Compass Investments

New York City faces a $12.6 billion budget shortfall.

the mayor favors tax hikes for the wealthy and corporations, as well as spending cuts.

He dismisses fears of an exodus, citing an increase in the number of millionaires after the tax changes in 2021.

ew York’s newly elected mayor told the press Wednesday that wealthy New Yorkers should contribute more to the city’s finances through tax hikes as the metropolis struggles with a budget deficit of more than $12 billion left by the previous administration.

Mayor Zoran Mamdani spoke with CNBC “Squawk Box” co-host Andrew Ross Sorkin during a town hall meeting where he outlined the financial challenges facing America’s largest city. The mayor characterized the budget problems as more serious than those New York City put up with during the Great Recession years ago.

Mamdani, the Democratic incumbent who took office Jan. 1, ran on a promise to increase taxation on wealthy New Yorkers. He blames what he calls “gross fiscal irrationality” for the current financial mess. The mayor pointed to former Mayor Eric Adams and former Governor Andrew Cuomo, whom Mamdani defeated in last November’s general election, arguing that their decisions led to the budget gap.

The new mayor assured his team would be forthright with citizens about money problems he said officials have been hiding for too long.

City Comptroller Mark Levin released figures earlier this month showing the budget deficit will reach $12.6 billion over the next two fiscal years. In fiscal year 2026, ending June 30, the city will face a $2.2 billion shortfall on a total budget of about $116 billion. Next year, that shortfall will rise to $10.4 billion.

Mamdani said Wednesday that his strategy will include cutting excessive spending along with raising taxes. He cited as an example the development of an artificial intelligence-based chatbot by the previous administration, which was rumored to have cost about $600,000 but proved difficult for humans to use.

{I think the magnitude of the crisis is such that we have to address all these aspects, the mayor said in an interview.

He added that the city government must show concern for both high quality services and efficient management. Every dollar spent, he explained, must serve a tangible purpose.

the 34-year-old city manager previously served in the state Assembly before taking the city’s highest office. During his campaign last year, he unveiled specific tax proposals. He wants to raise the corporate tax rate to 11.5 percent, which would bring it in line with what New Jersey charges. He also proposed a flat 2% tax for anyone with an annual income over $1 million.

Mamdani surprised many observers by defeating Cuomo in the Democratic Party primary for mayor in 2025. His unexpected triumph and his affiliation with the Democratic Socialists have caused concern among some in the city’s business community. A number of influential figures in the business community warned that his wealth redistribution plans could hurt the city, which is the financial center of the country.

When Sorkin asked about concerns about the possible exodus of billionaires, other wealthy individuals and companies due to his policies, Mamdani dispelled those worries.

Talk of capital flight invariably comes up when it comes to potential tax increases for the rich, he said.

The mayor pointed out that New York City has seen more millionaires since the state raised taxes on high-income earners in 2021. He emphasized that his revenue-raising initiatives are aimed at improving city services for all residents.

Mamdani mentioned the low temperatures in the city during the talk, calling it one of the coldest periods in New York City’s history. He noted that the city has weathered difficult times in the past thanks in part to the thousands of state Department of Sanitation workers who are able to cope.

That’s only possible when you really invest in public service, the mayor concluded, defending his position that higher taxes make for more efficient government.