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Fact check: How does Zohran Mamdani's tax plan compare to other progressive tax policies in the US?
Executive Summary
Zohran Mamdani’s tax plan centers on a 2 percentage point surcharge on city taxes for incomes above $1 million and raising the state corporate rate to 11.5%, aiming to raise roughly $9–10 billion annually to fund childcare, transit, and other progressive priorities [1] [2] [3]. Comparable U.S. proposals — from Massachusetts’s millionaire surtax to state- and local-level progressive reforms examined in recent fiscal studies — show mixed outcomes: measurable revenue gains in some cases, contested revenue estimates and behavioral-response risks in others, and broader questions about overall state and local tax regressivity that Mamdani’s plan would partially address [4] [2] [5].
1. A Clear Pitch: What Mamdani Proposes and Why It Matters
Mamdani’s blueprint is straightforward: a city-level 2% surcharge on incomes over $1 million that would move the top city-state marginal rate to about 16.8% and an increase in the state corporate tax to 11.5%, modeled to produce around $9–10 billion for universal childcare, free transit, grocery stores and other anti–cost-of-living measures [1] [3]. Advocates frame this as a targeted progressive step that asks the wealthiest New Yorkers and richer corporations to fund public goods that disproportionately benefit working-class residents; the proposal echoes recent municipal and state-level “millionaire taxes” and surtaxes designed to steepen progressivity within otherwise regressive state and local tax systems [4] [5]. The plan’s revenue scale is material relative to a city budget, which explains both its political appeal among progressives and scrutiny from fiscal critics [3] [2].
2. Revenue Promises vs. Skeptical Math: Conflicting Estimates
Critics argue the $9–10 billion revenue estimate is optimistic and that behavioral responses — migration of high earners, earnings reclassification, corporate relocations or increased tax planning — would shrink take and complicate collections [2] [6]. Supporters point to examples like Massachusetts’s millionaire tax generating $5.7 billion without large-scale outmigration, suggesting surtaxes can be durable revenue sources when properly designed [4]. Research on fiscal progressivity underscores that progressive income taxes and refundable credits can reduce regressivity, but also shows that state and local tax bases and mobility patterns vary widely, making extrapolation precarious; the net revenue depends on compliance, definitions of income, and interactions with state and federal rules [5] [7].
3. Comparisons with Other Progressive Models: Lessons and Limits
Mamdani’s plan resembles other U.S. progressive measures — millionaire surtaxes and corporate rate hikes — but outcomes differ by design. The Massachusetts surtax offers a real-world precedent for meaningful revenue without immediate mass departures, yet it is narrower than New York City’s context and fiscal complexity [4]. Broader academic and policy work finds that progressive income taxes and refundable credits are effective tools to combat regressivity at the state level, but many states remain regressive overall; so while Mamdani’s tax would improve progressivity locally, it would not erase larger structural regressivity in state and municipal systems without complementary reforms such as credits for low-income households [5] [8]. Corporate-rate changes face distinct dynamics — investment location, apportionment rules and state competition can blunt expected gains [2].
4. Political and Behavioral Obstacles: What Could Undermine the Plan
Political feasibility is contested: the proposal faces opposition from moderates and business groups who warn of economic dislocation and claim the wealthy could leave to avoid higher city-level taxes [6] [2]. Empirical comparisons show that large-scale exoduses are rare in documented cases, but small-scale relocation and increased tax-minimization strategies can reduce revenue and complicate enforcement [4] [2]. Moreover, corporate tax increases interact with state-level rules and multistate firms’ apportionment formulas, potentially giving firms incentives to shift income or restructure operations; careful legal and administrative design would be necessary to realize modeled revenues [2] [7].
5. Bigger Picture: How This Fits into U.S. Progressive Tax Debates
Mamdani’s plan sits at the intersection of municipal progressivism and broader debates about who pays for public goods. National studies show the federal system is progressive while many state and local systems are regressive; targeted surtaxes and corporate-rate hikes can partially reverse that at the city or state level but are not panaceas without broader tax-code changes and anti-avoidance measures [7] [8]. The plan’s comparison to policies like Massachusetts’s surtax provides a pragmatically useful precedent for revenue potential, while critical modeling and behavioral concerns underscore the need for conservative revenue estimates, robust enforcement, and compensatory measures for lower-income households to maximize equity and fiscal resilience [4] [2].