is nonzero. Or stated another way: the cost of eliminating all unfairness would not be worth it.
Fine, let’s take it for granted that you don’t want to all of it. But the clear implication of saying that people aren’t paying their fair share is that they generally should. So your ideal may not be 0, but it is (even by your own analogy), close to 0. It’s like saying the goal is to end fraud, and you bring up the technicality that actually the cost of ending all fraud is not worth it. Ok, but the ideal is still no fraud, and nobody is confused about the general goal being to get rid of as much of it as we can cost effectively.
So now I’m honestly asking, are you or are you not arguing that the general goal is to end people "not paying their fair share” (which you equate to living outside of the city you work in)?
Also can you please explain why you believe that “fair” is measurable in this way? Can you give another example of something where a common person would use a similar definition of fair? I think that your definition of fair means stores without dynamic pricing are unfair, which seems crazy to me.
You'll know they're paying their fair share when the arbitrage actually stops, but taxing non-resident earnings so aggressively to stop it produces way more negative side effects and regressive taxation effects than congestion pricing does. That's why congestion pricing is a good idea and 90% taxes on non-resident incomes is not (not to mention the ease of enforcement).