Raise Taxes or the Girl Gets It: Mamdani’s Forced, False Budget Choice

New York City deserves an honest assessment of its fiscal condition.

Photo by Unsplash

Zohran Mamdani is a smart man. As he stares down a sizable budget gap, I think he knows he’s being disingenuous with New York to try to get the political class to support his preferred policy solution.

Mamdani’s first budget is more honest than his predecessor’s in one important respect: It finally brings chronically underbudgeted spending above board. Adams routinely lowballed the cost of cash assistance, rental assistance and shelter — by hundreds of millions of dollars per program — and called the resulting gap someone else’s problem. Mamdani says his predecessor “handed the next administration a poisoned chalice.”

But that’s not the whole story. To use language as dramatic as Mamdani chose, we can say that Mamdani is now trying to force us all to swallow a false choice. He’s presenting New Yorkers with a manufactured dilemma designed to advance his political agenda.

The basic setup goes like this. We’ve got a $5.4 billion gap (after state aid). Mamdani says there are two and only two ways to close it. Tax the rich — with new income tax surcharges on millionaires and corporate tax hikes, just like Mamdani proposed in his campaign — or raid reserves and hike everyone’s property tax bills by 9.5% as a “last resort.”

So, the logic goes, if you oppose the property tax increase, you must support the tax on the rich. If you oppose the wealth tax, you deserve the property tax hit. It’s a political trap dressed up as fiscal necessity.

The question the mayor has not seriously engaged with is the one he most needs to answer: What can the city spend less on? There are real, specific answers — if he’s willing to look hard.

The size of the budget

The city’s budget is gargantuan by any honest measure. Its growth has outpaced the rate of inflation over the last few decades.

Why? A combination of things. The city’s budget has to stay in balance by law, year after year. So when Wall Street does really well, revenue rises, and so does spending (or reserves).

Before COVID, the biggest driver of growth was property tax revenue growth of about 6% per year. Politicians sometimes act like this rises like the oceans based on forces beyond their personal control. That’s not so; the City Council and mayor have been allowing the levy — the overall take — to grow and grow rather than touching the underlying rate, which happens to be the one tax rate under their control. If the City wished, it could do what many jurisdictions do and lower its rate when assessed value and the levy grow. Instead, the city keeps the rate constant, sticking to the fiction that money just keeps coming in and simply must be spent.

There are some good reasons for the growth, to be sure: Universal pre-K and expanded pre-K, both programs the public likes a lot, grew the budget substantially. A diverse student population is more expensive to educate, especially when that includes a large share of children needing costly special education services.

We have more tourists and commuters than any other city, requiring more sanitation and parks and police costs. We have the nation’s most diverse population. It’s a complex, aging infrastructure, costlier to maintain than that of Miami or Phoenix.

But our safety net is extremely generous by most measures, due to year after year of well-intended progressive legislation at the state and local level. This is in sharp contrast to Zohran Mamdani’s claim that the deck is stacked for the rich and against the poor. Few New Yorkers realize, for example, that the city pays a couple of thousand dollars a month in rent subsidy to each of 65,000 households that qualify for homelessness-prevention vouchers. Mamdani supported dramatically increasing eligibility for that benefit before it became clear that spending, which has already grown over $1 billion, would rise to an utterly unsustainable level with the relaxed eligibility.

And it’s also true that public employee unions have a very cozy relationship with successive mayors, who have acted less like management facing down labor and more like partners in a shared political project. This means that their contracts tend to build in healthy increases for many workers year after year. And progressive politicians layer mandate after mandate on government, the mathematical opposite of death by a thousand cuts. It adds up; under Bill de Blasio’s eight years from 2014 to 2021, the municipal workforce rose from less than 280,000 to more than 325,000 employees and the budget went up by $24 billion.

There’s no city with a per capita spending quite like New York’s. It’s true that many glib comparisons on social media are apples-to-oranges (or apples-to-yuzu), ignoring the fact that this city budget, unique in the nation, also includes many county functions, its public school spending, and more. But even when you account for that, the city’s nearly $14,000-per-person government pricetag is at the top of the charts. Its public school spending of some $40,000 per student is way higher than that of any other city.

The combination of very rich and very poor here makes more significant redistribution both economically just and politically possible. The budget depends disproportionately on millionaires and billionaires — which is to say the “tale of two cities” Bill de Blasio decried is actually what makes New York City’s spending possible.

Few New Yorkers would say that they get good bang for the buck in the eye-popping $127 billion fiscal plan, or that the sharp growth over the past few decades has delivered anything close to concomitant improvements in services. That’s the essential context for evaluating whether this is really a two-option problem.

