New York City Mayor Zohran Mamdani is proposing a package of tax increases he says would raise about $9 billion a year to fund programs that include fare free buses and expanded childcare. The plan would require approval from state lawmakers in Albany.
Mamdani has said the proposal would raise the state corporate tax rate from 8.85% to 11.5% for about 1,000 of the city’s most profitable companies. He has also proposed a 2% city income tax surcharge on New Yorkers earning more than $1 million annually.
Revenue estimates cited in Mamdani’s campaign materials put the corporate tax change at about $5 billion a year and the surcharge at about $4 billion. Mamdani has tied the revenue to program costs that include an estimated $700 million a year for fare free buses and about $6 billion a year to provide childcare for children ages 6 months to 5 years.
Albany Approval Required as Budget Gap Looms
Both tax increases require approval from the state legislature in Albany, where Governor Kathy Hochul has signaled resistance to income tax hikes while showing more openness to corporate tax increases following Mamdani’s decisive election victory.
The timing is critical. Mamdani must submit his preliminary budget soon while facing a projected $12 billion to $13 billion budget gap over the next two years, according to city comptrollers. The gap stems from fiscal mismanagement under former Mayor Eric Adams, Mamdani said in a January statement.
New York City’s fiscal year 2026 budget stands at $120.5 billion, representing 57% real growth since the 1970s. Tax collections reached $81.7 billion in 2025 dollars. Mamdani’s $9 billion request would represent roughly an 11% increase on projected state and local taxes of $82.8 billion.
John Kaehny, executive director of Reinvent Albany, said Hochul is likely to propose her own statewide universal childcare program in her January budget as she heads into the 2026 election season. “In a lot of ways, she’s going to be preempting Mamdani,” he said.
How the Tax Increases Would Work
Under the corporate tax proposal, the state rate would rise to 11.5%. The article notes that New York City also imposes a local corporate tax, which would remain in addition to state and federal taxes.
The income tax proposal is described as a flat 2% surcharge applied to all earnings for filers above the $1 million threshold. Under that structure, a taxpayer earning $1 million would owe an additional $20,000 in city income tax. The article contrasts this with a bracketed structure that would apply only to income above $1 million.
The article cites outside reports saying that, as of 2022, millionaires made up about 1% of New York City’s population and paid about 40% of city income taxes. It also says that under the proposal, millionaires would account for a larger share of revenues generated by the plan.
Revenue Estimates Draw Skepticism
Conservative think tanks have challenged Mamdani’s revenue projections. The Cato Institute published analysis arguing the corporate tax increase would raise closer to $3.8 billion rather than $5 billion, and warned the income tax hike could prompt high earners to relocate to Long Island or the lower Hudson Valley.
During the campaign, Mamdani’s chief rival Andrew Cuomo said “even I will move to Florida” if Mamdani won.
But economic research suggests a mass exodus of wealthy residents is unlikely. A 2016 Stanford University study examining 13 years of IRS data found that only 2.4% of Americans earning more than $1 million annually moved each year. Low-income Americans were twice as likely to move, typically seeking more affordable housing.
Among the 2.4% of wealthy Americans who did move, only about 15% relocated to states with lower taxes. Multiple studies have found that millionaires are reluctant to leave their social networks for tax savings alone.
“The idea of these billionaires paying a little bit more in tax shouldn’t really bother anybody,” said Bob Lord, a tax policy expert at the Institute for Policy Studies, which supports progressive tax policies. However, he acknowledged that a city-specific tax could result in migration to nearby areas that would exempt the wealthy from the levy.
Program Costs and Implementation
The bus plan is estimated at $700 million annually in the article. It also notes that additional costs could be associated with changes intended to improve bus speeds, such as lane infrastructure and fleet purchases.
Universal childcare is described as costing about $6 billion annually and requiring expanded staffing and oversight. The article cites city demographic data estimating roughly 500,000 children under age five in New York City as of 2023 and references staffing ratios used in city childcare requirements.
Other items mentioned as part of Mamdani’s broader agenda include a rent freeze for roughly 1 million regulated apartments, city run grocery stores, and property tax reform.
Massachusetts Precedent Shows Higher Acceptance
Progressive policy experts point to Massachusetts as evidence that wealth taxes can succeed when revenue is transparently directed toward public services. A wealth tax implemented there in 2022 raised $2 billion, exceeding initial estimates of $1.4 billion.
Omar Ocampo, a researcher at the Institute for Policy Studies, said the higher taxes became more accepted as Massachusetts used the revenue to make community colleges and school meals free for all students.
“When you see that this money is actually being used for what they say it’s going to be used for, there’s less resistance,” Ocampo said. “And people are more willing to pay for increased taxation. In Massachusetts, the state was very adamant that this revenue would go towards education and public transit. There’s less complaining about taxes when you can actually see the investment.”
Program Costs and Implementation Challenges
The free bus program carries an estimated $700 million annual price tag, though the cost of making buses faster remains unclear. It could require building new boarding islands, creating more dedicated bus lanes and purchasing new buses.
Universal childcare for children under five would cost approximately $6 billion annually and require a new bureaucracy potentially overseeing tens of thousands of teachers and staff. The city’s latest demographic data shows approximately 500,000 children in the five boroughs under age five as of 2023. Child care centers need one staff member for every five to six toddlers, according to city staffing requirements.
If Mamdani’s tax plan raises the projected $9 billion annually, it would be enough to cover the $6.7 billion combined price tag for these programs based on his campaign estimates. However, the mayor has also pledged a rent freeze on roughly 1 million regulated apartments, city-run grocery stores and property tax reform, adding to his fiscal agenda.
City spending is projected to rise $8.5 billion over three years even without new programs, according to budget analysts. Mamdani said in his January statement that he rejects austerity measures and will demand the wealthy and corporations pay their “fair share” for fiscal stability.
Whether he demands the full $9 billion in his first preliminary budget or phases it in over time will signal his approach to governing. The City Council, now under Speaker Julie Menin, is expected to take a more moderate stance than Mamdani’s progressive platform.
Property Tax Reform Also on Agenda
Mamdani called the property tax system “broken” in his inaugural address and pledged fixes despite resistance from tenant-majority voters. Experts recommend eliminating assessment caps on one-, two- and three-family homes, co-ops and condos, which are currently taxed at fractions of market value.
Proposed reforms include a homestead exemption capped at $500,000 income for primary residences and circuit-breaker limits for low- and moderate-income owners, phased in to prevent sharp increases. These changes could affect landlords already facing pressure from the rent freeze.
The Commercial Rent Tax, which targets Manhattan businesses paying over roughly $21,000 in base rent, remains a key revenue source unlikely to disappear under Mamdani, though changes to the threshold or rates could emerge through his executive budget.
What Comes Next
Governor Hochul will release her state budget proposal in January, potentially including her own universal childcare program that could compete with or complement Mamdani’s vision. The state budget process concludes in April, when lawmakers will decide whether to approve Mamdani’s tax increases.
For high earners and corporations, the coming months will determine whether New York City becomes significantly more expensive to operate in. For families and residents, the outcome will shape whether promised services like free buses and childcare become reality or remain campaign promises.
The debate over Mamdani’s tax plan will test whether New York can implement progressive redistribution without triggering the business exodus that critics warn about, or whether transparent investment in public services can build the public support that Massachusetts experienced.
Source
Mamdani wants to change the tax code. Here’s what that could look like | Gothamist