New York, New York

A Manufactured Crisis Meets Political Leverage

Mayor Zohran Mamdani has positioned himself as the reluctant steward of a fiscal emergency. Yet the numbers tell a different story. New York City does not suffer from a revenue drought. It suffers from an addiction to spending that has outpaced economic growth for years. Instead of confronting structural excess, Mamdani is attempting to gain leverage over Governor Kathy Hochul by threatening to raise property taxes unless Albany hikes corporate and income taxes on high earners.

This is not fiscal stewardship. It is political brinkmanship. By floating a 9.5% property tax increase while demanding higher state taxes on corporations and the wealthy, Mamdani is effectively telling job creators and property owners that they will pay more one way or another. That message carries consequences far beyond City Hall press conferences.

The deeper problem is that this strategy misunderstands how New York’s tax base actually functions. When nearly half of personal income tax revenue comes from a small percentage of high earners, even modest behavioral shifts can destabilize the entire budget. Threatening the very people who finance the city’s operations is not bold leadership. It is economic self-sabotage.

The Tax Base Reality Mamdani Cannot Ignore

According to State Comptroller Tom DiNapoli, the securities industry contributes 42.3% of the city’s personal income tax and 8.4% of total tax revenue. That concentration is not a minor detail. It is the backbone of New York City’s fiscal structure. Wall Street performance does not just influence the budget. It props it up.

Data from the Independent Budget Office show that firms with 500 or more employees account for only 0.3% of all businesses, yet employ over a third of New Yorkers and pay roughly 41% of total wages. The top 1% of corporate filers account for 93% of Business Corporation Tax liability. In other words, a tiny segment of companies and individuals carry a disproportionate share of the load.

When the top 1% of personal income tax filers contribute roughly 43% of total collections, policy errors do not need to be massive to have massive consequences. If even a fraction of those taxpayers relocate to Florida or Texas, where no state income tax exists, the revenue hole widens quickly. Raising rates on a shrinking base does not close gaps. It accelerates them.

Spending Growth Is the Real Engine of the Gap

The city’s employment trends reveal the underlying imbalance. The Citizens Budget Commission reports that from January 2020 to June 2025, health care and social assistance jobs rose 29%. This sector now employs nearly a million people, many supported by Medicaid spending and government funds. Meanwhile, excluding those gains, the city lost 38,000 private sector jobs in 2025.

City Comptroller Mark Levine has acknowledged the erosion of higher paying private employment. Higher wage sectors are stagnating or contracting, while lower wage, publicly subsidized sectors expand. That shift matters because not all jobs contribute equally to the tax base. The bottom 50% of filers contribute roughly 4% of personal income tax revenue. The top tier finances the bulk of it.

Mamdani’s agenda includes free buses, universal child care, and large scale affordable housing initiatives. These programs carry multibillion dollar price tags. Without structural spending reform, each new promise becomes another recurring obligation. Raising taxes to fund expanding commitments in a fragile economy compounds risk instead of solving it.

The Property Tax Threat and Its Ripple Effects

A 9.5% property tax hike would not exist in isolation. Property taxes influence rent levels, commercial lease rates, and development decisions. Landlords pass costs to tenants where possible. Developers reprice risk. Investors reconsider capital allocation.

At a time when New York State leads the nation in net population loss since 2020, according to Census estimates, adding new tax burdens signals instability. Texas and Florida have gained millions of residents over the same period. Texas now surpasses New York in financial services employment. Capital and talent are mobile. They respond to incentives.

If property owners and high earners perceive a coordinated squeeze from City Hall and Albany, relocation becomes rational. The result is not a stabilized budget. It is a narrower tax base supporting higher per capita spending. That dynamic widens structural deficits over time.

The Recession Scenario No One Wants to Face

The city comptroller’s office has modeled potential recession scenarios estimating two year revenue losses between $4.3 billion and $10 billion, with employment declines up to 150,000 jobs depending on severity. Those projections assume no major policy shocks layered on top of economic downturn.

If markets fall sharply, pension obligations surge. In 2022, as markets declined, projections indicated that city contributions to pensions could rise by $5.9 billion over three years to maintain funding levels. Those costs are not optional. Taxpayers must cover shortfalls.

Now combine recession risk with higher tax rates and population outflow. The city could face reduced revenues precisely when spending obligations climb. Demanding higher taxes in that environment risks shrinking the denominator of the tax equation while expanding the numerator of expenditures. The math does not favor optimism.

Why Mamdani’s Leverage Strategy Fails Basic Economics

The theory behind Mamdani’s pressure campaign appears simple: if Albany taxes corporations and the wealthy more, the city can avoid raising property taxes. But state tax increases affect the same individuals and businesses the city depends on. Layering state and city burdens compounds flight incentives.

Tax incidence matters. Corporations pass costs through reduced hiring, lower wage growth, higher consumer prices, or relocation. High income earners adjust residency, compensation structures, and investment decisions. Revenue projections that ignore behavioral responses overstate gains and understate losses.

Supporters often treat high earners as immobile revenue sources. Yet recent migration data contradict that assumption. The more concentrated a tax base becomes, the more sensitive it is to marginal policy changes. Ignoring elasticity does not eliminate it. It merely guarantees surprise when revenues underperform expectations.

A Sustainable Path Forward

New York City requires disciplined spending reform, regulatory clarity, and pro growth policies that attract investment. Public safety, functional schools, and predictable governance matter more than symbolic tax hikes. The city cannot tax its way into prosperity while its private sector contracts.

Governor Hochul faces pressure from the left flank to embrace broader tax increases. But doubling down on extraction from a narrow base risks destabilizing the entire state economy. Fiscal prudence demands acknowledging that growth, not punishment, expands revenue sustainably.

If Mayor Mamdani continues threatening property owners while pushing Albany to raise corporate and income taxes, he may discover that the budget gap he decries becomes larger, not smaller. Economic gravity is not partisan. It is relentless.

References

• "How Mamdani’s tax-hike mania could make his budget gap grow BIGGER" – New York Post
• Office of the New York State Comptroller – Securities Industry Tax Data (Tom DiNapoli)
• New York City Independent Budget Office – Business and Wage Statistics
• Citizens Budget Commission – Employment Sector Analysis
• Office of the New York City Comptroller – Recession Impact Modeling (Mark Levine)
• Manhattan Institute – Urban Fiscal Policy Research

Photo by Aditya Vyas on Unsplash