Mamdani Dangles 9.5% Property Tax Hike as Budget Fix; Critics See Political Theatre

New York’s mayor is turning to an unpalatable tax hike in response to a yawning budget gap, but the city’s real fiscal crisis may be of political, not solely financial, design.

The word “crisis” is much abused in New York City politics, but it is not often paired quite so nakedly with threats. On February 17th, Mayor Zohran Mamdani—freshly installed, yet already treading the slippery paths of budgetary brinkmanship—framed his $127 billion budget proposal in starkly binary terms: unless Albany taxed the rich and corporations more heavily, the city would need to raise residential property taxes by 9.5%. The reception, even in City Hall, was tepid.

It is difficult to recall a mayor more willing to brandish tax hikes as both cudgel and bluff. Mamdani contends a projected $12 billion gap (which, like Alice’s White Rabbit, seems to shrink every time anyone finds its trail—first to $7 billion, then to $5.4 billion after Governor Kathy Hochul sent more state aid) leaves only two honest options: squeeze the private sector’s wealthy, or squeeze property owners.

Budget hawks and City Council members, typically a fractious bunch, suddenly found something to unite them: opposition. Andrew Rein, head of the Citizens Budget Commission, called it a “false choice,” chiding the mayor for ignoring the solution his group favours—trimming expenditures that make little difference to citizens’ lives. Carol Kellermann, a previous Commission president, diagnosed gamesmanship: inflating the threat of a property-tax rise to make Mamdani’s preferred option—higher income taxes on the city’s richest—look more palatable by comparison.

The city is required by law to balance its books. Yet how it gets there is no small matter for the metropolis or its nine million residents. Mamdani’s gambit has sparked consternation among homeowners, especially Black and Latino families in boroughs like Queens and Southeast Brooklyn, where, as Queens Borough President Donovan Richards notes, communities still carry the scars of the 2008 foreclosure wave. Richards, usually a Mamdani ally, called the mayor’s proposal a “nonstarter”, warning it “would only worsen our wealth inequality and overall affordability crises.”

That sentiment resonates well beyond the council chambers. New York’s chaotic patchwork of property taxes, lamented by experts as “long broken,” means middle-class households in outer boroughs pay disproportionately more than the brownstone-dwellers of gentrified Brooklyn or Manhattan. Each round of increases entrenches that imbalance, with foreclosures and displacement following swiftly in the wake of higher bills. Affordability—already the city’s hobgoblin—might become positively funereal.

A hike would also reverberate through the city’s tectonic rental market. Most landlords, unable to absorb a nearly 10% tax spike, would pass costs to tenants—further fattening the rent rolls for market-rate apartments, now at record highs. In a city where renters comprise two-thirds of households, the trickle-down effect is not theoretical but immediate.

The politics of pinched purses

The savvier observers detect in all this a sort of fiscal theatre. By sharpening the pain of one choice, Mamdani seeks to nudge Albany lawmakers into passing the burden upstate. The state budget process offers him leverage, but not control: Governor Hochul has so far been unswayed by his entreaties, doling out funds selectively but resisting calls for broad new taxes. Taxing high earners and corporations may poll well in New York City; upstate, the idea remains about as welcome as a midtown subway delay.

For New York, whose budget often dwarfs that of many countries, the stakes are not merely balancing a ledger. A sharp rise in property taxes or state income levies would pose risks to economic dynamism. Since the pandemic, high earners have become notably footloose, with recent census data showing net outflows to tax-friendlier climes like Florida and Texas. Corporate headquarters, too, grow quietly anxious with each new fiscal raid. In the short run, new taxes may bring in cash; over time, too-robust extraction threatens to erode the city’s tax base.

The conundrum is hardly unique to Gotham; major American cities—and indeed metropolises the world over—are watching their own post-pandemic ledgers with mounting unease. San Francisco faces similar deficits and a haemorrhaging tech workforce. London, Paris, and Toronto all grapple with uneven tax systems and ballooning housing costs. What sets New York apart is the ritualistic drama of its budget dance, played out amid rising inequality and relentlessly high expectations for public services.

Mamdani’s insistence on a binary choice between two unpopular taxes glosses over a thornier reality: much of the city budget is already staked out for schools, policing, and social programmes, but some spending—on economic development or antiquated departments—offers little value in return. Belt-tightening, though rarely beloved by any mayor, is not merely feasible but occasionally necessary. The city’s fiscal “crisis”, we suspect, owes as much to a paucity of political courage as to arithmetic.

The lesson here is both sobering and faintly comic. New York’s finances are not in imminent peril; its leadership, facing an inconvenient gap, has contrived an air of high stakes—less to solve the crisis than to position itself in the coming contest with Albany. Meanwhile, homeowners and tenants are left to fret over the possibility of punishing hikes, unsure which ill wind may next blow their way.

For all the sound and fury, the real solution likely lies in a blend of modest new revenue, shrewder spending, and (not least) long-promised reform of the city’s property tax labyrinth. Neither existential doom nor bucolic stability is on offer for the city that never sleeps. But there is—just—time, and political space, to resist both apocalyptic warnings and the comfortable inertia that has left tax reform a perennial mirage. ■