New Year, a new mayor and possibly a slate of new taxes for corporations and New York City\u2019s top earners.<\/p>\n
Zohran Mamdani has promised New Yorkers free and fast buses, along with free childcare for all children from 6 months of age to five years old.<\/p>\n
And he hopes to pay for them with an increase to the state\u2019s corporate tax rate for large companies and additional income tax for the relatively small slice of New Yorkers earning over $1 million.<\/p>\n
There\u2019s plenty of disagreement over whether the tax hikes will enable Mamdani to keep his campaign promises, and whether he can even get the increased revenue at all. Both components of his plan will require approval from lawmakers in Albany.<\/p>\n
What\u2019s clear is that the new mayor holds an unabashed belief in redirecting wealth into services that help the city\u2019s lower- and middle-income residents. Some tax experts say it\u2019ll pay off.<\/p>\n
\u201cWhen you see that this money is actually being used for what they say it\u2019s going to be used for, there’s less resistance,\u201d said Omar Ocampo, a researcher at the Institute of Policy Studies, a progressive think tank in Washington D.C. \u201cAnd people are more willing to pay for increased taxation.\u201d<\/p>\n
Here\u2019s our guide to understanding the Mamdani tax plan, its revenue-raising potential and its possible long-term consequences:<\/p>\n
How much would taxes go up under the proposal?<\/p>\n
Mamdani would like to raise the state corporate tax rate from 8.85% to 11.5%. In campaign materials, he\u2019s estimated that the increase would only apply to roughly 1,000 of the most profitable companies and bring New York\u2019s rate in line with neighboring New Jersey.<\/p>\n
But that comparison doesn\u2019t account for the fact that companies in New Jersey don\u2019t pay local corporate taxes, while New York City has its own corporate tax rate<\/a> that\u2019s applied on top of state and federal taxes for companies with over $1 million in revenue.<\/p>\n Along with the corporate tax increase, Mamdani\u2019s proposal for higher income taxes on those earning more than $1 million each year would come in the form of a 2% surcharge on top of what they already pay.<\/p>\n Therefore, someone earning exactly $1 million would pay an additional $20,000 in city income tax, according to Mamdani\u2019s campaign materials.<\/p>\n That means the city would levy a 2% tax<\/a> on all of that person\u2019s earnings, rather than raising the rate for a specific income bracket.<\/p>\n John Kaehny, executive director of Reinvent Albany, said Gov. Kathy Hochul is unlikely to support an income tax increase to fund Mamdani\u2019s agendas.<\/p>\n She vocally opposed the policy throughout Mamdani\u2019s campaign, though she has more recently softened<\/a> to the idea of a corporate tax hike after his decisive win in the mayoral election.<\/p>\n But Kaehny said the governor is likely to propose her own statewide universal childcare program, which she can take credit for as she heads into the 2026 election season.<\/p>\n \u201cWe expect that\u2019s going to be one of the main proposals in her January budget,\u201d he said. \u201cIn a lot of ways, she\u2019s going to be preempting Mamdani.\u201d<\/p>\n How much new revenue will the tax increases raise?<\/p>\n The Mamdani campaign estimated that the increase in the corporate tax rate would raise $5 billion a year, while the income tax increase for anyone making more than $1 million would raise $4 billion.<\/p>\n As of 2022, millionaires made up about 1% of the city\u2019s population, but they paid about 40% of the income taxes, according to reports by the Citizens Budget Commission and The Empire Center. The Empire Center estimated that millionaires will account for 60% of the revenues<\/a> if Mamdani\u2019s tax proposals take effect.<\/p>\n But there\u2019s disagreement among some tax and public policy experts. Left-leaning think tanks have highlighted success stories of how similar policies have played out in other states, while right-leaning researchers have warned of a mass exodus of corporations and the wealthy from New York City, along with other unintended consequences .