(Bloomberg) -- New York City Comptroller Brad Lander, a progressive Democrat who is challenging Mayor Eric Adams in next year’s primary, backed away from a proposal to increase the city’s income tax on the top 1% of earners.
In May 2023, as federal pandemic aid wound down, Lander recommended raising the city’s top 3.876% income-tax rate to help pay for pre-kindergarten, universal child care, public transit and affordable housing.
But on Monday, Lander said he made the proposal because funding for pre-kindergarten and summer programs for elementary and middle-school children was in doubt. With funding for those programs now intact, Lander said additional revenue wasn’t needed.
“I’m pleased to say those programs were able to be maintained with no tax increases so we are not continuing to make that proposal,” he said in response to a question at a Monday breakfast in Manhattan hosted by the Citizens Budget Commission. “We can do universal pre-K and Summer Rising with the resources we have. I think the same is true with a lot of areas.”
The majority of the city’s pandemic stimulus funds went to education.
Lander’s proposal to raise the city income tax was among four options he suggested for new revenue sources to pay for services. The others included a surcharge on pied-à-terres and removing Madison Square Garden’s tax exemption.
Tax Burden
High-ranking state Democrats like Governor Kathy Hochul and state Comptroller Thomas DiNapoli, who also attended the breakfast, have warned that steep taxes and living expenses are pushing both wealthy and middle-class residents out of New York. Last week Hochul, who’s less popular with state voters than former President Donald Trump, said she won’t increase income taxes in next year’s budget despite massive funding gaps for the Metropolitan Transportation Authority.
The state last raised income taxes in 2021 on earners making more than $1 million, pushing combined state and city income levies above California’s 13.3%. The temporary tax hike is set to expire in December 2027.
According to US Census data cited by the Empire Center for Public Policy, a fiscally conservative think tank, more than 550,000 New York state residents left from April 1, 2020, to July 1, 2022. Many moved to Florida, which doesn’t have a state income tax.
In May 2023, Lander said the city could raise as much as $900 million by boosting the income tax on roughly 40,000 filers. The tax rate would increase to 4.46% for married filers earning between $750,000 and $5 million, and as high as 5.5% on all filers making more than $25 million. State lawmakers would need to approve a city income-tax increase.
At present, the city’s top rate of 3.876% kicks in at $90,000 for those who are married and filing jointly.
Lander said income taxes on high earners haven’t deterred hedge funds and asset managers that are moving or expanding in New York City. Bridgewater Associates is planning to open its first office in the city and Citadel plans to build an office tower on Park Avenue.
“We will lose some people who think it’s great to retire in Florida and it’s lovely to retire in Florida,” Lander said. “We need to keep this the place people come to make the next fortune.”
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