The property increase: a bad idea that’ll never happen

Enter Mamdani. With the budget having gone up and up and up under his predecessors, he wants to raise it substantially again, both to close the gap and to fund an ambitious new agenda that includes universal child care, free buses and more.

The mayor says the only responsible way to close the gap is to enact his proposed tax increases on the wealthy and corporations, both of which are going to be very heavy lifts in Albany, which is where such tax hikes have to happen.

If the Legislature and governor don’t assent to raising income taxes on the rich (along with a tax on all corporations that do business in New York), the mayor says he’ll have to pull the trigger on the truly awful option, the 9.5% hike of the property tax — along with taking out almost half of the city’s meager rainy day fund, leaving just a billion dollars there. That’s nowhere near enough cash to have squirreled away if a recession hits.

The city’s economy is not firing on all cylinders right now. As Comptroller Mark Levine makes clear in his latest report, “Health Care and Social Assistance added 7,000 jobs in December and has been the only significant job creator over the past 12 months; excluding that sector, private-sector employment would have fallen by 38,000 over the 12 months ending in December.”

The raiding of the reserves has gotten far too little attention. Mamdani proposes bringing FY 2027 budgetary reserves to just $100 million. In 1975, under the Financial Emergency Act, the state said $100 million was the statutory minimum general reserve for the City. There is no way that total is sufficient at the current moment. If there is any economic slowdown or federal cut, the City has no cushion. It should also be deeply concerning that $1.2 billion of the gap closing plan — $1 billion of the city’s $2 billion Rainy Day Fund and about $230 million from its Retiree Health Benefits Trust — is not recurring. That means if it’s used in one year, it’s gone for the next, while spending continues.

As I mentioned, the property tax has been effectively rising year after year — because the city lets the levy grow on an annual basis without raising the underlying rate. But, universally reviled for being inequitable in dozens of different ways, the increase would fall on every property owner in the city, and the harm would radiate outward in ways that matter most to Mamdani’s own coalition. New York City’s housing vacancy rate sat at a historic low of 1.4% as recently as 2024. The city is, by any measure, in an acute housing shortage, and adding major carrying costs to residential development is the wrong policy at exactly the wrong time.

New York City is a majority-renter city. Roughly two-thirds of households rent, and property tax increases translate to higher operating costs for landlords across the spectrum — from small outer-borough owners to large multifamily operators. For unregulated units, those costs will flow directly to tenants through rent increases, particularly at lease renewal. For rent-stabilized buildings, the math is subtler but no less damaging: rising operating costs that outstrip allowable increases contribute to building deterioration, deferred maintenance, and distressed sales — all of which erode affordable housing supply over time.

For a mayor who campaigned on making New York affordable for working people, who explicitly decried the property tax as deeply unfair and even racist, proposing such a hike isn’t just bad policy — it’s a form of rhetorical hostage-taking. He’s threatening to enact the very harm he campaigned against unless Albany gives him what he wants.

Either way, politically, this is not a real option. Nobody wants to do it.

Mamdani’s choice: soak the rich

That brings us back to Mamdani’s Plan A: a 2% income tax surcharge on earnings above $1 million, paired with corporate tax increases.

It’s more defensible in principle. High earners have done extraordinarily well while the City’s fiscal position deteriorated. Wall Street profits were on track to exceed $60 billion in 2025. The moral logic is not hard to follow.

But New York is not starting from a low-tax baseline, and this is a country where it’s really, really easy to move your capital from one city or state to another. New York’s combined top marginal rate — state plus city — already stands at 14.776%, the highest in the nation. It exceeds California’s 13.3%, New Jersey’s 10.7%, and Massachusetts’ 9.0%. Mamdani’s proposed 2% surcharge would push that combined rate up more, at a moment when the city’s competitive position is already under pressure.

(On the corporate side, the city already imposes the highest combined corporate tax rate in the nation, about 17.5%. We can go higher still, but it’s silly to imagine there won’t be any economic ramifications.)

Many Mamdani supporters point out that rich people have cried wolf for a long time, repeatedly threatening to leave the city before previous proposed tax hikes, and then staying put when push comes to shove. They’re generally right about this; the Fiscal Policy Institute has documented that the 2021 state tax increase did not produce a measurable uptick in high-earner out-migration. They’re generally right that it’s middle- and working-class people who are leaving in greater numbers given the pressures they’re facing, which are precisely what Mamdani says his agenda is designed to alleviate.

The more important concern isn’t capital flight but wealth formation. As the Citizens Budget Commission has documented, the state’s share of millionaires is shrinking sharply compared to the rest of the nation — not necessarily because of outmigration but because we’re not generating super-wealthy residents like other places are. New York’s share of the nation’s millionaires fell from 12.7% in 2010 to 8.7% in 2022 — a 31% decline that the Citizens Budget Commission estimates cost the state and city more than $13 billion in income tax revenue in 2022 alone. If we don’t get the tax mix right, this phenomenon might continue or accelerate.

