Mamdani Budget Floats on Wall Street Cash as Momentum Grows for New Taxes

When the City Council and Mayor Zohran Mamdani agreed on a $127 billion budget last June, the story behind the story was obvious.

The numbers for the fiscal year beginning last July 1 added up to a balanced budget, thanks to a flood of state aid and some fiscal gimmicks. And the plan projected a worrisome $6 billion hole for the next budget.

But when the mayor updates his budget later this week, he will be the beneficiary of two major developments that will ease his budget problems and, at the same time, get him closer to his long-cherished goal of a tax increase on the wealthy.

First, the city has received a flood of tax revenue from Wall Street that will shrink the deficit. And last Friday, newly re-elected Gov. Kathy Hochul opened the door to a tax increase, making it likely the question to be decided in the next state legislative session will not be whether to raise taxes but by how much, on whom and for what reason.

“I will work hard to manage within our existing resources, but if we need more, we will find a path, as I’ve done before when there’s a particular need, a very specific need,” Hochul said at the annual post-election political gathering in Puerto Rico, linking any increase to the mayor’s plan for universal childcare, which carries a price tag of as much as $9 billion a year.

The mayor’s announcement this week, called the November budget modification, is primarily a way to see whether the city is on track to produce a balanced budget. The fiscal watchdog Citizens Budget Commission says a key issue will be whether the Mamdani administration will detail the $1 billion in savings it has instructed city agencies to find.

Another key issue will be whether the administration will be able to cut spending in the city’s housing voucher program and at homeless shelters, along with the cost of sending special education students to private schools, as it has pledged.

Mayors do not usually change their revenue forecasts, but there is little doubt the city is going to see an increase over what it expected to collect in the current year.

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The state said last month that soaring Wall Street profits had boosted revenue for its current fiscal year, which ends March 31, by a whopping $8 billion more than projected. Hochul also said the expected deficit for the next budget had plunged to $3 billion from a little over $6 billion.

The governor put the windfall into reserves and paying down debt, though the Legislature could always decide to spend that money in the next budget and send some of that money to the city.

The city will not see as big a jump since income and corporate taxes comprise a smaller portion of local taxes than the state, but the numbers will go up. City Comptroller Mark Levine reported personal income taxes in the first three months of the city’s fiscal year were $500 million more than expected.

Since the revenue surge is almost completely dependent on Wall Street and because the profits it is generating are largely a result of the artificial intelligence boom, fiscal experts warn the windfall could disappear quickly.

“The rocky markets of the last few days serve as a reminder that the city needs to prepare itself to protect New Yorkers from the next bust,” said Andrew Rein, president of the Citizens Budget Commission.

He said he wants the city to follow the governor’s example and send extra money to its reserve funds in case tax revenue plunges.

With Hochul easing her opposition to tax increases, momentum for a hike seems irreversible. Both Assembly Speaker Carl Heastie and Senate Majority Leader Andrea Stewart-Cousins have said they favor an increase on wealthy New Yorkers. New York City residents making more than $2 million currently pay a 14% tax on income, the highest in the nation.

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