Economists at the Groundwork Collaborative (GWC) say Mayor Zohran Kwame Mamdani’s proposed millionaire tax is a financially sound decision for New York City amid its 2026-27 Fiscal Year budget negotiations.

GWC — a Washington, D.C.-based progressive think tank and advocacy organization — said not only would imposing a 2% tax hike on the wealthiest New Yorkers earning more than $1 million a year balance this year’s budget, but it would help solve budget shortfalls for the foreseeable future.

The organization released a report, “Closing the Gap: Why New York City Needs a Millionaires Tax,” on March 24 that detailed why it makes sense to tax the wealthiest New Yorkers and debunked the myth of “millionaire flight” often cited by opponents of the tax.

It advocated for the passage of the Fair Share Act — pushed by Mamdani and sponsored by state Sen. John Liu and Assemblymember Phara Souffrant Forrest — which would impose what they called a “modest” tax increase.

The tax would only apply to reported income over $1 million, meaning someone earning $1.5 million would pay an additional $10,000 in taxes, while someone earning $2 million would pay an additional $20,000 in taxes.

The Fair Share Act is projected to raise approximately $4 billion annually.

“It’s really clear that a modest tax increase on millionaires — like the Fair Share Act — is just vastly preferable to the alternative, draconian budget cuts that are going to hit families hard,” said Lindsay Owens, executive director of GWC.

Why New York historically faces budget gaps

Emily Eisner, the chief economist and acting executive director of the Fiscal Policy Institute, noted that lawmakers in Albany have consistently shifted costs onto the city, which she said can’t keep up with the city’s rapid economic growth.

Last year, she pointed out that the state reduced education funding by over $400 million. She also blamed the Eric Adams Administration for underfunding programs crucial to NYC’s safety nets that benefit working-class families.

“All of this happened alongside a backdrop of the wealthy and ultra-wealthy in New York City seeing their income rise and their federal tax liability fall,” Eisner said, noting that Trump’s federal tax cuts saved the wealthiest New Yorkers an aggregate of $6 billion in tax liability annually. “The city’s tax revenue has not followed pace with the city’s economic growth.”

She said while the state has been able to make changes to its tax program by raising taxes on corporations and top earners, the city should be able to do the same.

Alex Jacquez — chief of policy and advocacy at GWC, as well as author of “Closing the Gap” — added that Mamdani is forced to remedy previous revenue sharing arrangements between the state and the city, a decade of tax cuts under former-governor Andrew Cuomo, and the rescission of municipal aid intended to be a temporary measure during the height of the financial crisis in 2010.

Why supporters say the millionaire tax makes sense

Jacquez said in order to fulfill Mamdani’s ambitious affordability agenda, the budget must lay the groundwork for it and ensure it does not further squeeze working-class people it seeks to relieve.

“While people of course will squawk at the large numbers that any New York City budget puts forward, the vast majority of the spending is obligated or mandatory,” Jacquez said. “While Mayor Mamdani has put forward an ambitious spending plan championing affordability, it will not be able to materialize under the current budget. Right now, fixing the fiscal hole is right at the core.”

Mamdani has previously stated if Gov. Kathy Hochul and the City Council do not approve the tax hike on millionaires, he would be forced to increase property taxes by 9.5% that would disproportionately impact working-class residents who are already struggling.

He emphasized that the property tax hike is a “last resort” and strongly prefers taxing millionaires because it is more fair.

Mamdani argued that the current budget proposal announced by Council Speaker Julie Menin, which she claimed would close the city’s $5.4 billion budget gap without taxing the rich, would actually slash billions of dollars from agency budgets.

Menin has since said claims of these cuts are “untrue,” but Mamdani later accused her of “double-counting previously identified savings, overestimating revenues and exaggerating debt service savings does nothing to close a deficit.”

That is why Mamdani has continued to push for the plan he ran on — raising taxes on the wealthiest New Yorkers.

“My position? Tax the rich,” Mamdani said in a video released by the NYC Mayor’s Office on April 1. “Make sure the wealthiest New Yorkers and most profitable corporations pay their fair share… Without [the millionaire tax], our deficit won’t disappear. It will repeat year after year, asking future generations to shoulder the burden. We will solve the budget crisis, but I’m not going to let it come at your expense.”

