New York City’s business community’s criticisms of Zohran Mamdani, the self-proclaimed socialist Democratic candidate for mayor, are full of unwarranted hysteria.
After all, most major tax increases will require approval in Albany by the state legislature. Without those tax increases, Mamdani’s plans for city-run grocery stores, rent control, free childcare, building thousands of rent-controlled housing units, free bus service, and a $30 minimum wage aren’t going to get very far. The city council in New York City is far left, but they’re also not insane enough to ruin the city’s finances.
Mamdani’s tax plan is an exercise in delusional thinking. Forbes details the major elements of the candidate’s plan.
- Raising the Corporate Tax Rate from 9% to 11.5%, which his platform estimates will generate $5 billion annually.
- Creating a 2% New York City Income Tax for anyone making more than $1 million annually, which his platform estimates will generate $4 billion annually.
As the magazine points out, agenda items like free bus service and free childcare must be okayed by the state, where much of the money for those things would have to come from. Beyond that, Mamdani’s numbers don’t add up.
In his platform, Mamdani transparently suggests that at the current corporate tax rate of 9%, New York City collects $6.5 billion annually in corporate income taxes. However, his platform then claims that raising the rate by 2.5% will then increase collections to $11.5 billion. While Mamdani’s platform can be applauded for transparency, it does not connect the dots on where the numbers come from.
Nationwide, collections from individuals tend to dwarf those from corporations. This notion is because of the simple fact that there are far more individuals and non-corporate owned businesses than corporate entities. Thus, even though major corporations earn significant amounts of money, it is unclear how a small 2.5% increase in the corporate tax rate can have such a drastic effect on the tax collections for New York City.
I doubt whether Mamdani cares if one plus one adds up to two. As long as he gets his agenda passed, he’ll rely on the common sense of non-socialists to find him the money. Somehow.
One of his biggest challenges is that America, as a free country, allows for the free movement of not only people but also capital. There’s been a below-the-radar exodus of both already, and Mamdani’s election would only accelerate it.
Pre-COVID, major industries clustered in specific cities: commodities in Chicago, insurance in Hartford, health care in Minneapolis, and finance in New York City. That’s not the case anymore.
In the past five years, there have been a handful of large financial firms that have set up shop outside of New York. The first to leave was AllianceBernstein, an asset manager, which built a brand-new headquarters in Nashville. The enormous hedge fund Citadel is in the process of setting up an office in Miami. Even Goldman Sachs is setting up a large presence in Dallas and Miami. In total, 158 firms with $1 trillion in assets have left NYC in the last five years. This is probably just the beginning.
Mamdani threatens to raise taxes, but any tax hike must be approved by the state Legislature, so large tax hikes, at least initially, are unlikely. Even still, New York City remains the most heavily taxed jurisdiction, even above California, with a top marginal rate of 14.775 percent. But outside of taxes, the obvious concerns are crime and general livability. Mamdani has not backed off his desire to cut the prison population, claiming that the currest system “makes everyone more unsafe.” New York has a reputation for being a high-crime city, but it is actually safer than most large cities, especially in midtown Manhattan. However, the moment a banker is killed in a random act of violence on Park Avenue, a rapid exodus will likely be triggered.
San Francisco proves that the rich can tolerate high taxes, high crime, and a downtown that bad government has destroyed. They can even tolerate unlivable conditions as long as it’s not their neighborhoods that have become open-air drug markets and public toilets.
How far does that toleration go?
New York’s banks, hedge funds, financial consultants, and stockbrokers will find that they don’t have to work or live in New York to remain happy and comfortable. If Mamdani enacts much of his agenda, we can expect an accelerated exodus from New York City to friendlier climes and to capitalism.
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