Mayor makes case for taxing wealthy while warning New Yorkers of fiscal burden ahead
Mayor Zohran Mamdani presented his first preliminary budget on Tuesday afternoon, laying out two competing paths to close New York City’s remaining $5.4 billion fiscal gap. The budget presentation capped a remarkable week of fiscal negotiations with Albany, culminating in Governor Kathy Hochul’s announcement of $1.5 billion in additional state aid over two years.
The Budget Gap: From Crisis to Manageable Challenge
When Mamdani took office in January, the city faced a staggering $12 billion budget gap inherited from the previous administration. That figure has now been cut nearly in half through a combination of aggressive fiscal measures, updated revenue projections reflecting strong Wall Street performance, and the state funding commitment. The gap now stands at $5.4 billion, considerably less daunting than the crisis scenario facing the administration just weeks ago. According to City Comptroller Mark Levine, the city faces its largest budget gap since the Great Recession, a reality that underscores the severity of the fiscal challenge even with recent progress. The remaining gap still requires difficult choices, choices that Mamdani framed explicitly in his Tuesday address as fundamentally about who bears the burden of fiscal responsibility.
Path One: Taxing the Wealthy and Corporations
Mamdani presented his preferred approach as the “most sustainable and fairest path” to resolving the budget gap. This path relies on raising taxes on the richest New Yorkers and the most profitable corporations operating in the city. The mayor specifically called for a 2 percent personal income tax increase on the approximately 33,000 New Yorkers earning more than $1 million annually, coupled with increases to corporate tax rates. “The onus for resolving this crisis should not be placed on the backs of working and middle class New Yorkers,” Mamdani said during his address. The mayor emphasized that New York City residents contribute 54.5 percent of state revenue while receiving only 40.5 percent back in state services and funding. This “drain” on the city, as Mamdani characterized it, has persisted through multiple administrations and represents a structural imbalance that cannot be solved through city action alone. Wall Street’s exceptional performance in recent months has provided a temporary revenue boost, generating $2.4 billion in additional tax revenue in fiscal year 2026 and projected $4.9 billion in fiscal 2027. However, Mamdani cautioned that relying on volatile Wall Street profits is insufficient long-term governance strategy and that structural tax reform must address the imbalance between revenue contribution and service delivery.
The Wealth Tax Proposal
The specific proposal targets high earners and corporations with significant presence in New York City. According to the mayor’s office, these tax increases represent a commitment to progressive fiscal policy that prioritizes protecting working and middle-class New Yorkers. The administration has also created “chief savings officers” in every city agency tasked with identifying operational efficiencies and eliminating unnecessary spending without cutting core services. For detailed analysis of progressive tax policy in New York State, see the Urban Institute, which has extensively documented the impact of wealth-based taxation.
Path Two: The Last Resort Option
Mamdani presented the alternative path as one that would harm the city’s most vulnerable residents. This “second path” relies on property tax increases and depleting the city’s financial reserves, a budget strategy the mayor explicitly called “options of last resort.” Under this scenario, the city would raise property taxes by approximately 9.5 percent, directly impacting over three million residential units and more than 100,000 commercial buildings across the five boroughs. The median property owner in New York City would face substantially higher tax bills at a time when the city continues grappling with an affordability crisis. “This would effectively be a tax on working and middle class New Yorkers who have a median income of $122,000,” Mamdani said, articulating the core argument against this path. The property tax approach would hit small property owners and neighborhood businesses particularly hard, potentially worsening the city’s housing and commercial affordability crises. City Council Speaker Julie Menin has already signaled concern about property tax increases, stating that “the Council believes there are additional areas of savings and revenue that deserve careful scrutiny before increasing the burden on small property owners and neighborhood small businesses.”
Confronting the Adams Administration Legacy
Much of Mamdani’s budget address focused on assigning responsibility for the fiscal crisis to his predecessor. The mayor argued that former Mayor Eric Adams “significantly understated” budget deficits in the 2025 November plan, creating a cascading deficit that Mamdani inherited. “This crisis has a name and a chief architect. In the words of the Jackson 5, it’s as easy as ABC. This is the Adams budget crisis,” Mamdani said, drawing a sharp distinction between his administration’s transparency and the previous administration’s fiscal practices. The Adams administration responded that it inherited a $10 billion debt from previous city leadership and the COVID-19 pandemic compounded fiscal challenges. However, Mamdani and Comptroller Levine documented a pattern of systematic underbudgeting of essential services that created structural deficits year after year. Former Governor Andrew Cuomo also drew criticism from Mamdani, though a Cuomo spokesperson countered that Mamdani, as a state legislator, could have addressed the state-city funding imbalance during his tenure in Albany. For more on municipal budget crises, the Center on Budget and Policy Priorities provides ongoing analysis of city and state fiscal policy.
Governor Hochul’s Fiscal Partnership
The $1.5 billion state commitment announced Monday represents a significant shift in state-city relations. The funding includes $510 million in recurring annual funding targeting costs that shifted from state to city responsibility under prior administrations. Specifically, the state allocation includes approximately $300 million for youth programs, restoration of $150 million in sales tax receipts previously retained by the state, and $60 million for public health services. The remaining $500 million will be allocated to “shared priorities” to be determined in ongoing discussions between City Hall and Albany. Governor Hochul stressed in her statement that “a strong New York City means a stronger New York State,” framing the aid as investment in economic recovery rather than temporary assistance. This rhetoric represents an important shift from the more adversarial state-city relationship that characterized earlier negotiations. However, Hochul has privately expressed reservations about raising taxes on wealthy New Yorkers and corporations, signaling that the governor may not fully support the mayor’s preferred path.
The Road Ahead: Negotiation and Uncertainty
Mamdani made clear that his preliminary budget is exactly that: preliminary. The real negotiations begin now as the City Council reviews the mayor’s proposals, holds budget hearings, and develops its own fiscal recommendations. City Council Speaker Menin has positioned herself as willing to work collaboratively with the mayor while maintaining council authority over budget decisions. “The budget dance is that: It’s somewhat of a dance, which is unfortunate,” Menin said, acknowledging the structural tension between executive and legislative branches in budget development. The preliminary budget hearing process will likely extend through late February and March, with the council developing its own budget response. The mayor will then present an executive budget in response to council feedback, triggering another round of hearings before the council votes on an adopted budget that all parties can live with. For additional context on municipal budget processes, the Pew Charitable Trusts has published comprehensive guides to city budgeting best practices. Throughout this process, the fundamental question remains unresolved: will Albany act to tax wealthy New Yorkers and corporations, or will New York City residents face property tax increases and reserve depletion? Mamdani has made his preference clear, but the governor holds significant power over whether the state will raise taxes on those earning the highest incomes. The next months will determine whether the city avoids the painful second path and achieves genuine fiscal stability through progressive revenue measures. What remains certain is that New Yorkerswhether through city property taxes, state income taxes, or reduced city serviceswill bear some cost of the fiscal crisis inherited from prior administrations.
