OPINION:
New York City Mayor Zohran Mamdani aims to address affordability through socialistic redistributionism, but he is sorely mistaken about how to resolve the problems of his metropolis.
Mr. Mamdani’s policies include city-owned grocery stores, free bus service, affordable government housing, no-cost child care and a $30 hourly minimum wage by 2030. He has proposed raising the local corporate tax rate to pay for these generous social programs.
Although these projects purport to merely redistribute costs from businesses to residents, nothing could be further from the truth. These policies belie the reality that nothing is free, even in a socialist system. The policy trade-offs will exacerbate the exact issues they portend to fix.
A socialist framework emphasizes collective ownership, with the aim of an equitable distribution of resources, promoting public welfare by taxing private profits. In short, Mr. Mamdani, who apparently believes that entrepreneurs are undeserving of their hard-earned wages, proposes to finance his vision on the backs of New York’s businesses.
However, this taxation won’t hit only high-earning corporations; it will impose a burden on workers and households in New York City as well. When businesses are taxed, the burden shows up in price increases for families, pay cuts for workers and less business investment, which traditionally expands job opportunities.
New York City’s corporations are already burdened by excessive taxes: a 21% federal rate, a 7.25% corporate franchise state tax on firms with net incomes of more than $5 million, and an 8.85% business corporation locality tax on firms exceeding $1 million in receipts.
This is the highest combined corporate tax rate in the nation, totaling just over 37%. Mr. Mamdani’s proposed increase in the business corporation locality tax to 11.5% would push the combined rate to nearly 40%. Corporations will not be able to maintain high net profit margins and remain viable against their competitors. Faced with higher taxes, they may reduce activity, cut staff, raise prices or leave the city altogether. Therefore, increasing the tax rate does not necessarily result in increased government revenue.
New York’s excessive taxation incentivizes businesses and investments to migrate toward lower-tax states to remain competitive. Steep progressive rates on corporations starve the economy and end up reducing the tax base and government revenue. Though the Big Apple has a comparative advantage in being a mecca of finance, becoming the most costly regulatory and tax environment in the country will certainly erode this advantage.
Research from NYC’s Columbia Business School finds that when states increase corporate tax rates, C Corp employment and the number of corporations decline. Approximately 30% to 35% of these burdens land on workers’ wages, 25% to 30% on landowners, and 40% on firm owners, meaning not only do business profits respond, but so do paychecks and rents.
If economic theory is still unconvincing, then New Jersey provides a compelling case study.
After enacting the corporate transit fee in 2023, New Jersey’s top state corporate tax rate rose to 11.5%, the highest in America. The state’s anti-competitiveness is so obvious that it shows up unmistakably in the state’s budget as corporate tax receipts are projected down $771 million, or 15%, in fiscal year 2025.
The New Jersey Business & Industry Association 2025 Regional Business Climate Analysis found that “New Jersey ranks last in the region in cost competitiveness and business taxes for a seventh consecutive year.” Additionally, since 2015, excessive rates have encouraged a business exodus. Among these are seven of the 22 Fortune 500 companies headquartered in New Jersey.
The lesson is that New Jersey’s anti-business environment is harmful and New York’s has even worse expectations. Mr. Mamdani wants to match New Jersey’s corporate tax rate of 11.5% without considering its losing track record.
If implemented, these proposals mean New York City would lose its tax and jobs base even faster. Therefore, Mr. Mamdani’s “free” collective programs will become increasingly demanded yet underfunded, and remaining residents will likely experience an enhanced tax burden to pay for them. Declining government revenue, capital flight and high prices are consequences of raising tax rates.
Socialist policymakers always forget that corporations are more than just the money they generate and the taxes they pay. These entrepreneurs and businesses are directly responsible for employing millions of New Yorkers, achieving important socioeconomic objectives and generating innovative products that contribute to American progress.
The solution isn’t to raise taxes and strictly regulate firms. Instead, closing loopholes, lowering rates and removing onerous regulations allow businesses and New York City residents to thrive and grow their own slice of the city pie.
• Nicole Huyer is a senior research associate in The Heritage Foundation’s Thomas A. Roe Institute for Economic Policy Studies. Miles Pollard is an economic policy analyst in Heritage’s Center for Data Analysis.
Please read our comment policy before commenting.