Mayor Zohran Mamdani has painted himself as the unfortunate victim of a historic budget crisis, but he really should be counting his lucky stars.
New York City has a big spending problem, but not a revenue problem.
Yet that could change soon — warning signs are already flashing.
Mamdani isn’t confronting an external economic shock like a recession, 9/11, the financial crisis or COVID-19.
Wall Street is doing fine; the taxes on its stellar bonuses made $5 billion of the city’s budget gap disappear overnight.
As much as the mayor would hate to admit it, he needs Wall Street more than it needs him.
According to state Comptroller Tom DiNapoli, the securities industry contributes 42.3% of the city’s personal-income tax and 8.4% of its total tax revenue.
While small and medium businesses keep most New Yorkers employed, big business pays the city’s bills.
Those with 500 or more employees constitute only 0.3% of all firms but employ over a third of New Yorkers and pay about 41% of total wages, per the city’s Independent Budget Office.
Likewise, the top 1% of corporate filers accounted for 93% of the city’s total Business Corporation Tax liability in 2021, with the finance sector alone generating 54% of those collections.
In effect, finance is carrying water for a broader city economy that has flatlined in recent years.
As of last December, the unemployment rate in NYC was 5.6%, vs. the nation’s 4.4%.
Yet a close look under the hood reveals a sputtering economic engine.
Government-subsidized employment is growing, and private-sector jobs are shrinking.
The health-care and social-assistance sector — mostly low-paid personal-care and home health aides funded by exploding Medicaid spending — is by far the fastest growing in the local labor market.
From January 2020 to June 2025, these jobs rose 29%, reports the Citizens Budget Commission.
The sector now employs nearly a million people, with an average wage of about $60,000.
And not all jobs contribute to the tax base equally.
In 2021, the bottom 50% of filers contributed only about 4% of the city’s personal-income tax, while the top 1% paid 43%.
City Comptroller Mark Levine points out that, excluding gains in health care and social assistance, the city lost 38,000 private-sector jobs in 2025.
Higher-paid jobs are being replaced by lower-paid ones, eroding the tax base.
Plus, based on the latest Census Bureau estimates, New York state has been leading the nation in net population loss since 2020, shedding 201,269 residents.
Texas and Florida have seen the largest gains, adding a combined 4.5 million newcomers.
Texas now has more financial-services employees than New York.
Pair that with the prospect of Mamdani’s 9.5% property-tax hike, and more property owners and market-rate tenants could start searching home listings in Dallas, Miami or even north Jersey, accelerating the mayor’s budget woes.
Now imagine if a recession hits; he’d face a truly serious fiscal crisis.
Last year, the city comptroller’s office modeled the effects of a potential recession, estimating two-year tax-revenue losses between $4.3 billion and $10 billion and employment declines ranging from 71,200 to 150,000, depending on the severity of the downturn.
What’s Mamdani going to do in that situation — raise property taxes or demand help from Albany again?
Meanwhile, pending labor negotiations will soon have public-sector unions knocking on his door with their hands out, regardless of the state of the economy.
Finally, the booming stock market has kept the city’s five pension funds afloat. But when the market falls, taxpayers will be on the hook to top up the shortfall if returns dip below the rate needed to keep pensions adequately funded.
For example, as markets cratered in 2022, the comptroller’s office anticipated that city contributions to pensions would need to rise by $5.9 billion over the following three years.
Given these hazards, how can the mayor hope to make good on his multibillion-dollar campaign promises for free buses, universal child care, hundreds of thousands of new affordable-housing units and more?
There’s no way around what Mamdani can’t seem to admit: The city needs to cut billions in low-value spending.
It’s the only way he can guarantee a sustainable fiscal footing in the face of underbudgeted expenses and revenue-side risks.
To achieve the agenda he was elected on, he needs to grow the economy and tax base by making the city attractive to large firms and high earners.
That means making streets safer, schools better, regulations saner and more new housing available.
If Mamdani doesn’t knock off the tax-hike nonsense and start getting the basics right, the next downturn won’t just expose the city’s economic fragility — it will define his administration.
John Ketcham is director of cities and a legal policy fellow at the Manhattan Institute.
