Tax Fight Will Test Mamdani’s Influence In Albany Against Hochul

ALBANY, New York — A state budget fight over raising taxes on rich people and corporations is becoming a litmus test for how power is wielded in the Empire State’s capital — and pitting Gov. Kathy Hochul against New York City Mayor Zohran Mamdani.

Democratic state lawmakers this week formally proposed tax hikes that Hochul does not want, but are central to the democratic socialist mayor’s costly agenda.

Speaking Wednesday at POLITICO’s New York Agenda: Albany Summit, Hochul reiterated her tax hike opposition. But she demurred when asked to predict whether a final spending plan deal would include any increases.

“Let’s focus on getting the budget done,” she said. “I’m going to be smart about this budget and continue to address the affordability crisis.”

Despite leading the nation’s largest city, Big Apple mayors often need state approval to enact their goals, and Mamdani’s tax hike push is no different. The coming weeks in Albany will determine whether the new mayor, who rode a far-left populist platform to an upset election last year, will have the influence in the opaque and secretive statehouse to achieve a victory on a signature issue. The budget is due March 31.

“There are a lot of friends and fellow travelers in the Senate Dems and the Assembly Dems who do share a vision with the mayor,” Republican Senate Minority Leader Rob Ortt said. “This budget is going to come down to who has more influence in Albany — the mayor of New York or the governor of New York?”

The Democratic-led state Senate and Assembly’s budget proposals are in sharp contrast to Hochul’s $263 billion spending plan that does not include any significant tax hikes. The governor, who is running for a second full term this year, has steadfastly opposed tax increases over concerns they would make the state far less competitive. It would also fly in the face of her push to tout affordability measures in a state with a notoriously high cost of living and one of the country’s highest tax burdens.

Tax-the-rich boosters will be turning their attention to Hochul with the goal of intensifying a public pressure campaign to get her to bend on the issue. Our Time, a group composed of former Mamdani campaign volunteers, is expected to ramp up efforts to push for a tax hike, though an Albany rally sponsored by the group last month was sparsely attended. The Working Families Party, a left-leaning ballot line that is yet to endorse the governor, is pointing to President Donald Trump’s sweeping domestic policy package making deep cuts to health care and food assistance funding.

But opponents contend that raising taxes now would arrive at a deeply fraught time for New York’s economy and harm a fragile post-Covid recovery. The top 1 percent of earners account for more than 40 percent of the state’s personal income tax revenue.

New York has the third highest tax rates for people who earn more than $1 million behind only California and Hawaii. Wealth tax fights are breaking out in other large blue states like California. And increasing taxes on rich New Yorkers is politically popular.

But in New York, the debate highlights a schism among Democrats that Hochul is eager to sidestep in an election year she wants to keep free of intraparty drama.

That will be difficult this month as left-leaning Democratic state lawmakers mobilize for a fight over boosting taxes. Cheering them on is Mamdani, who is also trying to fill a $5.4 billion gap in the city’s budget.

“The Legislature and I agree: we cannot bridge this budget deficit on the backs of working-class New Yorkers,” Mamdani said in a statement.

In a worrisome sign for the mayor, Moody’s, the bond rating agency, revised its fiscal outlook for New York City from “stable” to “negative” on Wednesday afternoon. It suggests Moody's could eventually downgrade the the city if its fiscal situation isn't rectified.

The governor has shown little public willingness to strike a deal that includes tax hikes. In a statement, her office was noncommittal in reaction to the tax hike proposals from the Legislature.

“The governor looks forward to working with the legislature to pass a budget that makes New York safer and more affordable for working families,” said Hochul spokesperson Kara Cumoletti.

The governor on Wednesday told POLITICO she wants “a system in place where it’s not just taxing for the sake of taxing” and to avoid further erosion of New York’s wealthy tax base.

“I need people who are high net worth to support the generous social programs that we have in our state,” she said.

Hochul has often touted how she can work with anyone as she tries to avoid the bitter fights that have routinely erupted between New York governors and mayors for decades.

And she has formed a bond with Mamdani on key issues like expanding free child care in New York, a policy the mayor touted during his campaign. Hochul has also moved to aid the city’s budget woes by sending an additional $1.5 billion in direct assistance. She indicated, though, that the city budget is in the hands of the mayor and City Council.

“Now it’s up to the city council,” she said. “They’re doing their job, too.”

Federal spending cuts are taking an axe to New York’s sizable Medicaid program — billions of dollars in reductions in the coming years that no tax increase would be able to fill. Yet left-leaning advocates contend New York needs to respond with hiking taxes as a partial backstop, especially as many of the cuts are set to take effect next year. At the same time, the federal government has signaled plans to investigate fraud in the program.

“With all of Trump’s cuts to New York and removing of aid, New York is in crisis,” said Working Families Party co-director Jasmine Gripper. “In order to address that crisis immediately and to make sure we protect working families, we need to raise revenue and only raise revenue from the ultra rich.”

Hochul’s allies in the business community, though, contend the state is facing increasingly stiff competition from around the country. A hike in the corporate tax rate in the nation’s financial capital would make neighboring states far more attractive, they warn.

New York state’s flat population numbers — driven by years of outmigration — are expected to result in the loss of two House seats after the next Census in 2032.

“Jobs are more mobile today than they’ve ever been,” said Steve Fulop, the president of Partnership for New York City, which represents the interests of big business in the city.

“While people weren’t reticent to work remotely prior to Covid, today working remotely is something most companies can do rather easily. What you see is New Jersey one mile away being far more competitive than New York.”

Then there is the political dimension. Polls have shown Hochul leading her likely Republican opponent, Nassau County Executive Bruce Blakeman, by double digits. Yet she does not want to hand him a weapon to undercut her affordability message, especially as she also rails against the impact of Trump’s tariffs.

Blakeman’s campaign quickly seized on the tax hikes proposed this week by Democrats.

“Kathy Hochul and Mamdani have a spending problem, not a revenue problem,” he said in a statement. “When big companies and their executives leave New York, they take with them jobs and economic activity, leaving the middle class with the tax burden. Florida has more people, and their budget is half of New York.”

Hochul’s campaign in response pointed to the governor’s push to lower middle-income tax rates.

“Governor Hochul has cut middle-class taxes to historically low rates and put money back in New Yorkers’ pockets — a good place for Bruce Blakeman to start caring about protecting our state’s jobs and economy would be standing up against Donald Trump’s expensive tariffs, which are making everything harder for small businesses right now,” Hochul campaign spokesperson Ryan Radulovacki said.