Zohran Mamdani sent shockwaves throughout the US political landscape following his surprise win of the Democratic nomination for Mayor of New York. His victory was due, in part, to his political platform, which prioritized increased spending on social services, such as government-subsidized daycare and grocery stores, as well as making transportation via the bus system free. While impactful, Mamdani now has a potentially bigger challenge ahead: ensuring that these grand plans can be effectively funded. In this article, I discuss why Mamdani must be fiscally responsible for his plans as he enters the final stages of his campaign leading up to Election Day in November. I then highlight three key areas where questions still loom on the effects of his proposed tax increases.
Revenue Neutrality, Ben Wyatt, And Ice Town
In the hit TV show Parks and Recreation, shrewd government accountant Ben Wyatt (played by actor Adam Scott) revealed that he was once elected as the youngest Mayor of his hometown. Wyatt ran on a platform to create a winter sports complex called Ice Town. This plan flopped, leading to the town going bankrupt.
The reason why this fictional tale has shades of reality is due to the concept of revenue neutrality. According to US Legal, being revenue-neutral means that changes in tax laws result in no change in the amount of revenue coming into the government’s coffers. Legally speaking, all governments can spend more than they bring in, resulting in a deficit and incurring debt. However, most state and local governments have rules in place that prevent them from having a fiscal deficit, according to the National Conference of State Legislatures.
In the case of Ben Wyatt and Ice Town, he did not maintain revenue neutrality, spending more than the town brought in for revenues. These actions led to the town declaring bankruptcy.
Revenue Neutrality Does Not Apply To The Federal Government
As Congress continues to push forward with Trump’s One Big Beautiful Bill Act, one might question why the concept of revenue neutrality applies to Mamdani but not to Trump. After all, as I reported on Forbes, the CBO estimates the House’s version of the bill will increase the Federal deficit by $2.4 trillion.
The reason Congress can propose legislation that leads to an increase in the deficit is that the Federal government does not have the same restrictions in place as state and local governments do for running a deficit. In fact, according to the US Treasury, the last time the Federal government was in a surplus situation was in 2001, and the 2024 annual deficit was over $1.3 trillion. This annual increase in the deficit has led to an estimated US national debt exceeding $37 trillion, according to USDebtClock.org.
Many critics of the One Big Beautiful Bill Act point to the continuously increasing national debt as a point of concern. For instance, according to The New York Times, Kentucky Senator Rand Paul has pledged to vote against the One Big Beautiful Bill Act as long as it continues to increase the Federal deficit. The Hill reports comments with similar sentiments have been made by Trump’s close associate, Elon Musk.
Fiscal Responsibility Will Be Key For Mamdani
It was not until mere weeks before the Democratic Primary that Mamdani skyrocketed in popularity. Aside from his social media following, which The New York Times credits with a significant reason for his fame, Mamdani’s seemingly unusual policies appeared to have won over the hearts of New Yorkers, leading to his stunning defeat of former New York Governor Andrew Cuomo.
Mamdani has ambitious plans to invest in New York City’s social framework, including subsidized daycares, affordable grocery stores, and free bus transportation, among many other ideas. To pay for this, Mamdani primarily plans to increase taxes on New York City residents with high incomes, as well as corporations operating within the city.
What lies ahead for Mamdani in November is a big and important election against the incumbent New York City Mayor, Eric Adams. What is different about the election versus the primary is that Mamdani is no longer a political unknown. His policies are being carefully scrutinized. For instance, as I reported in Forbes, there are three key issues facing his tax increases:
- The Numbers May Not Add Up
- Most Large-Scale Tax Changes Happen At The State Level
- Wealthy Individuals And Corporations May Just Leave New York City
Another Forbes article highlights how these tax increases have the potential to lead to significant consequences if not carefully thought through.
3 Reasons Mamdani’s Tax Plans Need To Be Concrete And Well Thought Out
(1) The Numbers On The Proposed Changes Must Add Up
As Mamdani heads to a much grander and more significant stage, his tax policy changes must be more than just ideas. For instance, his platform states that he will increase corporate taxes by 28% (from 9% to 11.5%), and he expects this increase to generate 83% more corporate tax revenues ($6 billion to $11 billion). While there is room for interpretation and flexibility in estimates, these numbers do not appear to be accurate, and his platform offers little explanation or support for how they could be true.
(2) Taxpayers May Just Leave New York City And This Needs To Be Considered In His Estimates
Mamdani must factor in the risk of capital flight that tends to occur as tax rates increase. For example, a high-income taxpayer living in New York City can simply move to the suburbs if they are unhappy about the higher tax rates being imposed on them. Mamdani does not appear to account for this in his platform. Even more surprisingly, he continues to double down on increasing the taxes applied to specific high-income groups, including a focus on taxing specific ethnic groups and billionaires, according to The New York Post. If these individuals leave New York City, it is unclear whether Mamdani can pay for his proposed enhanced services. In fact, it is possible that New York City can be in a worse financial position than before Mamdani’s proposed tax increases.
(3) Everyday Taxpayers, Not Corporations, Might Bear The Burden Of The Tax Increase
Mamdani would benefit from understanding and incorporating the concept of tax incidence. The Tax Foundation discusses this as the idea that businesses pass on the tax burden to their customers. In the case of a 2.5% high corporate tax rate, a company operating in New York City, such as McDonald’s or Starbucks, might simply increase its prices by 2.5%. Thus, while New York City might bring in additional revenues from corporations, it may be due to taxpayers paying more, rather than the corporations themselves. Mamdani does not discuss this point anywhere, nor do New York City residents appear to be aware that Mamdani’s tax plans have the potential to increase prices on their daily goods and services.
Very few of these problems can be solved in a straightforward manner, which is why Mamdani must emphasize fiscal responsibility as he approaches the November election. Mamdani has visionary plans for the people of New York City. If he heeds the advice of economists and those with experience governing, it is possible he can implement many of the items on his agenda. However, if the plans to raise the funds remain shallow and impulsive, he may struggle to govern. Or, worst yet, Mayor Adams might be able to use Mamdani’s lack of preparedness as a weapon to retain his seat as New York City Mayor.
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