This week, Mayor Zohran Mamdani shocked New Yorkers with a proposal to cover the city’s looming budget shortfalls by raising city property tax rates by 9.5% and drawing down the city’s fiscal reserves unless the state enacts his proposed tax hikes on corporations and the wealthy. Already, the gap had been whittled down from a dire $12 billion to $5.4 billion, including via a $1.5 billion state cash injection, courtesy of Mamdani ally Gov. Kathy Hochul. Many observers read this as a threat, and new Comptroller Mark Levine warned that the moves “would have dire consequences.”
Brass tacks, I think it’s a bluff. Mamdani is not going to raise property taxes by almost 10%, not necessarily for any ideological reasons but for practical ones. Such a move would have significant implications for a huge cross-section of his other priorities. Last year, the Community Service Society and Progress and Poverty Institute — natural ideological allies of Mamdani’s, especially when it comes to affordable housing — put out a report analyzing 50 years of data on NYC’s property tax code to flesh out a conclusion that has long been conventional wisdom among progressive thinkers: it is regressive and disproportionately affects low-income New Yorkers, a point also made by Levine. Among the specifics were that large multifamily and commercial properties were taxed at higher effective rates, while owners of one to three-family homes and luxury properties worth over $1 million per unit received more favorable tax treatment.
While the city gets some leeway in how to assess values and issue tax breaks and whatnot, the natural conclusion here is that additional property tax burdens would be borne disproportionately by large, renter-occupied buildings – costs that would ultimately fall on renters. Mamdani knows this, of course, and he knows that he’s going to catch flak not only from his political opponents but his allies if he follows through on this particular strategy.
He’s engaged in a time-honored strategy: agitate about the looming fiscal crisis early on in the budget season to make the case for his own priorities and put pressure on the Legislature, which doesn’t want to be seen as refusing to take the actions that would keep the city solvent. Mayors also tend to be very cautious about projected revenues and budget gaps, in keeping with its legal responsibility to balanced its budget. Unlike the state or federal government, the city has a limited ability to issue debt.
Mamdani’s predecessor, Eric Adams, began his term with an effort at significant workforce reductions and other cuts to counteract what he described as a dire financial situation. It is very common for the City Council to have rosier and ultimately more accurate revenue projections than the typically wary mayoral budget office, so it shouldn’t surprise us if the Council’s forthcoming response to Mamdani’s budget ultimately identifies a much smaller budget gap than he has.
There will still be one, as the independent budget watchdog groups agree that the city is facing some pitfalls as a result of, among other things, the drying up of the last of the COVID-era federal spending and under-budgeted increases in spending on city bureaucracy and services – meaning that Adams lowballed expected expenses and used one-time steps to make up for the gap, steps no longer available to Mamdani. The president and chair of the centrist Citizens Budget Commission sent Mamdani a letter praising his efforts to find efficiencies in city agencies but urging him to focus more on “recurring savings driven by productivity, service redesign and evidence-based impact” by “aligning staffing and workload, streamlining administrative functions, leveraging technology to automate manual processes and eliminating or redesigning programs that have not demonstrated effectiveness.” That’s a lot of words to say he should reduce the workforce and cut some programs.
Cutting down on municipal employment is a thorny question. A lot of the city’s service-delivery issues over the past several years have been as a result of understaffing, most infamously at the Department of Social Services. Per reporting by the nonprofit news site New York Focus, that agency had almost 1,500 unfilled positions as of the end of last year, leading to forced overtime that itself contributed to burnout and resignations. As a result, there have been significant delays in processing for public entitlements like SNAP, which of course mostly affects the lower-income New Yorkers who need these services most.
This is partly what Mamdani was referring to in blaming Adams for the fiscal gap, i.e., that the prior administration had failed to fill some of these jobs so as to paper over increasing costs and left the mess for their successors. Still, it definitely is the case that there is some bloat in city agencies, and that there are areas where staff are not being effective. Where that fat lies depends a little on who you ask; I personally believe that the NYPD is much larger and better equipped than it has to be, but that’s not going to be a political winner for Mamdani. Cutting staff anywhere is also going to be controversial, as ultimately what you’re talking about is putting people out of jobs, even if that might be necessary from fiscal and operational standpoints.
In any case, I think the mayor’s talk about property taxes is a way of using whatever tools he has at his disposal to press the issue of state tax hikes for very wealthy people and corporations, and frankly I don’t think he’s going to back down on this. Not only is it a campaign promise and a potential fiscal lifesaver, but it is a pretty deeply held ideological position for him. The realities of actually governing have already shifted some of Mamdani’s practical approaches — see his turnaround on sweeps of encampments of the unhoused after the deaths of several people during the recent cold spell — but I don’t really see him budging on this.
Mamdani has estimated that his tax proposals would raise nearly $15 billion more in revenues over four years, and even if those are inflated numbers, we’re talking about a lot of money. The fact that he’s putting the nuclear option of big property tax hikes on the table to me is a sign that he is not going to relent, even if he has to play chicken with Hochul. He’s had a warm relationship so far with her, and she’s worked mightily to hand his administration and the city billions to implement his childcare proposals and reduce the budget gaps. But the governor, who’s up for reelection this year, has stood steadfast on the idea that she won’t sign a tax hike. At the core of her opposition is the belief that these hikes would drive people and businesses out of New York, a proposition that is very much in question.
Tax hikes and other revenue generators very often generate consternation that they will drive people away — remember when congestion pricing was going to kill downtown Manhattan? — but the effects in practice are often minimal. I don’t think that the small increases in the top marginal tax rate and in corporate taxes that Mamdani has proposed would cause any exodus out of New York, especially now in this environment of deep political uncertainty. Will Hochul call his bluff? I think she will try. It’s a question of how much political capital Mamdani thinks he has in the tank, and how much he wants to use up in this fight.
