New Yorkers Urged to Go Slow on Plans to Run From Mamdani Taxes

Tax practitioners are urging businesses and wealthy entrepreneurs to exercise caution before making good on campaign-season threats to leave New York City because Mayor-elect Zohran Mamdani must win state leaders’ approval to realize his proposals for higher taxes.

Mamdani’s (D) call for higher statewide corporate rates and a millionaire’s tax to pay for an affordability agenda resonated with voters in last week’s mayoral election. But those policies from the democratic socialist mayor-elect have spurred companies and high earners to map out their escape plans with accountants and lawyers in recent days.

Clients have expressed frustration with the incoming mayor’s economic proposals and what they see as the broader vilification of wealthier people as responsible for the city’s problems, said Aaron Shafer, principal in KPMG’s national state and local tax practice in New York City.

Many are ready to decamp for Florida’s sunnier business climate, Shafer said, having learned during the Covid-19 pandemic that it was possible to move away from the largest US city. Texas and Tennessee are also mentioned as possible destinations, he said.

“The phone’s really been ringing off the hook to further explore what that would really mean for them,” Shafer said of plans to flee New York City. “The conversations have been not whether they move to Florida but whether the new office will be in Miami or Palm Beach.”

But any city tax hikes would need to be approved by the state legislature, as well as Gov. Kathy Hochul (D), who has previously rejected such tax increases. “Driving them to Florida does not help us, so let’s be smart about this,” Hochul said in June in response to Mamdani’s plans.

Wait and See

Mamdani’s plan includes a statewide corporate tax hike from 7.25% to 11.5%, which would bring the top combined state and local corporate tax rate to nearly 19%.

The mayor-elect also wants to raise the city’s personal income tax rate on annual incomes above $1 million from 3.9% to 5.9%. Combined with state taxes, the overall tax rate on those incomes could reach 17%.

Chelsea Marmor, counsel at Eversheds Sutherland, has been cautioning clients to “step back and think” before making any quick decisions.

“It’s a much longer process to make changes in the tax law than I think maybe came forward during all the political campaigning,” Marmor said. “There’ll be a lot more discussion going on behind closed doors and in the public before major things happen. That would be my guess.”

Fleeing the city’s immense market and talent pool is easier said than done. Tax rates are just one factor in making a decision to leave. And city residents would truly have to sever ties—not just move temporarily to a second home while Mamdani’s term plays out, which would risk tax evasion charges, accountants said.

“Most of our clients are positioned to wait and see,” said Zal Kumar, a principal in Ernst & Young’s Financial Services sector.

Companies are sensitive to even small rate increases given they contend with dozens of different state and local taxes, Kumar said.

“I don’t know how much more the system can bear,” he said. “Increases in tax rates do compound the overall complexity of the tax structure in New York.”

Holding the Line

The first clues will publicly emerge during the state’s upcoming budget cycle, which typically kicks off in January with the governor’s budget proposal for the next fiscal year starting April 1.

Hochul’s endorsement of Mamdani in September—writing that affordability is “the No. 1 concern I share with Mr. Mamdani"—has some clients nervous. She is gearing up for a re-election campaign in 2026.

The governor “doesn’t seem like the firewall that people were hoping she would be,” Shafer said. Clients are dealing with “the uncertainty of, well, how strongly is she gonna push back? Is she gonna stop him? Is she gonna compromise somewhere in the middle?”

The difficulty corporations would face leaving New York City may allow policy makers to call their bluff and create momentum for tax reforms, Kumar said.

“I don’t know whether that’s leverage that the mayor-elect feels like favors tax policy changes, and whether that’s the reality that the governor recognizes, or really how that plays out,” he said. “I think that’s one of the unknowns.”