Soaking the rich — as Mamdani and other lefties want —won't pay for a supersized NYC gov't

New York Post

2 days ago

Mayoral candidate and Queens Assemblyman Zohran Mamdani vaulted into contention in this month's Democratic primary by pledging to supersize city government. 'He knows exactly how to pay for it, too,' his campaign brags.
Does he, though?
Mamdani's platform — free child care, more public housing and an end to bus fares or CUNY tuition, just to name a few — wouldn't come cheap.
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New Yorkers can have all of it, he promises, for the bargain-basement price of $10 billion in new revenues — less than a tenth of the current city budget.
Mamdani is very much lowballing his agenda's price tag. Yet even if he weren't, he still wouldn't likely be able to deliver.
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Most of his plans rely on a pair of tax hikes on corporations and millionaire earners, totaling $9 billion. He doesn't have authority to implement either.
Should his cocktail of social-media savvy and socialism land him in Gracie Mansion, he'd need Gov. Kathy Hochul and state lawmakers to OK these 'revenue raisers.'
New York's local governments, the city included, can't set their own personal or business income-tax rates. Between the city's 1975 brush with insolvency, and its more recent fiscal profligacy, that's understandable.
Here's another good reason: Candidates sometimes don't understand themselves how taxes work — and Mamdani is clearly one of them.
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Mamdani regularly compares the top state corporate tax rates of New York (7.25%) and New Jersey (11.5%). These are essentially the state tax rates on businesses profits related to their activity in a state. Mamdani says he'd 'match' New Jersey's rate.
On the one hand, that would be a windfall—for Albany, which collects the state corporate tax, not for New York City, where most is generated.
Yet Mamdani doesn't get that New York City's biggest firms already pay far more than they would on the other side of the Hudson.
Before anyone cuts a check to Albany, city businesses pay the Business Corporation Tax, at least 6.5% for small businesses and as much as 9%. On their remaining income, companies pay the state Corporation Franchise Tax, plus a surcharge to support the MTA.
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All-in, the top state-local rate for businesses in the city is generally just over 17.4%.
For them, 'matching' New Jersey would be a meaty tax cut.
But say Albany implemented Mamdani's $5 billion hike (after all, lawmakers pushed unsuccessfully for a smaller corporate tax increase this year). That would push the top combined corporate tax rate to a stratospheric 22%.
Nor would the proceeds flow automatically to the five boroughs. It would still be 'Albany's' money.
Mamdani would need to persuade lawmakers and the governor to spend the proceeds his way. He may find his friends in Albany aren't so friendly when money's involved.
Compare that to North Carolina, which is phasing out its corporate tax. It's no coincidence that state has been scooping up new corporate headquarters.
Or Pennsylvania, which is in the process of reducing its top corporate rate from 10% percent in 2022, to 8% this year, toward the goal of 5% in 2031.
Soak-the-rich rhetoric aside, even Albany can't ignore the explosion of remote work and the danger of pushing major employers to shift operations or direct expansions elsewhere.
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This isn't the only facet of tax policy Mamdani doesn't get.
His other big tax increase would have city residents with incomes over $1 million pay the city an extra 2% of their earnings (on top of their Medicare, Social Security, paid family leave and state and federal income taxes).
A growing body of data show people with high incomes and residences in other states limit their time in New York to reduce their exposure to the bigger bite taken by state taxes.
Here's yet another wrinkle: New York taxes people on their activity in the state, even if they don't live here. By contrast, since 1999, the city levies an income tax only on its residents — and, as with the business taxes, only with Albany's blessing.
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Plenty of people tolerate this extra tax, which tops out at just under 3.9%. But a two-point jump would measurably affect behavior.
A couple making $1 million would avoid about $53,000 in city taxes by moving to Westchester or Nassau — up considerably from the $35,000 they would save now.
That's effectively an $18,000 bonus for every millionaire earner who decamps for the 'burbs.
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If Mamdani prevails, his followers will abruptly encounter fiscal realities they are ill-equipped to manage — mainly because they've been told to ignore them.
Ken Girardin is a fellow of the Manhattan Institute.