Zohran Mamdani’s Tax Plan Leaves Us With More Questions Than Answers

Updated, Nov. 5: This article, initially published before Election Day, has been updated to reflect the results of the New York City mayoral race, which Zohran Mamdani, the Democratic candidate, won with a little more than 50% of the vote.

Zohran Mamdani was elected as the next mayor of New York City, a prominent political position as the leader of the most populous U.S. city.

Mamdani’s win is due, in part, to his embrace of a socialist-leaning agenda that revolves around raising taxes on the wealthy and corporations to pay for more social services for all. A key problem that he faces is that his policies for raising these funds tend to be based on statements that may lack merit or realism.

As many New Yorkers prepare to embrace their new mayor, it is incumbent on Mamdani to find a plausible path for bringing his vision to fruition. This article digs into statements from Mamdani’s own publicly available tax platform to highlight some of the areas that might be difficult to overcome.

Zohran Mamdani Tax Platform:

“Our state corporate tax rate is lower than all our neighboring states—New Jersey, Connecticut, Massachusetts, Pennsylvania, Vermont, Rhode Island, and even New Hampshire.”

Mamdani’s statement is factually correct in that New York levies a state corporate income tax of 7.25%, which is less than some of the states he picked as examples (Rhode Island actually only levies a 7% corporate income tax, which is less than New York).

However, if we were to expand that circle slightly further, we would see that New York has among the highest corporate income tax rates in the country. For instance, fellow East Coast business hubs such as Virginia, North Carolina, Georgia, and Florida have corporate tax rates ranging from 2.25% to 6%. Furthermore, New York’s 7.25% is well in line with most of the northeast states and West Coast states. Making it seem as though New York City is giving corporations a discount is misleading, at best.

Mamdani’s tax platform clearly illustrates a plan to raise the corporate tax rate to 11.5%, which would make it the most expensive tax state for corporations to operate in the U.S. Like individuals, corporations are mobile, as seen with 18 Fortune 500 companies between 2018 and 2023 fleeing the high corporate tax rate states of California, New Jersey, New York, and Illinois, to more financially beneficial states like Texas, Florida, and Georgia, according to Visual Capitalist.

His tax plan does not account for companies choosing to move operations outside of New York City. More concerning, his tax plan does not consider that if some of these companies were to leave, they would also take many jobs with them. As these corporate jobs are often high-paying, they can have a significant negative impact on New York City tax revenues.

Mamdani’s basis of comparison of New York state corporate income taxes with just the corporate income taxes of the states immediately surrounding New York not only includes one factually incorrect comparison, but it also does not consider the bigger picture of how companies can shift within the U.S., even traveling as short of a distance of Virginia to avoid his higher proposed corporate income tax rates.

Zohran Mamdani Tax Platform:

“The Mamdani administration will champion an increase of the top corporate tax rate to 11.5 percent—the same rate as New Jersey—which will raise $5 billion per year…. It will champion a 2 percent tax on all incomes over $1 million, which raises $4 billion.”

Not only does Mamdani’s platform not provide any mathematical support for where the $5 billion and $4 billion come from (a point that I highlighted in a prior Forbes contributor article), it is also unclear what jurisdiction he has over making such wide-scale changes. The same tax platform has been available on his website since he won the Democratic nomination in June. Despite some constant criticism of the platform lacking substance, no updates have been made, and it is unclear if these ambitious tax revenue increases of nearly 10% can come to fruition.

Even beyond whether the numbers would add up, there is a question of whether Mamdani has the authority to raise taxes as much as he claims. Typically, raising the corporate tax rate or individual income tax rates is spearheaded at the state level by the Governor (Kathy Hochul) and passed by the New York legislature. In fact, Section 1301 of the New York tax laws require an increase in local tax rates to be approved at the state level.

However, Hochul criticized Mamdani’s plans, saying he will drive New Yorkers to leave the state, according to PIX 11, leading to questions as to whether the state-level politicians will be receptive to such a large tax increase. Furthermore, New York Focus reports that Hochul is against any increases in income tax. Consequently, it seems as though his ability to raise the tax revenues that he campaigned on faces an uphill battle to coming to fruition.

One reason why this is a big issue is that localities are not able to run a deficit. This issue runs counter to the Federal government, which can go into debt to facilitate spending. As I reported in a Forbes contributor article, this notion means that any increases in spending need to be supported with increased tax revenues. If Mamdani cannot raise these funds through novel tax revenues, then he will need to cut spending elsewhere to facilitate his campaign promises for the new spending on social services.

Forbes3 Key Issues Surrounding Mamdani’s Proposed New York City Tax IncreaseBy Nathan Goldman

Whether or not New Yorkers leave is a clear issue of concern facing Mamdani. However, the bigger issue might be that he does not appear to have the support of the New York state officials in implementing his agenda, and New York City cannot spend more money than it brings in.

Zohran Mamdani Tax Platform:

“As the city’s economy grows, the city’s revenues naturally grow another $2-3 billion.”

When considering a 2025 budget of $90 billion, it is reasonable to expect the tax collections to grow around $2-3 billion annually. Most notably, this is due to inflation, which increases wages and spending annually. However, what is missing from Mamdani’s tax plan is the notion that inflation increases the tax revenues and the New York City government expenditures equally. Put differently, while some of the increased tax revenues could be due to growth, it is more likely to be due to inflationary pressures.

The reason why this idea is important is that Mamdani’s platform sells the idea that these policies will lead to an inflow of taxpayers who will contribute to the economy and grow the tax base. Rolling Stone recently commented that if the New York wealthy get taxed at a higher rate, then they will stay, an idea that plays directly into Mamdani’s expected outcomes.

However, one key issue with the Rolling Stone article is that there is little to no causal evidence to support that the wealthy do not move when facing higher tax burdens. In fact, in a Forbes contributor article, I highlight a large swath of academic literature that tests research questions related to whether taxpayers relocate due to tax burdens. The clear consensus of this literature, which employs advanced analytics and generates causal evidence, is that the wealthy do, in fact, leave when facing higher tax burdens.

ForbesIf Mamdani Raises NYC Taxes, Will The Wealthy Leave The City?By Nathan Goldman

The reason why this is important is that the wealthy contribute significantly to the underlying New York City tax revenues. For instance, if a wealthy taxpayer pays $500,000 in New York City taxes, and lower-income taxpayers only pay $1,000, if that wealthy person leaves the city, it would take 500 lower-income taxpayers to replace that lost revenue.

Potentially more concerning for New York City is that the notion of capital flight is likely to be a bigger concern when the tax is being levied at a city-level against wealthy taxpayers. Many of these targeted taxpayers already own other properties and have connections to lawyers and accountants (potentially even a team of them) to help manage their finances. Given this, it is plausible that the wealthy can use their resources to appear to no longer be a New York City resident, even if it means they are still spending significant time in the city.

As the Forbes reported, Zohran Mamdani was the clear winner in the New York City Mayoral election. His vision is novel, and many are hopeful for the promises he says he will deliver, such as free childcare, free transportation, higher minimum wages, and rent-controlled housing. However, these programs have large price tags, and it is, at best, unclear if he can raise enough revenues to meet these costs.