Free for all: Democratic socialist's policy pitches face tough fiscal reality in New York

Politico

27-05-2025

NEW YORK — Democratic socialist Zohran Mamdani has catapulted into second place in this year's New York City mayoral race by promising free buses, no-cost childcare and city-run grocery stores.
He'll have a tough time paying the tab.
To fund his vision, the state legislator wants to conjure up $10 billion in new revenue through higher taxes on businesses and wealthy New Yorkers. But beneath the sheen of that populist platform is a morass of necessary state approvals that threaten his plans coming to fruition.
Standing in his way: Democratic Gov. Kathy Hochul, who does not seem keen on raising taxes.
The governor, a moderate Democrat, has expressed steadfast opposition to hiking taxes on high-income earners. She will be facing reelection next year too, just as Mamdani would need her blessing to begin accomplishing his goals during his first year in office — adverse conditions that stand to imperil nearly half of the state assemblymember's $10 billion bonanza.
A POLITICO review of his proposals found Mamdani has likely underestimated the cost of his housing construction and school rehab plans by tens of billions of dollars, making it that much harder for the charismatic, 33-year-old politician to breathe life into them. Additionally, his sales pitch to levy Big Apple corporations significantly downplays their existing tax burden.
'He articulates his points very well, and they make sense. You understand exactly what he's saying,' former Gov. David Paterson said in an interview. 'The problem is: Nobody told him there's no such thing as Santa Claus.'
The questions around how Mamdani will fund his sweeping agenda underscore a fundamental question of the mayor's race: Whether a socialist lawmaker can effectively serve as an executive, a position that demands compromise.
While mayoral candidates often pitch municipal proposals that require the state's blessing, Mamdani is unique in tying multiple marquee planks of his campaign to the whims of Albany — a political bog that has swallowed more seasoned negotiators than the three-term legislator.
The gambit has helped in the short run. Mamdani has roared ahead of a pack of left-leaning hopefuls chasing frontrunner Andrew Cuomo by running a savvy campaign powered by viral social media moments, stage presence and the promise of cash added back into New Yorkers' pocketbooks.
He's the chosen candidate of the hyper-online, activist left, but offline — and in Gracie Mansion — the bigger the idea, the less likely a mayor has the power to pull it off alone.
New York City is a bureaucratic vassal of the state, meaning mayors need sign off from the governor and bicameral Legislature for everything from policing illegal cannabis shops to retaining control over the nation's largest public school system. In Mamdani's case, he would need to convince Albany to significantly expand the city's debt capacity and green-light free buses, in addition to passing the tax hikes necessary to realize his most buzz-generating visions. He is also pushing for an increase of the state-mandated $16.50-an-hour minimum wage to $30 by 2030.
Success, of course, would deliver a substantial payoff.
Former Mayor Bill de Blasio staked his 2013 campaign on creating universal prekindergarten with funding from Albany. The program is now the signature legacy of his rocky eight-year tenure.
De Blasio hoped to pay for his proposal with a tax on the wealthy before being thwarted by then-Gov. Cuomo, his political nemesis who delivered funding for the plan without raising taxes in an election year. But de Blasio believes Mamdani has a better shot in today's political climate.
'The difference now is the millionaires and billionaires have gotten massive tax cuts since the first [President Donald Trump] term, and they are about to get even more,' de Blasio said in an interview, noting the state Legislature is now entirely controlled by Democrats. 'So calling for higher taxes on the wealthy is an entirely different enterprise now than it was in 2014.'
For a sense of scale, de Blasio's Pre-K plan was priced at less than $500 million annually when the funding was included in the state budget. Mamdani is looking to raise 20 times that sum, almost all through tax hikes.
The assemblymember wants to collect $5 billion each year by increasing the state's corporate tax rate from 7.25 percent to 11.5 percent. He is looking to generate another $4 billion by hitting the top percentile of New York City income earners with a 2 percent flat tax. The last bit of revenue would come from a combination of procurement reform and collecting fines and fees owed to the city.
