New York Mayor Zohran Mamdani on Tuesday threatened “painful” tax hikes on millions of his constituents to close a city budget deficit. It’s encouraging that the novice leader understands that his constituents feel overtaxed. The next step is understanding that his city has a spending problem, not a revenue problem.
During the campaign, Mamdani called for higher taxes to pay for his social spending, including by taxing “richer and whiter neighborhoods” more heavily. In office he has lobbied lawmakers for a 2 percentage point hike on income tax for those making more than $1 million. He says this would help pay for “free” child care.
Yet on Tuesday, Mamdani admitted that his social programs aren’t exactly free. If he wasn’t able to soak high-earners further — the top income tax rate in the city is already nearly 15 percent — then he would punish millions of New Yorkers with property tax hikes. His 9.5 percent increase would hit some 3 million homes and more than 100,000 commercial buildings.
Even those tax hikes wouldn’t be enough, and Mamdani also threatened to take nearly $1 billion from the rainy-day fund and $229 million from the Retiree Health Benefits Trust. So the idea is to pay for a recurring entitlement with one-off raids into the city’s coffers?
Socialist utopia is expensive, but the new mayor didn’t exactly inherit a frugal city. Mamdani is proposing a $127 billion budget, up $5 billion from last year. That’s a city budget bigger than the state budgets of 47 states. Even the state government of Florida (population 23 million) spends less than New York City’s. And the state still managed to attract hundreds of thousands of New Yorkers in recent years.
The reality is that Americans may like the idea of “free” stuff — it’s how socialists win elections — but they are less excited about having to pay for it. They’re even less excited when they live in a state that ranks at the very bottom of the Tax Foundation’s State Tax Competitiveness Index.
“Someone earning a million dollars a year can afford to contribute $20,000 more,” Mamdani claimed. Perhaps. But with one of the highest tax burdens in the nation already, many wealthy New Yorkers will join their peers who have left the state for a place that respects their contributions rather than perpetually denigrates them.
Hitting rich New Yorkers could generate some short-term fiscal gains, but in the long run revenue would become decidedly less predictable. Look no further than California, where a slew of billionaires are fleeing at the mere possibility of a wealth tax. They’ll avoid the wealth tax — and California will miss out on the billions that these individuals otherwise would have contributed before a wealth tax was even imposed.
More experienced Democrats in New York understand this. Gov. Kathy Hochul, no one’s idea of a fiscal hawk, nevertheless instigated Mamdani’s tantrum by refusing to go along with more tax hikes. The city council speaker and comptroller also have sway and are skeptical of new taxes.
Mamdani claims his administration has found $1.7 billion to cut, but that’s a laughable number. The reality is that Mamdani is trying to expand a city government that already does way too much. The city should provide basic services, such as law and order, but instead it pours billions into social spending like housing and healthcare.
No one in New York is ambitious enough to dramatically reshape city government, and residents either vote for class warfare or vote with their feet. A reckoning will have to come eventually. The question is how bad it gets before reality sets in.
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