According to Ryan Bourne and Nathan Miller at the Cato Institute, if Zohran Mamdani wins the mayoral election in New York City, residents will be hammered with new taxes. They write:

New York City mayoral candidate Zohran Mamdani has pledged a battery of new social spending if he wins the city’s November election: $10 billion for housing, $1 billion for a new community safety department, at least half a billion to subsidize buses, billions more for free childcare, and untold sums for government grocery stores—a historically loss-making venture.

Previous analysis here has critiqued the economics of his “affordability” agenda. When asked how he’ll pay for all this, however, Mamdani says he’d raise $9 billion annually through a pair of tax hikes, which he insists most New Yorkers wouldn’t have to pay.

That’s because he thinks that businesses and the rich will foot the bill through $5 billion in revenues from higher corporate taxes and $4 billion from a 2 percent income tax surcharge on salaries over $1 million. Mamdani’s budget plan is just detailed enough to show that the math here doesn’t work, even if he did manage to get the state’s blessing for his proposals.

Raising the Corporate Tax Rate
Mamdani’s first proposal entails demanding New York State raise its top corporate income tax rate to 11.5 percent, matching New Jersey’s. He projects that it’ll raise $5 billion a year.

New York State’s 6.5 percent corporate tax has historically raised about $6 billion annually. Perhaps Mamdani has noticed that’s an implied taxable profit base of almost $100 billion, but that does not mean raising the top tax rate 5 percentage points equals a $5 billion revenue boost. That mistake confuses marginal rates with average rates. The fact is, by raising only the top marginal tax rate, nobody’s average tax rate would rise 5 percentage points. Since 2021, New York companies already pay a 7.25 percent tax if they earn over $5 million, and New Jersey’s top rate doesn’t kick in until $10 million.

In reality, 79 percent of New York’s corporate filers in 2021 paid less than $1,000 in corporate income tax—an implied taxable profit base under $15,385. These firms would still fall into the lowest tax bracket and not see their tax bills increase at all under Mamdani’s policy. Mamdani knows this. He celebrates that his proposals would affect only the most profitable corporations, but because the top tax rate affects only a fraction of New York corporations, adjusting it could only have a fraction of the effect Mamdani predicted.

Read more here.