On November 4, 2025, New York City voters made a striking choice. Zohran Mamdani, a 34-year-old state assembly member from Queens who identifies as a democratic socialist, won the mayoralty. His campaign focused on a bold promise regarding affordability and aims to transform the city’s approach to housing, transit, and taxation. He highlighted one of New York's biggest challenges, which is the combination of high rents and stagnant wages. However, this also raised many economic questions that will impact his first term. Can a city as large and complex as New York achieve widespread affordability through extensive public building, rent freezes, and free transit without risking negative fiscal effects like capital market pressure, taxpayer relocation, or increased long-term debt?
Let's review some of the promises Mamdani made which led to his election, and how much they may cost:
Massive public housing production: Mamdani’s campaign plans to create around 200,000 new publicly subsidized, rent-stabilized homes in ten years, with a projected cost often cited at about $100 billion for production and preservation combined. His platform speaks of a significant capital program to triple the production of publicly subsidized homes and double funding for preservation. This means an public investment of around $10 billion per year for ten years and an average subsidy of about $500,000 per unit when allocated over 200,000 units, comparable in scale to a major federal housing program if it comes to fruition.
Rent Freeze: His campaign included a commitment to freeze rents for rent-stabilized units to offer immediate relief to tenants.
Fare-free local transit: He proposed making city bus service free, framing it as a measure for equity and climate improvement. Reports estimate the cost of citywide free buses at around $700 to $800 million per year, a figure that Mamdani agreed with during his campaign. However, MTA officials and analysts warn that actual costs could be higher if they account for changes in ridership and improvements to services. If the city also subsidizes subway fares beyond targeted discounts, this number will rise significantly because subway revenue comprises a larger share of MTA income.
New revenue through progressive taxation and borrowing: His campaign called for higher taxes on wealthy households and corporations, along with bold public borrowing to support investments in housing and services. New York City has a substantial amount of outstanding debt, with fixed-rate debt alone reaching tens of billions, according to city management. Mamdani’s policy ideas included expanding the use of municipal bonds and re-evaluating bond caps to free up more capital for housing. Making these significant upfront investments will likely require both new taxes and considerable borrowing.
These are not just minor adjustments. They represent major shifts: a revival of large-scale public development, active use of municipal finance to increase housing supply, and an increasing of the tax burden to the wealthy and businesses.
So - this begs the question: Where will the money come from, and is it even remotely a stable plan?? Let's dive in:
Raise taxes on the wealthy and corporations - Mamdani's statements and media coverage during the campaign indicated plans to increase taxes on high-income households and corporations to fund operating subsidies, such as transit, maintenance, and services. Some proposals include a surcharge on very high-income earners and a higher city corporate tax rate. However, these changes would need debate and/or approval at the state level in many cases.
Let's talk taxes for a moment: As of the latest tax data, New York State’s top personal income tax rate is 10.9% for the highest earners. The city income tax for residents is also progressive; the top rate for 2025 was around 3.876% on taxable income over about $50,000. This means the combined state and city tax rate for top earners is roughly 14-15%, before federal taxes are considered.
The property tax system in New York City is complex, with varying rates. Residential property taxes are usually lower for single-family homes and higher for certain commercial properties. Proposals to change property tax relief or shift tax burdens frequently arise in discussions about housing.
Mamdani’s campaign did not provide examples of what the new tax rates may be. However, reports suggest that the plan relies on significant increases for high earners and corporations to generate multiple billions each year. Those changes would likely raise combined tax rates above the current 14-15% mark for wealthy New Yorkers, increasing their tax burden.
Aggressive use of municipal bonds and capital markets - He aimed to leverage municipal borrowing by easing bond caps and releasing targeted housing bonds to cover upfront costs of construction. Now, this is a common strategy for cities to accelerate projects; however, it also increases long-term debt obligations.
Redirecting or re-prioritizing existing city revenues - The platform promised savings through municipal reforms, such as tackling fraud and negotiating vendor contracts, and reallocating existing budgets to prioritize housing and services.
Do you think this all sounds good so far? Well, let's look at this in a bit more detail...
A main criticism of Mamdani’s approach is the “tax flight” argument. Critics argue that if high earners face more taxes, they will leave, shrinking the tax base and forcing cuts to services or higher taxes for everyone to make up for the loss. This logic seems appealing, and many refer to states like California as cautionary tales of excessive taxation and fiscal distress. But the actual evidence on tax flight is more complex than this view suggests.
California did experience significant net outflows of adjusted gross income during the pandemic. IRS migration data and state studies indicate that large amounts of income left California from 2020 to 2022 - one analysis found over $100 billion in AGI shifted during this time - which can reduce the taxable base and complicate revenue forecasts. However, attaching this migration solely to tax policies overlooks the influence of housing costs, remote work trends, climate events, and pandemic factors—all of which played a role in migration trends.
California often serves as a warning, but research from various academic and policy organizations shows that tax policy is just one of many factors driving migration. Wealthy households do not always leave simply because of higher taxes. Some studies suggest that raising top tax rates can generate revenue with only modest migration responses—meaning they don’t always lead to mass amounts of people leaving the state. For instance, academic research and state financial reports indicate that increasing tax rates often raises significant revenue without causing large-scale departures of wealthy taxpayers. However, given that California lost 100 Billion dollars in tax revenue, it's important to take this scenario seriously, and not discount it by diluting that number with others leaving for climate change reasons.