'Together, these approaches would raise $10 billion and would transform this city into one where New Yorkers can afford their rent, can afford public transit, can afford their child care, can afford their groceries — one where New Yorkers can do more than worry each and every hour of each and every day whether or not they can continue living in the wealthiest city in the wealthiest country in the world,' Mamdani said during an April press briefing explaining his approach.
State lawmakers have routinely supported increasing taxes on the wealthy. The governor would be a much harder sell.
'I'm not raising income taxes,' Hochul said in March, citing a desire to stem an exodus of the wealthy to lower-tax states. 'I will cut income taxes instead. That's how I'm going to keep people here.'
Hochul is up for reelection in 2026, the first year of Mamdani's term if he were elected. Rendering her cooperation even less likely is the prospect of a competitive Republican challenger eager to cast the state as unaffordable and hostile to commerce.
As for business taxes, the governor has supported hiking them as recently as this year. The assemblymember has pitched his corporate tax increase as a way to bring New York's rate on par with the top business tax bracket in New Jersey.
But the comparison is not exactly apt.
Big Apple businesses pay well above the New York state rate. New York City charges its own corporation tax, and companies located in the five boroughs must make additional offerings to the Metropolitan Transportation Authority. That translates to a total tax rate of more than 18 percent for major corporations, roughly seven points higher than the largest corporations pay across the Hudson River.
'The kind of tax increase he is proposing would hollow out New York City in terms of jobs and its tax base,' said Kathy Wylde, head of the Partnership for New York City, a nonprofit representing the interests of major corporations in the five boroughs. 'The idea that he would net raise an additional $10 billion is fantasy because those taxpayers and the jobs that they provide would be moving out faster than he could collect.'
Wylde cautioned the city has already posted a net loss of 1,000 private-sector jobs for the first four months of the year, according to an internal report shared with POLITICO, and she noted that many of the city's biggest employers will not benefit from the proposed Trump tax cuts because of how their businesses are structured. Additionally, a recent report from the Citizens Budget Commission showed New York State already had the highest income and business taxes in the country as of 2022, the latest year available for analysis.
A more practical issue for Mamdani? The city has no claim to state corporate tax collections, which flow into a multibillion-dollar sea of revenue controlled by the state.
The candidate does not seem fazed.
When asked during a recent forum how he will convince Albany, Mamdani pointed to the Legislature's push to raise income taxes in 2021, which he said was accomplished in part by getting broad support from the public — suggesting that if he were to build such a strong coalition, Hochul would have no choice but to relent.
'The mayor of New York City has been described as having the second-largest bully pulpit in America,' he said. 'There is an opportunity to use that bully pulpit in a manner other than what [incumbent New York City Mayor Eric Adams] has done.'
In particular, Mamdani plans to sell the increase of the corporate tax as the vehicle to fund universal childcare — a benefit he argues would accrue across socioeconomic lines and make the city more competitive. His team said he would work with state officials to route the spoils of that levy directly to New York City.
Campaign spokesperson Andrew Epstein disputed the notion of a corporate exodus as a result: Not only are major firms in line for a federal tax cut, but the corporate rate Mamdani wants to hike — unlike the MTA surcharges — is based on an entity's business activity in New York, not where it is located. In other words, he argued, anyone wanting access to the city's 8.5 million consumers will ante up.
Epstein also pointed to polling that shows higher taxes on the wealthy have broad support in New York.
'The Mamdani revenue plan is necessary in order to Trump-proof New York City, and we are confident that Zohran will use his experience in advocating for smart tax policy in Albany — where he won major tax increases on billionaires and corporations in 2021 — to deliver a New York that protects its people from the Trump administration's attacks on the working class,' Epstein said in an email.
James Parrott, a fiscal policy expert with The New School, said high-income earners do not make decisions about where to live primarily based on taxes — meaning a hike would not automatically spur them to flee. He said there's room to increase rates on the highest earners in the five boroughs. But even they, along with New York City corporations, have their limits. The key to successfully leveraging more money, Parrott said, is to tie tax increases to specific policies that have broad public support.
