Mamdani Floats 9.5% Property Tax Hike for NYC if Wealth Tax Stalls

New York’s threatened property tax rise reveals how tangled city finances are, and why rethinking public revenue is overdue.

New Yorkers enjoy a famously byzantine tax code, but few can decipher why a city with a $107bn budget still faces such chronic shortfalls. This month, Mayor Zohran Mamdani cast a sharper relief on the problem by suggesting a 9.5% increase in property taxes—a move that would raise eyebrows even when coffers are flush. The mayor argues this hike is not a fait accompli, but the “last resort” should Albany fail to green-light his preferred fix: a city wealth tax aimed at the upper crust.

The dilemma is both perennial and peculiar. New York’s progressive mayor faces a $7.1bn shortfall for the fiscal year ahead, driven by ballooning housing and migrant-service outlays, tepid post-pandemic revenue recovery, and the stiff cost of city worker contracts. Mamdani’s Plan A, pressed in recent trips to Albany, would slap a 1% special tax on fortunes above $30m—a policy both sure to capture headlines and, historically, to stall quickly in the state legislature.

If legislators demur on the wealth tax, the city’s plan B would be to raise the property tax rate from 20.9% to 22.9%, a leap poised to yield roughly $4bn in new revenue. By New York standards, this is not a minor nudge; in dollar terms, it would be the largest hike in over a decade. Local homeowners’ wallets would feel the squeeze most acutely, though commercial property owners, already aggrieved by vacancy and remote work’s slow return, have registered their objections too.

A hike on this scale would not merely pinch Park Slope brownstone owners or Midtown landlords. It would cascade through renters and small businesses, with landlords certain—as economic logic and past behaviour suggest—to pass along much of the added cost. For a city still digesting 2023’s record commercial vacancies and housing prices routinely described as “punishing,” the prospects bode ill for affordability and local vibrancy.

Deeper currents swirl beneath these headlines. New York’s budget gap is not, as city officials sometimes imply, a one-off blip caused by a migrant surge or gubernatorial stinginess. Rather, it reflects structural weaknesses: a tax base heavily dependent on high earners and property, rigid state-imposed revenue limitations, and ballooning spending. Also in play: federal pandemic aid, which until last year helped paper over the cracks, has now ebbed away. As city expenses resume their ascent—wages, security, housing subsidies, and, more recently, costs for new arrivals—revenues simply have not kept pace.

Political headaches abound for Mamdani. Proposing a new wealth tax remains reliably popular among the Democratic city’s left, but Albany’s more centrist legislators, wary of flight risks among the very rich, have repeatedly demurred. Local officials note that the affluent are unusually mobile, and that New York relies on a small cohort of tax filers for a formidable share of its income-tax take. One study by the Independent Budget Office estimates that the top 1% of earners paid 42% of the city’s total income-tax revenue in 2022—a precarious reliance, as any exodus or mere slowdown in bonuses and business activity would leave a gaping hole.

Little wonder the mayor’s property tax threat is framed as muscular brinkmanship, not policy preference. Yet the threat itself is revealing. City leaders have precious few levers to pull: state law blocks New York from directly taxing many lucrative segments, and local reforms of property-tax structure, though much discussed, remain stalled for fear of opening a political Pandora’s box.

Taxing dilemmas, national resonance

New York’s standoff echoes perennial debates in other high-cost, high-tax cities: San Francisco, London, and Vancouver all face similar woes. In each, mayors and councils have sought to target wealth, patch holes with property levies or “mansion taxes,” and pursue more progressive redistribution. The enduring lesson, both in New York and beyond, is that there is scant public enthusiasm for higher property taxes—beyond the class of wonks who stress their steadier base compared to income taxes—yet the politics of wealth taxes are even more fraught.

The city’s present fix may portend further malaise for municipal finance. As remote work reshapes real-estate needs and population growth stagnates, the underlying property values that anchor tax receipts look less buoyant than in decades past. Large-scale reassessments to correct historic inequities—owners of modest homes face higher effective rates than luxury condo dwellers—regularly stall. Albany, meanwhile, shows little taste for change.

The wealth-tax gambit, if somehow achieved, would mark a national precedent, placing New York at odds with both the state’s governor and the caution of cities generally loath to frighten deep-pocketed residents. More likely, some muddled compromise awaits: a partial hike paired with cuts or deferred spending, and creative accounting elderly budget hands have practised for generations.

It is tempting to see Mamdani’s move as mere posturing, but that would miss the real cost of uncertainty. When local businesses and residents face fickle, unpredictable levies, they delay investment or flee to friendlier climes. Gallup polling finds a record 27% of New Yorkers are considering leaving within five years, a figure that policymakers in both City Hall and Albany might consider sobering.

For now, fiscal inertia rules. The city muddles through, buoyed more by hope for a rapid return to economic normalcy than by a sustainable revenue plan. Though New Yorkers have weathered worse over the past half-century, the current juncture provides a reminder that world-class cities cannot run on improvisation forever.

Fiscal sobriety, not flashy new taxes or slapdash hikes, will be the ultimate requirement. If New York is to avoid a slow slide into fiscal slouch—as some rival metropoles already have—it must reckon honestly with the hard questions of what it wants to pay for, and who, in the end, ought to foot the bill. ■