Mamdani presses for tax hike on New York’s wealthiest as budget deficit looms

“We must raise taxes on the wealthiest few in New York City so that we can invest in the many,” the newly elected Democratic socialist mayor of the country’s largest city said in an interview Tuesday.

During the campaign, Mamdani pledged to raise taxes on millionaires and corporations to help fund his ambitious affordability agenda. But the plan drew swift rebuke from the city’s elite, who said a tax hike would drive the wealthiest out of New York. New York Gov. Kathy Hochul, who would have to sign off on the increases, has said she opposes income-tax hikes but has previously been more open to a potential corporate-tax increase.

Mamdani said in the interview that the tax increases were now urgently needed to meet the moment. “New York City has not seen a gap of this scale since the Great Recession,” he said, referring to the 2008-09 financial crisis. He added that his administration has already begun conversations with state officials.

Hochul’s office didn’t immediately respond to a request for comment. Mamdani also wants Albany lawmakers to increase the amount of state funding the city receives.

The mayor, who took office Jan. 1, must present his first preliminary budget for the next fiscal year in February, kicking off months of wrangling with city council members over spending before the deadline for a final budget in June.

Despite the yawning hole, Mamdani said he plans to present a balanced preliminary budget by pursuing savings and looking for inefficiencies without cutting any programs that benefit the working class. He didn’t directly address whether his proposed budget would still allow him to pursue signature proposals, such as free bus service and government-subsidized grocery stores.

“That budget is going to ensure that the working-class New Yorkers who did not create this crisis are not then made the victims of it,” he said. The governor and the mayor announced earlier this month that the state would fund a rollout of free child care for 2-year-olds in the city—another major policy proposal of Mamdani’s campaign.

Earlier this month, City Comptroller Mark Levine warned of deficits, including a $2.2 billion shortfall in the $115.9 billion budget for the city’s current fiscal year ending June 30. His office projected a $10.4 billion gap for the next fiscal year.

Mamdani and Levine both blamed the previous mayor, Eric Adams, for the fiscal crisis, accusing his administration of chronic underbudgeting for large expenses, including rental assistance and overtime for city workers. “New Yorkers were not told the truth and now we are paying the price,” Mamdani said.

A spokesman for Adams didn’t immediately respond to a request for comment. The spokesman previously said it was wrong to blame the former mayor for longstanding budget gaps and fiscal pressures that he inherited when he took office. The Adams administration helped revitalize the city’s economy after the Covid-19 pandemic, the spokesman said.

Nathan Gusdorf, executive director of the Fiscal Policy Institute, a think tank that analyzes the city’s finances, said that his group was critical of the Adams administration’s budgeting practices, including inaccurate forecasts that at times led to confusing and adversarial negotiations with the city council. Some of the city’s projected deficits were because of policy commitments passed by the council that weren’t adequately funded, Gusdorf said.

Gusdorf was skeptical that Mamdani can present a balanced budget solely by finding efficiencies. He said there may be political will in Albany to increase income taxes or corporate taxes given the deficit and broad support for Mamdani’s affordability agenda. He added that city residents would be more opposed to spending cuts.

“The reality is there is probably no way around a city tax increase to balance the city’s budget,” he said.

Write to James Fanelli at james.fanelli@wsj.com