Zohran Mamdani Wants to Raise NYC Taxes Because It’s ‘most Expensive City’

Mamdani’s NYC taxes proposal: what could change, when, and who would pay more

New York City is debating a new package of NYC taxes aimed at very high earners and large businesses. The change is not law today. It is a proposal tied to Zohran Mamdani’s policy platform as NYC mayor. If enacted, it would raise the city’s personal income tax on residents above a very high income level. It would also raise the city’s business tax rate.

Effective date: Not set yet. Any start date would depend on state authorization and final bill language. The earliest plausible start would be a calendar-year effective date, which would first affect tax year 2026 (returns filed in 2027) if enacted in time. It could also start later.

Mamdani argues the changes are justified because New York is the most expensive city in the U.S. He says the goal is to protect middle-class residents by raising more revenue from the top end.

⚠️ Warning: NYC income tax rules turn on residency, not citizenship. Many visa holders pay NYC tax if they are NYC residents under New York rules, even if they are “nonresident aliens” for federal purposes.

Before vs. after: the proposal at a glance

The tools in this article show the exact rates and thresholds. The key point is that the proposal increases the top-end NYC resident income tax and increases the corporate-side tax rate.

Important: “Before/after” reflects the direction of change. The exact figures are shown in the tools.

Who is affected (and who is not)

Likely affected

• NYC resident high-income households whose income exceeds the proposal’s high threshold.
• Businesses subject to NYC business taxes, depending on entity type and nexus.
• New immigrants and visa holders who are NYC residents under New York rules, including many H-1B, L-1, O-1, and TN workers living in the five boroughs.

Often not affected directly

• NYC residents below the high-income threshold.
• Many F-1 and J-1 students/scholars with modest income. Some are “exempt individuals” for the federal Substantial Presence Test. See IRS Publication 519 (U.S. Tax Guide for Aliens) at IRS Publication 519 (PDF).
• People who live outside NYC but work in NYC. NYC generally does not impose a commuter tax today.

For federal filing, immigrants still determine whether they file Form 1040 as a resident alien or Form 1040-NR as a nonresident alien. Publication 519 is the main IRS reference. Federal status does not automatically decide NYC residency, but it often overlaps in real life.

Why supporters say this is needed (and what critics dispute)

Mamdani’s stated rationale centers on affordability. He points to New York’s status as the most expensive city and argues the city needs more money for core priorities. He also frames the proposal as a way to reduce pressure on working and middle-class residents.

There is also an active counterargument. Opponents warn that higher top-end taxes can push some taxpayers and firms to relocate, reduce investment, or change how they report income. Supporters respond that the tax is targeted, that city services require stable funding, and that quality-of-life spending can help retain residents.

This debate matters because the fiscal outcome is not guaranteed. Even if rates rise, actual revenue depends on behavior, markets, and enforcement.

What would change on a return: mechanics and examples

Personal income tax: marginal rate vs. total tax

A top-bracket increase usually applies only to income above the threshold. That is a marginal rate change, not a flat increase on all income.

For example, if your taxable income is just above the threshold, only the slice above it faces the higher rate. If the proposal is drafted as a surcharge, it could be structured differently. Some surcharges apply to all taxable income once you cross the line. That detail will matter a lot.

In public discussion, “top 1%” is a shorthand. In practice, the law would use a dollar threshold and a tax base. That base could be federal AGI, New York taxable income, or a city-defined measure.

Practical impact: A two-percentage-point increase at the top end generally increases tax roughly in proportion to the amount of income exposed to the higher rate. For a $1 million earner, the additional tax depends on how much income is above the threshold and on deductions.

Corporate-side change: who bears it

Businesses do not all feel a rate change the same way.

• A C-corporation may pay more city business tax directly.
• A pass-through business may not pay the corporate tax, but it may still face NYC business taxes, fees, or indirect effects.
• Businesses can respond through pricing, hiring, wages, or investment. Those effects are possible, not certain.

Interaction questions to watch

• NYC vs. New York State layers: City tax is on top of state tax for residents. Headlines often cite combined rates.
• State approval: NYC often needs Albany authorization to change major tax parameters.
• Federal tax interaction: State and local income taxes can affect federal itemized deductions on Schedule A (Form 1040). Under current federal law, the $10,000 SALT cap is scheduled to expire after 2025 unless Congress extends it. Check IRS forms and instructions at IRS forms and publications.

Budget context: why “gap” numbers change

Mamdani links the proposal to a budget gap he says the city inherited. Budget gaps and shortfalls are forecasts. They reflect expected revenue, spending commitments, debt service, and economic assumptions.

Two things can both be true:

1. A budget outlook can look worse early in the cycle.
2. Later revenue collections or revisions can reduce the projected gap.

A revised forecast may reflect timing, one-time collections, or changed economic assumptions. Closing a gap can also involve multiple levers:

• Spending reductions or re-phasing projects
• Use of reserves
• Federal or state aid
• Revenue measures, including tax changes

The tool in this article shows the competing gap and revenue figures referenced in the current debate.

Political pathway and constraints (why the governor matters)

Even if the mayor supports a tax increase, NYC cannot always enact it alone. Major NYC tax changes often require state legislation. That means Albany politics and the governor’s position are central.

Governor Kathy Hochul has publicly opposed this package, calling it a “non-starter.” Procedurally, that matters because:

• The governor has agenda control in budget negotiations.
• State legislators may be reluctant to pass a city tax increase without executive support.
• Timing can slip into later sessions, which affects the first possible tax year.

If the proposal moves forward, watch for whether it is attached to the state budget, passed as standalone legislation, or reshaped into a narrower measure.

Transition rules and “grandfathering” issues to watch

The proposal’s transition rules are not final. Here are the provisions that typically decide who gets hit and when:

• Effective-date language: Calendar-year start vs. mid-year start.
• Part-year NYC residents: New York has part-year resident rules. Moving into or out of NYC mid-year can change liability.
• Income sourcing vs. residency: NYC income tax is residency-based. A move to another state mid-year can reduce exposure.
• Corporate transitions: Businesses may need new estimated tax calculations and revised accruals.

If enacted late in the year, lawmakers sometimes add safe harbors for estimated taxes. They can also delay implementation to the next tax year.

📅 Deadline Alert: If you expect a higher NYC tax bill, adjust withholding and estimated tax early. Federal underpayment rules are based on timely payments during the year, not when you file Form 1040.

What immigrants and visa holders in NYC should do next (tax year 2026)

1. Confirm your federal residency filing position (Form 1040 vs. 1040-NR). Use IRS Publication 519: IRS Publication 519 (PDF).
2. Review NYC residency exposure if you moved in 2026 or plan to move. Part-year rules can matter.
3. If you are a high earner, run a withholding checkup once legislative language becomes clearer. Start with IRS resources at International taxpayers.
4. Business owners should plan for estimated tax changes if a higher city business rate is enacted. Track updates and forms at IRS forms and publications.
5. Watch the Albany calendar in 2026. The key question is whether the final bill sets an effective date that reaches tax year 2026 (filed in 2027) or later.

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.