New York City’s mayor-elect, Zohran Mamdani, has proposed a tax plan that could reshape the city’s economy and ignite a fierce debate over the limits of progressive taxation. His proposal calls for nearly $9 billion in new annual revenue—$4 billion from a higher income tax on millionaires and $5 billion from a steep increase in the corporate tax rate. The plan has triggered immediate concern among business leaders and Wall Street. At the same time, Governor Kathy Hochul weighs whether to support or oppose the most aggressive tax hike in the city’s modern history.
A Tax Plan That Divides
Mamdani’s income tax increase would raise the city’s top rate from 3.9 percent to 5.9 percent, creating a combined state-and-city rate of 16.776 percent—the highest in the nation. The corporate tax proposal would lift the state rate from 7.25 percent to 11.5 percent, matching New Jersey’s rate. When combined with New York City’s own corporate tax and the Metropolitan Transportation Authority surcharge, the total effective rate would reach approximately 23.8 percent, exceeding the federal rate of 21 percent. Critics argue this would make New York the most tax-hostile environment for business in the country.
The Math Behind the Proposal
Mamdani frames the tax increases as a matter of fairness, citing New Jersey’s high corporate tax rate. However, New Jersey does not layer city taxes on top, unlike New York City. The combined burden would be unprecedented, inverting the traditional tax hierarchy and placing local obligations above federal ones. The Cato Institute has questioned whether the projected $5 billion in corporate revenue is realistic, noting that most firms pay little in corporate income tax and would see only a marginal increase.
Migration and Economic Impact
Recent migration data shows New York is losing high-income earners. Between May 2024 and October 2025, the city lost 15,552 residents earning over $201,000 annually, alongside 164,249 departures from lower-income households. Over the past decade, New York lost $517.5 billion in resident income, while New Jersey lost $170.1 billion. Florida has become a popular destination, with over 125,000 New Yorkers relocating and taking nearly $14 billion in adjusted gross income with them. Brokers report increased interest from affluent New Yorkers considering exits, especially as the combined tax burden could exceed 50 percent when federal rates are included.
The Childcare Imperative
Mamdani’s driving goal is universal childcare for all NYC children aged six weeks to five years, with wages for childcare workers comparable to public school teachers. The program could cost $6 billion to $12 billion annually. The lack of affordable childcare has already had severe economic consequences—in 2022 alone, the city lost approximately $23 billion in economic activity as parents left the workforce or reduced their work hours due to caregiving responsibilities, leading to families leaving the city.
The Political and Economic Stakes
Governor Hochul, who extended the existing millionaire tax through 2032, has expressed reluctance to raise taxes further, warning that high-net-worth individuals could leave the state. She faces a Democratic primary challenge from Lieutenant Governor Antonio Delgado, who has positioned himself to her left and is challenging her on progressive issues. Democratic majorities in the legislature also favor revenue increases, although not at the levels proposed by Mamdani. Hochul’s next budget is due in January 2026, and her decision will determine whether New York pursues the largest tax increase in its history or draws a line against Mamdani’s agenda.
The Road Ahead
The outcome will define New York for decades. If Hochul approves Mamdani’s full $9 billion plan, she bets that the benefits of universal childcare and progressive credibility outweigh the risks of an exodus. If she resists, she faces pressure from the left and from Mamdani’s administration. For New York’s wealthiest residents and corporations, the answer will determine whether the moving vans stay parked or accelerate south.