The revenue concentration this creates is extraordinary and fragile. State millionaires currently pay 41% of all personal income tax. The top 200,000 taxpayers — out of nearly 11 million filers — pay half. The bottom 50% pay 0.2%. At the city level, the top 1% account for roughly a third of all income tax revenue.

Though such disparity in tax burden might seem fair from an economic justice perspective, this is a system perched precariously on a narrow base. A recession, a sustained downturn on Wall Street, or simply a bad bonus season can cause city revenues to crater in ways that an economy-wide downturn would not predict.

The city’s budget gaps are not one-time problems — they are projected to extend to $6.7 billion in FY2028, $6.8 billion in FY2029, and $7.1 billion in FY2030. Income tax surcharges on high earners are among the most volatile revenue sources available to any government. New York State learned this during the financial crisis, when income tax receipts from high earners collapsed.

The savings targets

Which brings us back to what the mayor has conspicuously avoided: a genuine, rigorous look at the expense side of the ledger. This is where the false choice truly falls apart — because there is a third path, and it’s not exotic. It just requires doing some politically difficult things the mayor hasn’t shown an appetite for.

Mamdani’s Executive Order 12 — the Chief Savings Officers initiative — projects $710 million in FY26 savings and $1.1 billion annually thereafter, at targets of 1.5% to 2.5% of agency budgets. This is not aggressive. Bloomberg-era Programs to Eliminate the Gap routinely required 3% to 5% reductions and at times crept into the double-digit percentages. Worse, the detailed agency plans aren’t even due until March 20 — meaning the mayor presented New Yorkers with a revenue ultimatum before his own administration had finished reviewing the spending side.

Consider uniformed agency overtime, which has ballooned well above budgeted levels for years. At the NYPD, headcount is at lower levels than it has been in recent history. That’s not a big problem for driving crime down, but it has greatly increased the reliance on overtime. At the FDNY and Correction Department, workers get unlimited paid sick days. But in the fire department, if more than 7% of firefighters call out sick over the course of a month, the city can cut back staffing on certain engine companies by removing the “fifth man” (extra firefighter) — while all other engine companies stay staffed with the usual four firefighters.

Fixing this and finding other efficiencies throughout the municipal workforce requires driving a hard bargain with public sector unions — unglamorous, politically costly work that no mayor has been willing to prioritize.

Indeed, in the single largest department, the Department of Education, most of the money goes to teachers. Under an underfunded state mandate that Mamdani has supported, the City will have to hire thousands more of those to bring class sizes down in a way that may compromise teacher quality and harm undersubscribed schools in lower-income neighborhoods. It may also have to build new classrooms despite declining enrollment. That’s just dumb — as is the refusal to look really hard at spending across the system.

Last year, the New York Editorial Board put the question to Mamdani: “New York State spends more money per pupil on schools than any other state...Yet, at least on measurable outcomes, like test scores and graduation rates, we are in the middle of the pack. What do you think explains that disconnect, and how would you go about trying to get more bang for the buck in education?”

His answer pivoted to a critique of Adams’s failure to enforce the class-size mandate. In other words, it wasn’t an answer at all. That’s not serious.

The serious response

So what does it all add up to? The false choice Mamdani has constructed — raise taxes on the wealthy, or punish everyone with a property tax hike — is designed to foreclose a conversation he doesn’t want to have. If and when his preferred tax increases fail in Albany, if and when the property tax gambit implodes politically, Mamdani will have to offer a Plan C to close the gap.

The mayor should start preparing the public for it now. Plan C is doing the hard, unglamorous work: serious savings targets at the 3-5% level rather than the 1.5-2.5% range his executive order contemplates; real accountability for overtime abuse at the uniformed agencies; specific consulting contracts terminated and insourced; and an honest conversation about which new programmatic commitments — universal child care, free buses, and more — can wait until the structural gap is closed.

The budget gaps running through FY2030 are structural, not cyclical. They won’t be solved by one legislative victory in Albany or one tough year of savings or one-time use of the city’s reserves. They require a mayor willing to have an honest conversation about what government can and cannot do right now.

It is not a betrayal of progressive governance to spend public money carefully — it is, in fact, a prerequisite for it. An administration that cannot demonstrate fiscal discipline will not be trusted with the larger ambitions it has set for itself.

Note: An earlier version of this piece included a Fareed Zakaria quote asserting that the city’s budget has grown faster than its economy since 2014. That’s incorrect. New York City’s all-funds budget has grown a bit slower than its economy over this period. Thanks to the reader who pointed out the error.