Living in the suburbs is perfectly fine; I think a perfectly virtuous outcome here would be that people keep living in the suburbs if they wish, but have adequately funded suburban rail and bus transit into the city.
An important piece of context is that NYC has some of the US's best suburban transit, including three different suburban rail systems (NJT, MNRR, LIRR) and one non-subway interurban rapid transit system (PATH).
That's because they turned it down[1]. New Jersey has decided that their strategy is going to be to dig their heels in and hope for a supportive administration, rather than plan for the next century of growth in the economic region that powers their state.
Most superfund sites of any state, decades of chemical industry and now pharma, and also peaches not really liking how north NJ is, mostly. Jersey's a wacky place, for sure, but believe me, the politics in New Jersey get even crazier than this due to boroughitis.
NJ needs to stop its commuter residents paying NY income tax, particularly those doing WFH more than half the year. They can boost NJT with that pile of money.
How do you propose they do that? NJ doesn't levy NY's taxes, NY does.
(To my understanding, NJ gives every resident an equivalent income tax credit for the taxes they pay in NY. Given that they can't stop NY from taxing its own employees, this would mean they'd effectively need to double income taxes for NJ residents.)
An important piece of context is that NYC has some of the US's best suburban transit, including three different suburban rail systems (NJT, MNRR, LIRR) and one non-subway interurban rapid transit system (PATH).