The economics behind Zohran Mamdani’s biggest plans

He faces a steep path ahead. Mamdani’s ability to execute on his plan is largely dependent on buy-in from state lawmakers and from Gov. Kathy Hochul, who is up for re-election in 2026.

Mamdani also enters office with New York City facing what the city comptroller’s office estimates to be a budget shortfall in the billions, and looming impacts from federal cuts that the GOP passed this summer as part of its tax bill that will shift more of the burden of programs like Medicaid and food assistance to cities and states. President Trump also had threatened to withhold billions in federal funds if Mamdani won.

What follows is a look at the economic realities that await some of Mamdani’s biggest policy proposals. A Mamdani spokesman didn’t respond to requests for comment.

Like the millionaires tax, this change needs approval from state lawmakers and Hochul. The overwhelming majority of New York’s corporate tax revenue stems from a small percentage of corporations, according to the state’s Department of Taxation and Finance. The state’s corporate tax revenue has increased each fiscal year since 2019, when it brought in $3.4 billion; it brought in $7.5 billion in the 2024 fiscal year.

At an 11.5% rate—and assuming all corporate taxpayers were taxed at the highest rate—corporate tax revenue in the 2024 fiscal year would have reached $11.9 billion, a $4.4 billion increase in revenue. Mamdani’s platform doesn’t explain how corporate tax revenue raised at the state level would flow back to New York City.

For corporations that also are paying New York City’s corporate income tax of 8.85%, their city-and-state tax rate begins to approach the federal 21% corporate tax rate, Walczak said. Some companies also pay an MTA transportation surcharge.

Mamdani has said revenue from the millionaires tax would help pay for programs like universal child care and make the city’s personal-income tax system fairer. Imposing the tax requires the signoff of the state legislature and the governor. He more recently has said he is open to other sources of revenue.

New York City’s personal income tax system is relatively flat, but New York state’s income tax regime is more progressive than average, according to the Institute on Taxation and Economic Policy, with the state’s top 1% income earners subject to a 13.5% tax. Mamdani’s proposal would make the combined city and state personal income tax rate the highest in the country for those earning a little over $1 million, according to E.J. McMahon of the Manhattan Institute.

It is unclear whether this change would raise the revenue that Mamdani’s campaign has estimated. It would have brought in an additional $3.74 billion and $2.77 billion in 2021 and 2022, based on the most recent tax data available from the New York City Independent Budget Office. But those estimates assume that married couples filing jointly are subject to the tax hike, which effectively could lower the income threshold for those subject to the hike.

The Mamdani campaign hasn’t specified which category or categories of filers its hike would affect.

Mamdani’s ability to fund his ambitious child-care proposal largely relies on his proposed tax increases on New York City’s highest earners as well as on corporations. Both proposals require the cooperation of state lawmakers and Hochul.

The average annual cost of center-based daycare for infants and toddlers in 2024 in New York state was $26,000 per child, up 43% since 2019, according to the New York State Office of Children and Family Services. New survey data released by Ester Fuchs in October showed that 29% of families with young children in New York City found child care unaffordable, with wide disparities among neighborhoods.

Economist Jonathan Gruber, of the Massachusetts Institute of Technology, said data were “unambigious" in showing that robust child-care offerings promote workforce participation of mothers. But benefits to children are highly dependent on child-care quality, he said, favoring the rollout of higher-quality offerings, even if they are not universally available.

Estimates of the cost of Mamdani’s universal child-care proposal range widely. The Fiscal Policy Institute estimates the annual cost could range from $2.5 billion to $3.5 billion, for example, while the Penn Wharton Budget Model estimates annual costs around $9.5 billion.

The $70 billion borrowing plan exceeds the city’s current debt limit, which is pegged to the total amount of taxpaying property in the city, by tens of billions of dollars. The state legislature has agreed to raise that limit before, usually under dire circumstances like the attacks of Sept. 11, 2001, or the 2008 financial crisis. But to do that, Mamdani would need cooperation from the governor and lawmakers in Albany.

Plus, some of the money to repay the bonds might end up coming out of the city’s general coffers, said Howard Cure, director of municipal bond research at Evercore. Affordable housing can generate revenue—rent collected from tenants—that is ultimately used to repay housing bonds. But that money alone might not be enough to repay the debt, Cure said.

It is unclear how borrowing of that scale could affect interest costs or the opinion of ratings firms. Prices on New York City general obligation bonds have been largely unaffected by Mamdani’s rise—likely because it’s far from clear that he will get to borrow the amounts cited in his campaign, analysts said.

—Heather Gillers

This is one of the few areas where Mamdani would have the immediate ability to effect change, without buy-in from Albany or Hochul. Mamdani could appoint up to eight members of the Rent Guidelines Board and presumably have the five “yes" votes needed to pass any rent guideline—if New York City Mayor Eric Adams doesn’t make any appointments before his term is up.

A rent freeze wouldn’t incur an immediate cost to New York City, but annual costs to the city could reach $3 billion and grow from there, said Mark A. Willis, senior policy fellow at the NYU Furman Center. That’s because owners of rent-stabilized buildings built with government subsidies could almost immediately need assistance to cover their debt-service obligations and continue maintaining the units, he said. These buildings, built after 1973, were underwritten assuming rents would rise over time.

A rent freeze also could cost the most-squeezed owners of units built before 1974 more than $2 billion over four years, Willis said. Those owners could see their annual shortfall in revenue increase by 42%, to some $400 million, in the first year alone.

The mayor doesn’t have the power to unilaterally change fares; they are set by the MTA board, to which the mayor appoints four members. The city also has historically used bus and subway fares as a source of repayment for bonds sold to investors to build and fix the transit system, raising questions about what could replace bus fares as a stable repayment source. Bondholders also would need to consent to changing the source of repayment, said Nicole Gelinas, at the Manhattan Institute.

A 2023 analysis by the Independent Budget Office estimated that making city buses free would have cost the city $708 million in revenue in 2022. MTA CEO Janno Lieber has said the cost of free buses could start approaching $1 billion annually in the next several years.

According to the MTA’s website, the agency faces a $3 billion recurring budget shortfall when the federal aid it received during COVID runs out as “ridership isn’t projected to be back to pre-Covid levels in the foreseeable future." Free buses could deepen that budget shortfall.

Write to Juliet Chung at Juliet.Chung@wsj.com