<\/p>\n The Cato Institute, a conservative think tank, published a report<\/a> arguing that Mamdani\u2019s corporate tax increase would only raise an amount closer to $3.8 billion and that the income-tax increase would tempt high earning New Yorkers to relocate to Long Island and the lower Hudson Valley, where they can still be close to the city.<\/p>\n During the campaign, Mamdani\u2019s chief rival, Andrew Cuomo, said, \u201ceven I will move to Florida\u201d<\/a> if Mamdani won.<\/p>\n But economic research suggests a mass movement of millionaires is unlikely<\/a>.<\/p>\n A 2016 Stanford University study<\/a> that examined migration patterns of Americans earning more than $1 million a year found that only 2.4% of them moved each year. The authors of the study analyzed 13 years of IRS data to track changes in addresses among high earners.<\/p>\n They found that low-income Americans are twice as likely to move, typically in search of more affordable housing. And among the 2.4% of wealthy Americans who moved, only about 15% moved to a state where they paid lower taxes.<\/p>\n Friends, family and familiarity may keep them put. Several<\/a> other studies<\/a> found that millionaires are unlikely to leave their social networks to pay lower taxes.<\/p>\n And in New York, entrepreneurs and high earners are willing to pay a higher cost of living<\/a>, including higher taxes, for the benefits of living in an economic and cultural hub, according to economic research.<\/p>\n \u201cThe idea of these billionaires paying a little bit more in tax shouldn\u2019t really bother anybody,\u201d said Bob Lord, a tax policy expert at the Institute for Policy Studies, which supports progressive tax policies.<\/p>\n But he conceded that a city-specific tax could result in a migration to Long Island, Westchester or other nearby locales that would exempt the wealthy from Mamdani\u2019s levy on the rich.<\/p>\n \u201cIf it\u2019s really true that there\u2019s gonna be a mass exodus, then it becomes self-defeating,\u201d Lord said.<\/p>\n Will fewer millionaires move to New York City?<\/p>\n Even if there isn\u2019t an exodus of wealthy New Yorkers, the city could still become a less attractive place to live for millionaires from other states. Ana Champeny, vice president for research at the think tank Citizens Budget Commission, authored a study<\/a> in August that found that New York had a smaller share of the nation\u2019s millionaires in 2022 than it did in 2010.<\/p>\n The city\u2019s share went from 7% to 4% during those years, according to Champeny\u2019s findings.<\/p>\n \u201cIf you are a high earner, there might be other places that provide a more attractive value proposition,\u201d Champeny said. \u201cTaxes are definitely part of that equation, but they\u2019re not the only part.\u201d<\/p>\n She added that the disproportionate share that higher earners pay into the city\u2019s tax coffers is a clear reason to attract more of them to the state.<\/p>\n While the overall number of millionaires increased across the U.S., California, Florida and Texas attracted millionaires at higher rates compared to New York City. If the city had maintained the same share of millionaires, Champeny said it would have collected $13 billion more in income tax revenue in 2022.<\/p>\n Will it be enough?<\/p>\n Mamdani\u2019s campaign estimated that free buses would cost around $700 million a year. The cost of making those buses fast is unclear. It could require building new types of bus stops<\/a> like \u201cboarding islands\u201d that make getting on and off easier, creating more dedicated bus lanes and purchasing new buses<\/a>.<\/p>\n Free childcare for children under age five would cost around $6 billion<\/a> and would require its own bureaucracy that would potentially oversee tens of thousands of teachers and staff. The city\u2019s latest demographic data<\/a> shows there were approximately 500,000 children in the five boroughs under the age of five as of 2023. And child care centers need one staff member for every five to six toddlers, according to the city\u2019s staffing requirements<\/a>.<\/p>\n But if Mamdani\u2019s tax plan does in fact raise $9 billion a year, it might be enough to cover the $6.7 billion combined price tag for these immense projects, based on his campaign\u2019s estimates of their costs. And Ocampo, the researcher for the Institute of Policy Studies, said the tax hikes may be accepted by the wider public if it sees that the money goes to making New Yorkers\u2019 lives easier.<\/p>\n