STEVE FORBES: Don't crush homeowners to pay for NYC's out-of-control budget

New York City finds itself, once again, at a political and fiscal crossroads. Mayor Zohran Mamdani has unveiled a $127 billion preliminary budget for fiscal year 2027, warning of a $5.4 billion shortfall and asserting that, absent new revenue tools from Albany, the city may have to raise property taxes - possibly by as much as 9.5 percent - on millions of residential and commercial properties. 

This is a grave mistake - not merely for its economic consequences, but for what it signals about governing philosophy in the nation's largest city.

Property taxes are the most regressive form of taxation in local government. Unlike a tax on incomes or profits, property levies are indiscriminate: they hit long-time homeowners on fixed incomes, working-class families striving to build equity and small business owners who are the backbone of local communities. These levies are not tied to one's ability to pay, but to a valuation often disconnected from cash flow. For a city already straining under affordability pressures and an elevated cost of living, this is a recipe for further exodus and economic stagnation. 

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To be sure, Mayor Mamdani frames this as a "last resort" or even a strategic lever to pressure Albany to raise taxes on the wealthy and on profitable corporations. But calling it a "last resort" does not mitigate its harm. Mayors and governors negotiate hard - that's politics. But the collateral damage from a property tax hike would be felt in neighborhoods across all five boroughs: rents edged upward as landlords pass costs through to tenants, small business margins hollowed out and families forced to choose between property ownership and financial survival.

It's worth recalling that New York City has not raised property taxes in any significant way since the Bloomberg era in the early 2000s, a moment of crisis that demanded extraordinary action. This current proposal comes not in response to an unprecedented calamity, but a political impasse. It is precisely the kind of fiscal brinkmanship that punishes ordinary citizens for elected officials' inability to craft more responsible solutions.

Proponents of the hike will suggest that property taxes are the only lever left, since the city cannot unilaterally raise income or corporate taxes without Albany's blessing. But that is an abdication of responsible budgeting, not a defense of it. A mayor who claims to inherit a "historic" budget gap that was sharply reduced - with assistance and careful revenue calibration - undermines the crisis narrative. Indeed, Governor Kathy Hochul has already committed substantial state aid to the city, cutting the gap and undermining the argument that dramatic, city-wide tax increases are imperative. 

Rather than squeezing more out of homeowners and Main Street merchants, City Hall should be scrutinizing wasteful and non-essential spending, streamlining operations, and finding efficiencies within the $127 billion bureaucratic behemoth. The budget reflects priorities - and if spending choices fail to reflect prudence in lean times, that is a political decision, not a fiscal necessity.

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Another troubling dimension is the broader economic signal this tax hike would send. New York City already competes fiercely with other global cities for business investment, talent and jobs. Other states with far more competitive tax regimes - including zero income tax states - have lured residents and corporations away from New York for decades. A new, steep property tax increase only reinforces the narrative that economic prosperity in New York comes with a punitive price tag, accelerating demographic and business departures in a state that can least afford it. 

More fundamentally, this episode highlights a deep misunderstanding of what good governance requires: balance, creativity and fairness. True leadership doesn't simply balance books on paper; it balances the economic health of a city with the vitality of its workforce and the sustainability of its middle class. That means resisting the impulse to raise taxes as the first line of defense and instead engaging in genuine spending reform and economic growth strategies that don't crush taxpayers.

Yes, cities must sometimes make tough choices. But pitting property owners and small businesses against the perceived wealthy is a false dichotomy. A thriving New York - one with robust job creation, resilient communities and inclusive opportunity - is not built by relentless tax increases. It is built by unleashing economic potential, encouraging investment and ensuring that governance is efficient and fiscally disciplined.

New Yorkers know this instinctively. They are hardworking people who have endured years of rising costs and economic pressures. They simply want the city to spend wisely, and leadership must respect that.

Mayor Mamdani should go back to the drawing board and work with the City Council, stakeholders and the state to find pro-growth solutions. Raising property taxes - not to mention wealth taxes - should not be on the table - least of all as a bargaining chip in political negotiations. Let us pursue growth, reform and opportunity - not tax hikes that risk sending New York backward.

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