Jacquez also pointed out that while the state’s assembly and senate have brought forward their own proposals to close these budget gaps, they are only temporary fixes.

In order to create sound fiscal footing for years to come — a permanent solution to the budget crisis — Jacquez said the Fair Share Act must be passed.

Elected officials fight back on the tax

While Gov. Kathy Hochul did not directly respond to QNS’s question of whether she would support the millionaire tax, the governor spoke during a March 18 forum and said she understands that ordinary New Yorkers feel “that the system is stacked against them.”

She said while she hears their concerns, she is also listening to members of the City Council and the people of NYC who have the opportunity to “challenge spending that maybe has gone on a long time without anybody questioning it.”

When Mamdani pressured Hochul to raise taxes on millionaires, and eventually entered negotiations with her, the governor agreed to grant the city $1.5 billion to help fix the budget shortfall. 

“$1.5 billion is not something that is handed out every day,” Hochul said. “I did that because I wanted to help them get a foundation to build from as they look for savings, which I think are necessary.”

Hochul also made comments about convincing millionaires to not only stay in New York, but return from states like Florida to help boost tax revenue.

“I have to look at the fact that we are in competition with other states who have less of a tax burden on their corporations and their individuals,” she said in a New York Post story on March 18.

Speaker Julie Menin, on the other hand, said “all options need to be on the table,” and the City Council is “feverishly looking” to find savings.

She said she believed in progressive taxation, but argued it should instead be implemented on the federal level.

“I urge the federal government to do progressive taxation on millionaires,” she said. “I think that’s honestly something that should happen.” 

However, she echoed Hochul’s concerns about putting New York “at a different tax rate than other states.”

Debunking the myth of millionaire flight

Owens debunked the myth that millionaires flee the state when taxes increase. 

“Look, I’ve been in economics a long time, and it is often really hard to estimate the behavioral impacts of a given policy,” Owens said. “But one of the most clear-cut cases is us being able to study what happens when you raise taxes on millionaires and determine whether or not it’s true that millionaires migrate.”

She explained that, like anyone else, millionaires file taxes. By studying tax returns, which are pegged at locations, researchers can determine how many millionaires live in the city and state at a given time.

Based on GWC’s studies, Owens said millionaires are staying in place — they have bought homes in the state, their children are enrolled in schools, and they have jobs in cities where their social and employment networks are embedded locally.

The two types of people that are leaving the state, she continued, are actually young people and working-class people — the latter of which leave the state at twice the rate of millionaires.

When millionaires do leave the state, Owens said, they generally don’t leave for cheaper places like Florida or Texas — instead, they leave for equally expensive states such as California, New Jersey and Connecticut.

Based on their findings, only 15% of millionaires who leave New York State end up in a place with lower taxes. 

“I do think this is a really frustrating political response,” Owens said of elected leaders claiming raising taxes would result in millionaire flight. “We know definitively that millionaire migration is a myth.”

These predictions estimate that 23 millionaires out of 9,000 would potentially leave in response to a 1% tax increase, she said.

And, she emphasized, tax policy is not the biggest predictor of whether someone will become a millionaire — it’s the economy and the market.

The choice between the working class and the wealthy

Economists at GWC said at the end of the day, any deficits or cuts made to the budget ultimately fall on the backs of working-class people.

NYC maintains the country’s largest public school district, police force and public health care system.

Jacquez emphasized that these are the services on the chopping block when the city can’t make up for its budget gaps.

“New York is unlike any other city in the country,” he said. “These are all the things that keep New York City up and running, keeping it in a place that drives economic growth. This is why people are able to live in the city.”

Jacquez said these services are residents’ tax dollars at work, and they mean a lot to those who use them.

He pointed out that Mamdani’s recent efforts to fill potholes are funded by tax dollars, which are being used to tangibly benefit people’s everyday lives.

Owens said working-class families are all looking for the same suite of services — such as affordable housing and child care — which attracts young people to the city.

She said even if she were to take Hochul at her word and the state made attempts to keep millionaires in the city, one of the best ways to do it is by attracting young people with robust programs and services.

“The way to attract young people is to make sure you have a city that has affordable housing and child care,” Owens emphasized. “The same policies you would put in place to attract the future millionaires of New York are actually the same policies that the working class cares about right now, today.”