(The Center Square) — New York City mayoral frontrunner Zohran Mamdani’s plans to tax the city’s wealthiest to fund his policy initiatives could drive top earners out of state, according to a new report by a watchdog.
The Empire Center’s report looked at Mandani’s plans to set a new wealth tax on households making more than $1 million per year and increase corporate taxes to help fund his signature plans to provide free community college, bus service, and universal childcare. Mamdani’s campaign estimates both proposals would generate an additional $9 billion per year, which would amount to an 11% increase in tax revenues for the city.”
The report’s author said Mamdani’s wealth tax would only impact about one percent of New York City’s tax filers, while the proposed increase in corporate taxes would affect about 1,000 of the city’s 250,000 businesses.
“Before going ahead with these plans, city and state leaders should consider how much money those narrow groups are already pumping into government coffers – and the broader economy – and whether New York should risk chasing some of them away,” the Empire Center’s Bill Hammond wrote in the report.
New York City’s wealthiest residents currently pay the highest non-federal income taxes in the U.S., the report noted. The top marginal rate, applying to people with incomes of $25 million or more, is just under 14.8% – including a state tax of 10.9% and a city tax of 3.876%. That’s one-and-a-half points higher than the No. 2 state, California, and almost triple the national median of 5%, according to the report.
The report noted that the share of millionaires choosing to live in New York has been declining – from 12.7% of the national total in 2010 to 8.7% in 2022, the last year for which data are available from the Internal Revenue Service.
“A hypothetical taxpayer with $25 million in taxable income would potentially save $1 million a year by moving to New Jersey, almost $2 million by relocating to Connecticut and as much as $3.7 million by going to Florida or Texas,” the report said. “Mamdani’s proposed two-point hike would add another $500,000 to each of those amounts.”
Mamdani, a Queens assemblyman and democratic socialist, will face off against former Gov. Andrew Cuomo, a Democrat running as an independent, and Republican Curtis Sliwa in Tuesday’s mayoral election. Hundreds of thousands of voters have already cast ballots during the early voting, which wraps up Saturday. The latest polls show Mamdani with a comfortable lead over his two rivals in the race to City Hall.
The Empire Center’s report also panned Mamdani’s plans to hike the state’s top corporate tax rate by about half, up to 11.5% from its current maximum of 7.25%, which has caused concerns among New York City’s business community. If approved, that would match the corporate rate in New Jersey, which is the highest in the nation, the report noted.
For Mamdani, the wildcard is Democratic Gov. Kathy Hochul, who endorsed his mayoral campaign but has opposed wealth taxes, the report’s authors noted. Still, Hochul’s opposition is “not absolute” according to the report, which cited her support in the state budget for a five-year extension of “temporary” tax hikes on high-income taxpayers. Mamdani’s plans are likely to win support from progressive Democrats in the state Legislature, the report noted.
“A newly elected mayor seeking higher taxes on the wealthy would likely receive a warm reception from many of Albany’s ruling Democrats – many of whom have supported doing the same thing at the state level,” Hammond wrote.
