Mayor Zohran Mamdani proposed several measures last week intended to reconcile New York’s $5.4 billion budget shortfall, or to use the mayor’s preferred phrase, the Adams Budget Crisis. Mamdani detailed how the former mayor systematically understated the operating costs of key city departments, ballooning New York’s budget deficit. To address this massive funding shortfall, Mamdani has called for New York Governor Kathy Hochul to enact a two percent income tax increase on New Yorkers making over one million dollars a year. Should this measure fail to pass, Mamdani’s backup plan would constitute a 9.5% increase in property taxes, while the city “would also take $980 million from its Rainy Day Fund and $229 million from the Retiree Health Benefits Trust.” So far, Governor Hochul has roundly rejected calls for an income tax increase on the wealthiest New Yorkers.
Mamdani was careful to refer to his proposed property tax as a ‘last resort’, insisting that “we are going to utilize every single option to ensure [this] does not come to pass.” His repeated use of the word ‘crisis’ also seems to have been quite deliberate. In recent history only two New York mayors drew from NYC’s reserves to fund the government: Michael Bloomberg during the 2008 financial crisis and Bill DeBlasio during the COVID-19 pandemic. Mamandi is effectively highlighting how historically drastic such a measure would be in contrast to the simpler, more effective option of a slight tax increase on New York’s wealthiest.
Much of the blowback from this press conference was focused on the proposed 9.5% property tax hike. Drop Site News has suggested that that’s no accident, claiming Mamdani’s political and media opponents prefer to narrowly focus on defeating this measure in order to avoid any discussion of a state-level income tax increase. Naturally, they fear that such discussion will lend too much political legitimacy to the notion of taxing millionaires and billionaires.
That isn’t to say that all the criticism directed towards this tax increase is in bad faith. If the property tax takes the form of a blanket increase, it would largely favor the rich while disproportionately targeting black and hispanic families, many of whom have owned small properties in New York for over a decade. According to Kate Willet, however, Mamdani has proposed a property tax reform bill to effectively address this iniquity. Some economists have warned that property owners will respond to the tax by passing the costs on to their tenants. This risks driving up rents for average New Yorkers, which would be a major political blow to the mayor who campaigned on greater affordability and freezing the rent for all stabilized tenants. Fortunately for Mamdani, six of the nine members of the Rent Guidelines Board will be his appointees, which at least in theory will make it easier for him to follow through on such a major campaign promise.
New York City has been required by law to balance its budget (i.e. ensure that government spending does not exceed revenue) every year since 1975. This law was introduced in the context of the fiscal crisis that brought the city to the brink of financial ruin, as well as stagflation and an oil embargo that were bringing an end to America’s post-war economic boom. New York’s wide-reaching network of government programs and social services found itself under threat when private banks, who had hitherto furnished massive loans to finance these programs, suddenly refused to extend any new credit to the city government. City and state governments responded by ramming through austerity programs, slashing funding for education and healthcare while cutting jobs and benefits for thousands of public-sector employees.
The budget crisis facing New York today, much like the economic crisis it faced in 1975, is of a political as well as economic nature. Even in the 70s when New York’s finances were in turmoil, economic necessity did not dictate the slashing of government programs, benefit cuts for municipal programs, and a massive reduction in social spending on schools and hospitals. Wall Street leaders, and their counterparts in Washington DC, such as Treasury Secretary William Simon and chief economic advisor Alan Greenspan, were fed up with deficit spending in response to the economic downturn. As Michael Beaya Reagan correctly observed, New York was facing “a classic Keynesian crisis – economic depression and market failure – but with austerity as the proposed policy solution.” As the American ruling class shifted rightward, the working class was made to shoulder the burden of New York’s economic recovery.
Now Mamdani is assuring New Yorkers that he will solve this crisis “without balancing the budget on the backs of working people.” Wisely, he has framed this current crisis within the political backdrop of a conflict between city and state. Early on in the press conference, he described how former Governor Cuomo “extracted our City’s resources” to create “a stunning fiscal imbalance” in which “New Yorkers contribute 54.5 percent of state revenue and receive only 40.5 percent back.” The implication is clear: New York’s suburbs and outer regions must begin paying their fair share of taxes, as New York City has furnished a disproportionate amount of state revenue for decades.These structural imbalances between New York regions, which extend to the balanced budget law (New York State is still allowed to engage in deficit spending, unlike NYC), are useful facts that help Mamdani craft a compelling narrative: without bold systemic change, the hardest-working, worst-paid members of our city will face an ever-eroding quality of life.
However, if New York is to meaningfully challenge Albany, it will require open conflict with Governor Hochul, who has steadfastly refused to raise income taxes. It is not clear whether Mamdani will mobilize his supporters to bring the fight to the governor’s office, but the early signs have not been heartening. Mamdani endorsed the unpopular Hochul for re-election two weeks ago, despite her opposition to taxing the wealthy and her encouraging hospitals to hire scabs during the recent Nurses’ strike. This is not the first time Mamdani has defended a servant of the billionaire class. He knows that pragmatism is required for his political survival. Still, Mamdani and his team must remember, as thousands of their supporters surely do, that class warfare dominates every aspect of political life in this country. If they are unwilling to put up a fight, the capitalists will unhesitatingly crush any prospect for social reform, to say nothing of the growing socialist movement in America.
In any case, don’t expect a quick resolution to the budget problem. The new fiscal year begins on July 1; the standoff between city and state is likely to come down to the wire. New Yorkers who want a hand in determining their city’s future must monitor this situation as closely as possible. Democracy @ Work will provide regular, detailed updates on this process throughout the coming weeks and months.
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