Will Mamdani’s Proposed Millionaire Tax Save Or Sink New York City?

Key Concepts

• Millionaire Tax: A proposed 2% tax on income exceeding $1 million annually in New York City.
• Progressive Tax System: A tax system where tax rates increase as income increases.
• Flat Tax: A tax system where everyone pays the same percentage of their income, regardless of income level.
• Tax Flight: The phenomenon of wealthy individuals leaving a jurisdiction due to high taxes.
• Fair Share Amendment: Massachusetts' 4% surtax on income exceeding $1 million, approved in 2022.
• Adjusted Gross Income (AGI): Gross income minus certain deductions, used to determine tax liability.

Will Mamani's Millionaire Tax Save or Sink New York City?

Aman's Concerns and Mamani's Proposal

Billionaire Bill Aman, founder and CEO of Pershing Square Capital Management, expressed concerns that New York City would become "much more dangerous and economically unviable" under Zoran Mamani's leadership, particularly due to Mamani's proposed policies. Mamani, a Democratic primary winner, advocates for a progressive agenda focused on affordability in New York City. A key component of his plan is a 2% tax on the "wealthiest 1% of New Yorkers" – those earning over $1 million annually. This "millionaire tax" is projected to generate $4 billion annually.

Intended Use of Revenue

The $4 billion raised from the millionaire tax would be allocated to funding various projects, including:

• Universal free early child care
• Free bus rides
• More affordable housing

Justification for the Tax

Mamani argues that the top 1% in New York City, approximately 34,000 households, earn 35% of all income earned by city residents. He also points out that this group benefited from tax cuts under President Trump's 2017 Tax Cuts and Jobs Act, which lowered the top marginal rate from 39.6% to 37%.

New York City's Tax System

Mamani claims that New York City's income tax is essentially a flat tax of 3.9%, stating, "Whether you make $50,000 or $5 million, you pay practically the same tax rate." While New York City's tax rates do start at 3.078% and only climb to 3.876%, with compressed brackets leveling off after $50,000 in taxable income, it's not technically a pure flat tax. Mamani's proposed 2% tax would be added on top of existing rates for incomes over $1 million, making the tax system more progressive.

Massachusetts' Experience with a Millionaire Tax

Mamani cites Massachusetts as an example of a state where a millionaire tax has been implemented successfully. In November 2022, Massachusetts voters approved the Fair Share Amendment, a 4% surtax on personal income exceeding $1 million. In its first three quarters, the tax raised $1.8 billion, which was used to fund school lunches, transportation, and education.

Concerns About Tax Flight and Actual Outcomes in Massachusetts

There were concerns that the Massachusetts tax might cause wealthy residents to leave the state. While Massachusetts did experience population loss in 2021, the year the bill passed, most of those who left were upper-middle-class taxpayers, not millionaires. This aligns with historical data showing that Massachusetts has been losing individuals across all income levels since 2009, with more concentrated losses among middle and high-income earners, potentially due to high housing costs and remote work opportunities.

Data on Millionaires in Massachusetts

Data from the IRS's Statistics of Income program showed that the number of tax returns reporting an adjusted gross income (AGI) of $1 million or more in Massachusetts grew by 36% between 2018 and 2022. Wealth data from Wealth-X also indicated that the number of millionaires in Massachusetts rose by 38.6% between 2022 and 2024, and their collective wealth increased from $1.6 trillion to $2.2 trillion.

Conclusion

The video explores the potential impact of Mamani's proposed millionaire tax on New York City, drawing parallels with Massachusetts' experience. While concerns about tax flight exist, data from Massachusetts suggests that a millionaire tax may not necessarily lead to an exodus of wealthy individuals and can generate significant revenue for public services. The actual outcome in New York City would depend on various factors, including the specific design of the tax and the overall economic climate.