'If this was for something that was widely seen as enhancing the attractiveness of New York City to potential employers, like universal childcare would, then I don't think it's going to be a big push factor driving corporations out,' he added.
Mamdani's plan to provide childcare for all New York City children under 5 would indeed consume much of the new revenue he is hoping to obtain. His campaign has pegged the cost at between $5 billion and $7 billion. The group Prenatal to Five Fiscal Strategies, which has provided fiscal estimates for childcare programs, predicted in a 2023 study the cost would be $6.6 billion with current salaries for childcare workers and up to $9.6 billion if those workers are paid living wages.
Mamdani's proposal for free buses would run the cash-strapped MTA around $900 million in annual revenue, according to the latest projections, though the legislator has suggested the governor-controlled transit authority board might be enticed by a cost-sharing agreement with the city. The tab for a new Department of Public Safety would entail $450 million in new spending, per the campaign, while the cost of piloting five city-run grocery stores would come out to $60 million, an estimate his team arrived at by doubling the projected costs of a similar effort in Chicago.
The democratic socialist's biggest ticket items — and the ones most likely to exceed his cost estimates — would be included in the capital budget, rather than the annual expense plan.
New York City is already set to borrow around $173 billion over the next 10 years to finance major infrastructure projects like the construction of four new jail facilities. Mamdani is proposing to more than triple the $30 billion dedicated to housing in the hopes of, in turn, tripling the city's production of affordable homes.
That would almost certainly require permission to exceed a state-imposed debt limit — another major ask from the state. And even then, the math doesn't pencil out.
The city typically uses up the annual supply of federal subsidies underwriting significant affordable housing costs. That means Mamdani would have to make up the difference with more taxpayer dollars, making any serious production boost much more expensive than the units being financed today.
And his pledge to build with union labor would drive up expenses even more. In 2016, the Independent Budget Office found prevailing wage rates — less costly than full union construction — would increase the price tag of city-subsidized housing projects by 23 percent.
Mamdani has also pledged to renovate 500 schools by replacing pipes, heating and air-conditioning systems, and removing mold and lead paint. He has pegged the cost of those upgrades and other green initiatives at $3.27 billion over a decade.
Jeremy Shannon, an architect and former director of sustainable design and resiliency at the city's School Construction Authority, said such an undertaking would exceed Mamdani's estimates by an order of magnitude. The Adams administration, for example, recently allocated $4 billion for green upgrades at just 100 schools, said Shannon, who was previously a volunteer for one of Mamdani's rivals, city Comptroller Brad Lander.
'As a sustainable design architect, I would love to see the level of school and housing decarbonization that both candidates are proposing done over the next five years because we are in the middle of an ecological crisis,' he said, adding he was not speaking on behalf of Lander's camp. 'Zohran's climate action plan, however, is not helpful.'
Taken together, that means Mamdani would likely need to borrow tens of billions of dollars more than his plans call for, increasing the stakes for relaxing the city's debt limit and increasing annual repayment obligations if he were to get it.
Epstein, the campaign spokesperson, said Mamdani would use the mayor's bully pulpit to advocate for more debt capacity from the state, along with additional federal subsidies. For his housing plan, the lawmaker also plans to leverage the supply of city-owned property, upzone areas that have not contributed to housing production and fast-track affordable projects.
And he did not budge on higher construction wages.
'Union labor is essential to this plan,' Epstein said. 'Shortcuts that stiff workers are antithetical to our city's values and bound to fail.'
Despite the significant political roadblocks ahead of him, Mamdani has one thing working in his favor: The electorate's attention tends to be captured by bold ideas, not how to pay for them.
'If a plan speaks to voters' aspirations and it addresses some of their concerns, they don't care how a candidate pays for it,' said Democratic consultant Trip Yang, who is unaffiliated with any mayoral campaign. 'Democratic primary voters vote off emotion.'