New York City Mayor Zohran Mamdani has introduced a plan to modify the tax code, proposing an increase in the state corporate tax rate from 8.85% to 11.5% and a 2% surcharge on income for individuals earning over $1 million annually. This initiative aims to fund public services such as free and efficient public transportation and childcare for children aged six months to five years.

Mamdani's tax proposals are projected to generate approximately $9 billion annually, with $5 billion expected from the corporate tax increase and $4 billion from the income tax surcharge. The plan is designed to redirect wealth towards services that benefit lower- and middle-income residents, reflecting a commitment to social equity. However, the implementation of these tax increases requires approval from state lawmakers in Albany, and there is ongoing debate regarding their feasibility and potential economic impact.

Critics, including some tax experts, express concerns that such tax hikes could lead to a migration of wealthy individuals and corporations out of New York City, potentially undermining the intended revenue gains. Conversely, research indicates that the movement of high earners is relatively low, with only 2.4% relocating annually, often for reasons beyond tax considerations.

The proposed tax increases come at a time when New York City has seen a decline in its share of the nation’s millionaires, dropping from 7% in 2010 to 4% in 2022. This trend raises questions about the city's attractiveness to high earners, as other states like California and Florida have been more successful in attracting wealthy individuals.

Mamdani's administration aims to ensure that the revenue generated from these tax increases is visibly reinvested into public services, which may enhance public acceptance of higher taxes. Historical examples, such as Massachusetts' wealth tax, suggest that transparency in the use of tax revenue can lead to greater public support for tax increases.

Overall, Mamdani's tax plan represents a significant shift in fiscal policy, emphasizing the redistribution of wealth to support essential public services, while also navigating the complexities of state approval and potential economic repercussions.