New York has also had waves of migration in the past, some due to the pandemic, and some longer-term. Recent analyses following New York State’s 2021 tax increases (which raised the top state marginal rate) found little evidence of an increase in millionaires leaving as a direct result of these tax hikes, and those rate increases produced several billion dollars a year in additional revenue. Policy groups on either side of the debate interpret the same tax data differently, highlighting how contentious the topic is.
Evidence indicates that some high-income taxpayers migrate across state lines, or leave the U.S. for various reasons, but those reasons are usually multifaceted. Research suggests that wealthy households exhibit only modest sensitivity to changes in top tax rates—meaning tax increases can still raise revenue despite concerns about mass departures. However, the nature of the tax does matter (for example, whether it targets income, wealth, capital gains, corporate income, or residency), and the implementation of policies (like tax credits or exemptions) greatly impacts behavior. These are all factors NY City will have to take into consideration.
Here's a breakdown of what may happen if increase in taxes forces higher income earners to flee NY City:
Immediate effects - Smaller tax base. High-income earners contribute a large portion of income and capital-gains tax revenue. If they relocate or lower their taxable activities in the city or state, revenue may fall short of projections, especially if the tax hikes were based on overly optimistic assumptions.
Budget balancing choices - Cities and states facing revenue shortfalls have to choose between cutting services, raising other taxes, or borrowing more. For capital projects like housing, borrowing is common. For ongoing shortfalls, recurring revenue must match steady expenses. If revenue isn’t enough, municipalities may face structural deficits that cannot be covered by one-time bond proceeds.
Debt burden and rating pressure - When a local government borrows heavily, debt-service costs increase. Credit rating agencies look at whether the government can sustainably repay its debts. If revenue drops unexpectedly and debt increases, it can lower credit ratings, raising future borrowing costs and creating a negative feedback loop. Increased interest payments can tighten budgets, prompting more borrowing or tax hikes.
Political economy - If high earners leave and a revenue gap emerges, difficult political choices arise. Many governments respond by raising rates on other taxable groups, which may include middle-income residents and businesses, cutting services, or allowing maintenance and capital projects to stall. Over time, this can lead to increased taxes or a decrease in public services. This pattern is a common critique linking potential outcomes in New York to those observed in California.
Supporters of Mamdani’s platform present several counterarguments to the tax-flight issue presented:
1 - Public investment can draw people in. The main point is that good public services like affordable housing, reliable transit, quality schools, and public safety make high-tax areas attractive to many residents and businesses. High taxes, along with a high quality of life, can actually attract people rather than push them away. Scholars often cite high-tax, high-service areas in the Northeast and Scandinavia as examples.
2- Revenue from the rich is important and can finance valuable programs. High-income households make up a large share of income tax revenue. By capturing a small portion of their income through higher rates, cities can gather significant funds to support programs like housing subsidies, transit, and child care. Supporters argue these programs will strengthen the city's economy.
3- Policy choices can protect against tax flight. Options include targeted tax increases at high income levels, broadening the tax base in less mobile ways, and combining tax hikes with incentives for local investment. Examples include credits for job creation and retention tax credits. Supporters stress that how policies are designed matters more than just how they are talked about.
Even if you agree with Mamdani’s goals, implementing them is not straightforward and presents several political and legal challenges.
State cooperation - The MTA and some taxation aspects are managed at the state level. To change fare policies widely, modify municipal tax rates guided by state law, or access certain borrowing abilities, Mamdani will need support from Albany. This will be a significant political challenge, as the governor and state legislature have powers that a city mayor cannot change alone.
Legal details of rent freezes - New York’s rent stabilization laws involve the Rent Guidelines Board, along with various state and city regulations. Unilaterally freezing rents on existing controlled units faces legal and administrative hurdles. How long would a freeze last? Who compensates landlords for lost income, if anyone? How can deterioration of rental units be avoided? These practical issues can decide whether a policy helps ease housing struggles or leads to fewer available rental units.
Challenges of large municipal construction - Creating 200,000 units, even with nonprofit and union partners, demands land, skilled labor, supply chains, and a consistent flow of funding. Big capital projects often face inflation, delays, and political pushback, such as local opposition, environmental reviews, and contract disputes. Can the city build quickly enough to influence rents within a single mayoral term? Likely not; this is designed as a decade-long project.
Revenue instability and ongoing costs - Borrowing for construction is one thing; covering ongoing costs like transit subsidies and maintenance for housing requires reliable annual revenue. Will tax hikes be enough, stable, and politically viable? What plans exist for economic downturns? These operational issues are crucial to the city’s financial health and residents’ everyday lives.
Strategies to keep high earners - Mamdani’s team will need clear plans for retaining high earners, as their presence supports tax revenue. This may involve making the city more appealing through improved public services, tax credits for local investment, or other incentives.
The campaign emphasized fairness instead of just providing benefits to a few; however, the specifics are not yet clear... and, is it "Fair" when you campaign on raising billions in taxes from one segment of the population?
And, let's think about it: High income earners are the most mobile of all of us - many know and understand the tax systems far beyond the norm. Will they stick around to see how this plays out?
Zohran Mamdani’s election signals that many New Yorkers seek real solutions for the affordability crisis, not just small fixes. His approach emphasizes public services and redistribution over market-driven solutions. Turning campaign promises into lasting policies will require overcoming complex technical, legal, and budget challenges. For New Yorkers concerned about their rents, commutes, and their children's futures, the next 12 to 36 months will be crucial. Many questions remain unanswered: specific tax rates, the structure and timeline for rent freezes, the exact plan for bonds, and strategies if migration patterns shift. In public policy, the stakes are high and there’s little room for error.
